Suppose a country has no growth in technology, and capital and labor hours are growing at the same rate. Suppose a developing country does not allow foreign investment to flow into the country and, at the same time, it has a very low saving rate. Use the fact that saving equals investment and the growth accounting formula to explain why this country will have difficulty catching up with industrialized countries. The states of the United States have moved toward each other in real income per capita over the past 100 years, but the countries of the world have not. Worldwide saving rates fall.
Countries place high tariffs on importation of goods.
The legal system of developing countries is improved to protect the rights of entrepreneurs. For the labor-only model, show what would happen if the population required more food for subsistence. Show what happens to output and population. Suppose policymakers desire real GDP per hour of work to grow by 2.5 percent at an annual rate. The US educational system is falling behind other countries, especially in mathematics and science in grades K through 12.