In the early 1980s, Brazil and South Korea had similar saving rates (around 17% of GDP) and similar levels of income per capita (around $6,000 in 1996 dollars). In the 1980-2010 period, the saving rate stayed around 17% in Brazil, whereas it increased to more than 30% in Korea. (a) Use the Solow model to predict the effects on the steady-state income per capita for both countries (assuming their multifactor productivity gains were exactly the same) and compare. (b) In 2010, income per capita was $9,000 in Brazil, and $28,000 in Korea. Is this consistent with your predictions?
In the early 1980s, Brazil and South Korea had similar saving rates (around 17% of GDP) and similar levels of income per capita (around $6,000 in 1996 dollars). In the 1980-2010 period, the saving rate stayed around 17% in Brazil, whereas it increased to more than 30% in Korea. (a) Use the Solow model to predict the effects on the steady-state income per capita for both countries (assuming their multifactor productivity gains were exactly the same) and compare. (b) In 2010, income per capita was $9,000 in Brazil, and $28,000 in Korea. Is this consistent with your predictions?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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