Suppose that the two countries are equal in every respect with the exception of the population. One country has higher population growth than the other. Suppose that initially the two closed to trade.
a) Provide a graphical comparative analysis of the two countries using the Solow model. Describe in details the steady-state of per-capita output and capita in the long-run. (200 words)
Suppose that the two countries are now identical in every respect with the exception of the savings. One country has higher savings than the other.
b) Provide a graphical comparative analysis of the two countries using the Solow model. Describe in details the steady-state of per-capita output and capita in the long-run. (200 words)
The two countries with different saving rate but identical in every aspect including populatin, agree to remove the barriers to trade and capita flows.
c) Comment on the implications of the policy for the steady-state values of per-capita capital and output in the two countries. (200 words)
According to endogenous growth theory, developing countries can receive more benefit from trade with developed countries than from trade with developing countries. Discuss this in reference to the article on “North-South R&D spillovers”, by Coe, Helpman and Hoffmaister, 1997. Use the empirical evidence and data in the article, to support your discussion. (300 words)
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