Chile, known as one of Latin America’s wealthiest, most stable and peaceful countries, is in the grip of a political and economic upheaval with thousands of people protesting since Oct. 6. However, Chile remains the most unequal country in the largely-developed Organization for Economic Co-operation and Development (OECD), with an income gap 65% wider than the OECD average. Half of Chilean workers earn $550 a month or less, according to the National Statistics Institute. A 2018 government study showed that the income of the richest was 13.6 times greater than those of the poorest.
Suppose that the following function represented the Chile's economy in 2000: Y=AK0.4L0.6. The country's national income was $170billion in 2000. Calculate total labour income and total capital income.
Labor share of income is equal to the exponent above labor. So, labor share of income is 0.6
Capital share of income is equal to the exponent above capital. So, capital share of income is 0.4
The country's national income = $170 billion.
Total labor income = ($170 billion) * (0.6)
Total labor income = $102 billion.
Total capital income = ($170 billion) * (0.4)
Total capital income = $68 billion.
Chile, known as one of Latin America’s wealthiest, most stable and peaceful countries, is in the...
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