QQ234

4. The Mankiw-Romer- Weil (1992). A different way of formulating human capital is to assume that human capital is accumulated just like physical capital, so it is measured in units of outputs instead of years of time. Assume production is given by Y = KOH(AL)I-a-8, where a and B are constant between zero and one whose sum is also between zero and one. Human capital is just accumulated like physical capital: H = SHY - 6H Where ay is constant share of output invested in human capital. Assume that physical capital is accumulated as K= SKY - OK That the labour force grows at rate n, and the technological progress grows at rate g. Solve the model for the path of output per worker. y = 1/2, along the balanced growth path as a function of 54. 48 . n. 9.6. a and 3. Discuss how the solution differs from the setup where human capital is accunnilated in years of time,1. Human Capital in the Solow-Swan Model: Suppose that the production function in the Solow-Swan model is given by Y(t) = AK(t)"H(t)L(t) 1-a-x where Y is output, A is technology, K is physical capital, H is human capital, and L is labour. Assume that 0 So 0. Output can be converted one-to-one into either investment in physical capital or human capital. Saving directed towards investment into physical capital is given by 0