Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Hello, I want to ask How can I do the Question 5.1 and 5.2 Thank you!! Consider the Solow-Swan growth model with human capital, in

image text in transcribed

Hello, I want to ask How can I do the Question 5.1 and 5.2

Thank you!!

image text in transcribed
Consider the Solow-Swan growth model with human capital, in which the production function is given by: Y(t) = K(t)"(A(t ) H (t ) ) 1- High-skilled labour depends on the number of workers through the expression: H(t) = eyuL(t), and capital accumulates according to: K (t) = sY(t) - 8K(t). Assume that technology and the number of workers rise over time according to: A(t) = gA(t), and L (t) = nL(t), respectively. The parameters satisfy: 0 0, u > 0, g > 0, andn > 0. The government of a developing country has hired you as an economic adviser. The government recognises that their income-per-person is only half that of neighbouring richer countries, and holds the view that their economic fortunes would be greatly improved by increasing the minimum school leaving age to a level in-line with its richer neighbours. Using the model described above, answer the following questions and show all working: 5.1. Derive an expression for steady-state output-per-effective-worker. Explain the effect that an increase in the number of years of schooling, u, has on steady-state output- per-effective-worker and use a Solow-Swan diagram to illustrate the effect that an increase in u has on the economy in the short-run and the long-run. (You may assume that the increase in u occurs when the economy is at steady state). (20%) 5.2. Will a change in years of schooling, u, lead to higher growth in income-per-worker in the short-run and/or the long-run? Support your answer using a diagram depicting growth in income-per-worker over time as the economy approaches the balanced growth path following an increase in u that occurs at time to. (20%)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Managers And The Legal Environment

Authors: E. Bagley

9th Edition

1337555177, 978-1337555173

More Books

Students also viewed these Economics questions

Question

1. To understand how to set goals in a communication process

Answered: 1 week ago