Country A and country B both have the production function Y=F(K,L)=K1/3L2/3 Does this production function have constant returns to scale? Explain. What is the per-worker production function y=f(k)? Assume that neither country experiences population growth or technological progress and that 20 percent of capital depreciates each year. Assume further that country A saves 10 percent of output each year and country B saves 30 percent of output each year. Using your answer from part (b) and the steady- state condition that investment equals depreciation, find the steady-state level of capital per worker for each country. Then find the steady-state levels of income per worker and consumption per worker.
Uploaded by PresidentBraverySkunk32 on coursehero.com