Two Countries, Highland and Lowland, Are Described by the Solow

question 14

Essay

Two countries, Highland and Lowland, are described by the Solow growth model. Both countries are identical, except that the rate of labour-augmenting technological progress is higher in Highland than in Lowland.
a.In which country is the steady-state growth rate of output per effective worker higher?
b.In which country is the steady-state growth rate of total output higher?
c.Does the Solow growth model predict that the two economies will converge to the same steady state?

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Definitions:

Unaware

Lacking knowledge or awareness about something.

Equity of Redemption

The right of a debtor to reclaim property that has been used as collateral after the debt obligation has been fully paid.

Hypothecation

The practice of pledging assets as collateral to secure a loan, without transferring ownership of the collateral.

Legal Title

The formal right of ownership of property, recognized and protected by law.