Find out the two possible fiscal policy solutions for the problem.
The Solow model and relative country Performance: Consider the real world data for South Korea and South Africa for the year 2000. Capital/Worker (K/N) and GDP/Worker (Y?N) are expressed in 2000 dollars
Pop. Growth
Savings Rate
Capital/Worker
GDP/Worker
n
s
k
y
SK
.0106
.325
91495
33202
SA
.01675
.1796
22704
20315
Assuming that the depreciation rate, d = .05 and the share in the Cobb-Douglass production function, Θ=.35 is the same for countries. what will happen to their relative output per worker in the long run? Will South Africa catch up?