What is the per-effective worker production function

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Two countries, Richland and Poorland are described by the Solow growth model. They have the same Cobb-Douglas production function F(K,L) = Kf(EL)1-f. Poorland saves 10% of its income. Richland and Poorland have the same levels of popualtion growth, technology growth, and depreciation.

(a) What is the per-effective worker production function?

(b) Show that steady state income per effective worker is equal to:
((n+g+ f)/s) f/ (f-1)

(c) What is the steady state ratio of income in Richland to Poorland if sr is the savings rate for Richland? (Hint: It depends on ? and sr).

(d) If f equals 1/3, what savings rate would Richland have to have in order to have twice times the income of Poorland.

(e) If f equals 2/3, what savings rate would Richland have to have in order to have twice the income of Poorland. How could you justify this alpha? How else might you explain the income differential?

Reference no: EM13209413

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