As an analyst for the Latin American Development Bank, you calculate that the share of income going to capital in both Columbia and Costa Rica is 10%. As a result you know that the per worker production function is:y=A*k0.10 You also know that the capital to labor ratio is 15.25USD in Columbia and 23.12USD in Costa Rica. Further, RGDP per worker is 12.18USD in Columbia and 13.31USD in Costa Rica.
a) What is the value for Total Factor Productivity in each country?
b) What is the return on capital (the real interest rate) in each country?
c) Given you answer to part (b), what will happen to the Capital Stock in each of the countries over time, that is will capital move between countries?
d) How do you think this will change RGDP per worker in each country?