Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Endogenous Growth Model (20 points) Suppose that there are two types of human capital that an individual can accumulate. During the current period, individual i
Endogenous Growth Model (20 points) Suppose that there are two types of human capital that an individual can accumulate. During the current period, individual i has Hi1 units of type 1 human capital and H12 units of type 2 human capital. If individual i chooses to allocate lu units of time to accumulating type 1 human capital, then the quantity of type 1 human capital the individual has in the future period is: 'i1=b1(liu)[a(Hi1+Hi2)+(lia)H1] where H1 is the average level of type 1 human capital in the economy. Alternatively, if individual i allocates lu units of time to accumulating type 2 human capital, then the quantity of type 2 human capital the individual has in the future period is H'i2:b2(lu)[Hi1+Hi2] Assume that b2>b1. 1. Suppose that all individuals choose to accumulate type 1 human capital. What happens to the distribution of income, consumption, and human capital across the population in the long run, and at what rates do individuals' incomes, consumption, and human capital growth in the long run? Explain [8 PtS] l'x) Suppose instead that all individuals choose to accumulate type 2 human capital. What happens to the distribution of income, consumption, and human capital across the population in the long run, and at what rates do individuals' incomes, consumption, and human capital growth in the long run? Explain [8 pts] DJ Explain any differences between your results in parts a) and part b). and discuss. [4 pts]
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started