Question

The amount of education the typical person receives varies substantially among countries. Suppose you were to compare a country with a highly educated labor force and a country with a less educated labor force. Assume that education affects only the level of efficiency of labor. Also assume that the countries are otherwise the same: they have the same saving rate, the same depreciation rate, the same population growth rate, and the same technological progress. Both countries are described by the Solow model and are in their steady states. What would you predict for the following variables?(A) The rate of growth of total income.(B) The level of income per worker.(C) The real rental price of capital.(D) The real wage.

Answer 1

Answer:

A) Same rate of growth of total income.

B) Same level of income per worker.

C)  Same real rental price of capital.

D)  Same real wage.

Explanation:

A) Since the both countries has same technological progress and population growth, it won't increase the growth of income in country than the other.

B) Same population same saving rate means that there is the same level of income per worker.

C) Population growth and other growths are same by which it can be concluded that rental price of capital will be the same.

D) The labor force maybe highly educated but considering the growth of progress in both countries are same, hence the real wage would be the same.