Question

3.) There are two countries, Anihc (country A) and Bapan (country B), with the same production function . However, country A has saving rates of 0.2, depreciation rate of 0.2 and population growth of 0.2; while country B has saving rates of 0.1, depreciation rate of 0.15 and population growth of 0.05. Using the Solow model:
a.) Find the steady state capital-labor ratio for each country.
b.) Find the steady state output per worker, and the steady state consumption per worker for each country.
c.) Which country produces the most per capita? Which country consumes the most per capita?
d.) Now country A has production function while country B has production function . Country A has saving rates of 0.2, depreciation rates of 0.2 but population growth of 0.6. Country B has saving rates of 0.1, depreciation rate of 0.15 and population growth of 0.05.
e.) Find the steady state capital-labor ratio for each country.
f.) Find the steady state output per worker, and the steady state consumption per worker for each country.
Which country produces the most per capita? Which country consumes the most per capita?

Answer 1

(a) Production functions of both can countries are same. - ly=k Steady state capital labor ratio (**)-(on)" state per capita output and Country A: 8=0.2, 5:0.2, n = 0.2 -> **-(0:202] = (0.5) ਕ Country B:8=0.1, s= 0.15, n = 0.05 - ka Listoosita - (04) Han (b) you of country A = y a b country 8 = [o-s 7o** Consumption per capita of country A = (-s) y = (-0.2) yt =>60= 0.8[0.5] Consumptiro per capita country 836-01 (0-53 -0.9 (0.7 (c) (yes) [0.5] (nyug) 40.5] **)n = 694) [05) → Both countries produce same level of per capita autput But, could 0.8 0.5]' (6rso 0.9[.571 (CMA < (CS) 16> (6) = Country B consumes the most per capita. - 1 0-8 -0.89 <1

I believe that the production functions for country A and B are missing in the highlighted places (please refer to the screenshot below) and hence I am unable to solve them.

If the difference is only interms of [$\alpha$], then you may plug the repective values in the expression and find the steady state k, y and c and compare them.

d.) Now country A has production function while country B has production function Country A has saving rates of 0.2, depreciation rates of 0.2 but population growth of 0.6. Country B has saving rates of 0.1, depreciation rate of 0.15 and population growth of 0.05. e.) Find the steady state capital-labor ratio for each country. f.) Find the steady state output per worker, and the steady state consumption per worker for each country. Which country produces the most per capita? Which country consumes the most per capita?