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Unformatted text preview: 1 Economics 101 In-Class Exercise #3 Answers Romer Model Department of Economics Professor Siegler UC Davis Summer 2009 Consider two countries that are described by the Romer growth model: ܻ ௧ ൌ ܣ ௧ ܮ ௧ (Output production function) Δܣ ௧ ൌ ݖҧܣ ௧ ܮ ௧ (Ideas production function) ܮ ௧ ܮ ௧ ൌ ܰ ഥ (Resource constraint) ܮ ௧ ൌ ℓ ത ܰ ഥ (Allocation of labor) The following exogenous parameters are the same in both countries: ܣ ҧ ൌ 250, ݖҧ ൌ 1 4,000 ൌ 0.00025, ܽ݊݀ ܰ ഥ ൌ 2,000 The only difference between the two countries is that Country B has a larger share of researchers than does Country C. In Country B, 8 percent of the population are researchers in the ideas producing sector, while in Country C only 4 percent of the population are researchers ( ℓ ത ൌ 0.08 ܽ݊݀ ℓ ത ൌ 0.04 ). A. What is the level of output per capita in Country B and Country C in year 0? Which country produces more goods and services per person in year 0? country produces more goods and services per person in year 0?...
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- Summer '08
- Economics, per capita