Question
In 2010, the average years of education completed in Uganda was about 6. In the US, it was about 12.4. The US's investment rate into
In 2010, the average years of education completed in Uganda was about 6. In the US, it was about 12.4. The US's investment rate into physical capital was 17% of GDP. Uganda's was 18% of GDP. Uganda's annual population growth rate was about 3% while the US's was about 1%.
a)Use the Solow model to calculate the ratio of steady state output per capita in the US relative to Uganda. Assume the countries had the same productivity level A, depreciation rate of 5%, and =1/3
b) Draw a graph to illustrate the differences in the production functions between the countries and how these affect their steady state levels of output per capita in the Solow model.
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