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Expenditure-side real GDP at chained PPPs (in mil. 2017US$) denoted by rgdpe. Number of persons engaged (in millions) denoted by emp. Average annual hours worked
"Expenditure-side real GDP at chained PPPs (in mil. 2017US$)" denoted by rgdpe. "Number of persons engaged (in millions)" denoted by emp. "Average annual hours worked by persons engaged" denoted by avh. "Share of gross capital formation at current PPPs" denoted by csh_i. "Average depreciation rate of the capital stock" denoted by delta. "Share of labour compensation in GDP at current national prices" denoted by labsh. "TFP level at current PPPs (USA=1)" denoted by ctfp.\fLet us consider a Solow growth model in which the aggregate production function at time for country i {CAN, USA} is given by: vi = (k) (eirt)\" where Y} is the aggregate real GDP in country i, K is the aggregate physical capital in country i, L is the aggregate number of workers in country i, e' is the average working time of a worker parameter in country i, At > 0 is the total factor productivity parameter in country i and &' (0,1) is the labour share of output parameter in country i. The equilibrium law of motions of the physical capita per worker from time to time + in country i can be written as: (1 +n)ki, = vyl + (1 o)k} where n! (-1, +) represents the growth rate of the population of workers parameter in country i, y* (0,1) denotes the investment rate parameter in country i, (0,1) is the depreciation rate parameter in country i, y} = Y{/L. denotes the output per worker in country i and k; = K'/L: stands for the physical capital per capita in country i. b. Calculate the real GDP per worker in both Canada and in the United-States in 2019. Compute the ratio of the real GDP per worker in the United-States in 2019 to the real GDP per worker in Canada in 2019. (3 points) c. Derive a value for n' by calculating the average annual growth rate of employment (emp) in both Canada and the United-States from 2009 to 2019. (2 points) d. Calculate in both Canada and the United-States from 2009 to 2019 the average values for avh representing e', csh_i representing y', delta representing 8, labsh representing El, and ctfp representing A. (5 points) e. Using the average values found in questions c. and d., derive the ratio of the real GDP per worker in the United-States to the real GDP per worker in Canada predicted by the Solow growth model. Is this result consistent with the actual real GDP per worker gap found in question b? (10 points)
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