Respuesta :
Answer:
Part a: According to Solow model higher per capita real GDP will be in Chile because of its highest saving rate.
Part b: The per capita capital stock or the labour ratio is the primary factor for these differences in the simple Solow model.
Explanation:
Part a:
According to Solow model higher per capita real GDP will be in Chile because of its highest saving rate.
In Solow model the GDP per capita is defined as
                      [tex]y=k^{\alpha}=f(k)[/tex]
Also the steady state path is given as
[tex]sf(k)=(s+n)k\\\frac{s}{s+n}=\frac{k^*}{f(k^*)}\\\frac{s}{s+n}=\frac{k^*^{\alpha-1}}{k^*}\\\frac{s}{s+n}={k^*^{\alpha-2}}[/tex]
As all other parameters are same thus the country with higher value of s will have a higher per capita GDP.
According to the Solow model, higher saving rate means larger capital stock and high level of output at the steady state.
Higher saving rate leads to faster growth in Solow model. So there is higher per capita real GDP for the country that has higher saving rate.
Part b:
In Simple Solow Model, the steady state per Capita GDP, [tex]y^*[/tex] is the function of the steady state per capita capital stock given as [tex]k^*[/tex]
Now this indicates that
[tex]y^*=f(k^*)[/tex]
where f is an increasing concave function i.e. f'>0 and f''<0
Thus the sole dependence of per capita GDP is on per capita capital stock.
Thus the per capita capital stock or the labour ratio is the primary factor for these differences in the simple Solow model.
Answer:
the Solow model will predict CHILE to have the higher per capita real GDP.
the primary factor that the simple Solow model use is CAPITAL. For example In 2018, capital investment was $3,652.2 billion for a capital contribution of 17.82%
Explanation: the solow model predict Chile to have higher per capital real GDP because Chile has the highest percentage of average saving rate among the four countries.
Capital is one of the factors in the growth accounting factor introduced by Robert solow in 1957.
