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Question 1: The following tables show data on investment rates and output per worker for three pairs of countries. For each country pair, calculate the ratio of GDP per worker in steady state that is predicted by the Solow model, assuming that all countries have the same values of A and d and that the value of a is 1/3. Then calculate the actual ratio of GDP per worker for each pair of countries. For which pairs of countries does the Solow model do a good job of predicting relative income? For which pairs does the Solow model do a poor job?
a. Investment Rate Output per Worker Country (Average 1975-2009) in 2009
Thailand 35.2% $13,279
Bolivia 12.6% $8,202
b. Investment Rate Output per Worker Country (Average 1975-2009) in 2009
Nigeria 6.4% $6,064
Turkey 16.3% $29,699
C. Investment Rate Output per Worker Country (Average 1975-2009) in 2009
Japan 29.9% $57,929
New Zealand 18.6% $49,837
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