Reference no: EM133268572

Consider the production function used in class, y = Akαh1-α

a. Derive the steady state values of k and y.

b. Assuming that two countries have the same values only for A, δ, and α derive an expression for the predicted steady state values of output per worker relative to a benchmark country (assume that to be to the US). Countries may differ in terms of gamma, h, andn.

c. The table for this homework contains data on investment rates, popula- tion growth rates, and human capital for many countries. A = 1, δ = 0.05 and α = 1/3 for all countries.

(a) Calculate the ratio of each country's steady state k and y relative to the US steady state y based on part b.

(b) The spreadsheet also provides Y and L to calculate actual y. Plot the actual (y-axis) vs the steady state predicted (x-axis).

(c) Discuss the differences and similarities between the actual and pre- dicted values.