Questions are given below.... answer the in details

Consider the following standard Homer Model and a variation that includes human capital. Goods Production Flmction Ideas Production Function Human Capital Production Function Resource Constraint Allocation of Labour Human Capital Y. = as... 15AM] : EAthLGJ H: 2 L511; Lyt+La3g +LM = L La; : TE Assume parameters take the following values in each specication. Standard Human lCapital E 1000 1000 Ly; 750 700 LG; 250 200 La; r 100 :2 0.0005 0.0005 A5 10 1 l] 1. Explain what using labour to produce human capital implies for the economy? 2. Solve for the balanced growth path of output per capita in both models, showing all working. 3. Does the inclusion of human capital increase the rate of growth compared to the standard model? What is the impact on output in the short and long run? Consider Ramsey's model with human capital based on Lucas' (1988) paper, with the following modified human capital formation technology: h = shy h, " (1 - 4,) he is the average human capital in the economy in period t and y E (0,1). How does the value of y affect growth rate in the economy and its possible divergence from the welfare maximizing growth rate?Human lCapital Model: Fieinterpretthe human capital growth model as follows: Suppose there are two groups of people in a country, the lowskilled and the highskilled, where the lowskilled have less human capital per person initially than the highskilled. Each type of worker produces output independently from the other, using efficiency units of labor and total factor productivity, 2, which is assumed to be common across groups. Each individual in this economy accumulates human capital on their own,1 and each has one unit of time to split between human capital accumulation and work. Assume that the high skilled have initially higher efficiency of learning: bh :> bl , and that uh 6: ul . {a} In all developed countries, there has been an increase in the socailed skill premium, the gap between the wages of highskilled workers and lowskilled workers, over the last 3G years. Determine how this model can explain this observation. Endogenous Growth Model Consider the endogenous growth model, where the future period quantity of human capital is a function of current human capital, which drives production and thus growth. [a] Find the growth rate of human capital and consumption. Be sure to show your work. [to] Use your answer from part {a}, in addition to the fact that C = Y in equilibrium, to explain why' the economy' will grow indenitelyr when oil u] :r 1. [c] The Canadian government subsidizes education for its citizens in an effort to increase the country's stock of human capital. What is the economic rationale for this policy"?I Consider the human capital growth model with the representative consumer. The efciencyr pa rameter of human capital accumulation technology is b. The total productivity factor is given by z = 1-5. Denote by H; the human capital accumulated in period t? and by u the time spent working in period t. Assume the initial human capital is H0 2 1. Now, assume the consumer has to choose between (v.1, b1) 2 (0.9, 10.35) and (152,52) 2 (0.8, 5.20). 1. Using the predictions of the Endogenous Growth Model for the consumption path, which set of (u, b) will you recommend to the consumer in the long term. 2. After how many years is your recommendation valid? Taking in consideration the human capital growth model with the representative consumer. The efciency parameter of human capital accumulation technologyr is la. The total productivity factor is given by z = 1.5. Denote by Ht the human capital accumulated in period t, and by u the time spent working in period t. Assume the initial human capital is H0 = 1. Now, assume the consumer has to choose between {u1, loll = {0.9, 143.35] and {u2, b2] 2 {0.3, 5.20]. 1. Using the predictions of the Endogenous r(Eurovvth Model for the consumption path, 1.Ivhich set of (u, b] will you recommend to the consumer in the long term. 2. After how manyr years is your recommendation valid