1. Assume that a country's production function is Y = KiLÄ. Assume there is no population growth or technological change a. What is labor productivity computed from the per-worker production function? Is this value the same as labor productivity computed from the original production function b. Assume that 10 percent of capital depreciates each year. What gross saving rate is necessary to make the given capital-labor ratio the steady-state capital-labor ratio? (Hint: In a steady state with no population growth or technological change, the saving rate multiplied by per-worker output must equal the depreciation rate multiplied by the capital-labor ratio.)
1. Assume that a country's production function is Y = KiLÄ. Assume there is no population growth or technological change a. What is labor productivity computed from the per-worker production function? Is this value the same as labor productivity computed from the original production function b. Assume that 10 percent of capital depreciates each year. What gross saving rate is necessary to make the given capital-labor ratio the steady-state capital-labor ratio? (Hint: In a steady state with no population growth or technological change, the saving rate multiplied by per-worker output must equal the depreciation rate multiplied by the capital-labor ratio.)
Chapter20: Economic Growth In The Global Economy
Section: Chapter Questions
Problem 4P
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