Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Two countries, h and I , whose economies are well represented by the Solow model, have the same parameters, 3, n, a, and 6, the

image text in transcribed
Two countries, h and I , whose economies are well represented by the Solow model, have the same parameters, 3, n, a, and 6, the same labor force but differ in their level of total factor productivity, Ah 2: AI. They are both in steady state but, as a result of their difference in the level of technology, I}, = 21'}. a) By what factor do the two countries\" levels of technology differ? By what factor do the two countries\" capital stocks differ? Assume a: = 1f2. b) Assuming that factor inputs are ee to migrate without cost, will they (either, K or N or both} have an incentive to do so? Why? Let's assume that n = [l and that An I} A! is the result of some barriers that prevent the ow of knowledge between these two economies. Now both economies join a common economic market and as a result A, instantaneously increases to An. The rest of the parameters are unaffected. c) Let's allow for migations of labor and capital flows across the two countries, sketch the path of output per capita in both countries before, at the time and after the barriers are lifted (do so inthe same figure using one color for each country). d) Let's allow only for capital flows, sketch the path of capital per capita in both countries before, at the time and after the barriers are lifted (do so in the same figure using one color for each country}

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

Marketing

Authors: Shane Hunt

3rd Edition

1260800458, 9781260800456

More Books

Students also viewed these Economics questions

Question

Annoyance about a statement that has been made by somebody

Answered: 1 week ago