You Are Asked to Make Comparisons of Two Pairs of Countries

question 2

Essay

You are asked to make comparisons of two pairs of countries. The first pair is the Latin American countries of Chile and Argentina; the second pair is France and Germany. You are given the following information: the average saving rate in Argentina is 23.3 percent, in Chile it is 28.7 percent, in France it is 21.1 percent, and in Germany it is 20.8 percent. Assuming the countries are identical in every other way, which country would the Solow model predict to have the higher per capita real GDP? However, you find out the steady-state real per capita GDP in each of the countries is $13,300 in Argentina, $12,500 in Chile, $31,300 in France, and $34,000 in Germany. What is the primary factor that the simple Solow model uses to describe these differences? Give an example.

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Definitions:

Physical Isolation

The state of being separated from other people or communities, often referring to geographic or natural barriers that limit access and communication.

System of Roads

An interconnected set of paths or routes designed for the transportation of goods, people, and services across areas.

American Identity

The sense of a collective character, traditions, and beliefs shared by citizens of the United States.

Local Loyalties

Local loyalties refer to the allegiance or strong attachment people have towards their local community, town, or region, often taking precedence over national loyalties.