1. Consider the following data, which applies to Avataria and Twilightia in the

Question

1. Consider the following data, which applies to Avataria and Twilightia in the years

1990 and 2010. In both countries the production function in per worker terms is:

y = A(k)^1/2(h)^1/2.

Country; Year; Output per worker, y; Physical capital per worker, k; Human capital per worker, h

Avataria: 1990; 50; 5; 125

                 2010; 400; 60; 375

Twilightia: 1990; 25; 8; 128

                    2010; 300; 48; 768

(a) What were the productivity levels in each country in 1990 and 2010?

(b) Which country had higher annual factor accumulation growth rate between 1990 and 2010?

(Calculate these rates.)

(c) Which country had higher annual productivity growth rate between 1990 and 2010? (Calculate

these rates.)

Explanation / Answer

Avataria :

CALULATING FOR AVATARIA 1990:

50 = A(5)^1/2(125)^1/2

50 = A(625)^1/2

=>A = 2

Hence,A=2

CALULATING FOR AVATARIA 2010:

400 = A(60)^1/2(375)^1/2

400 = A(22500)^1/2

=>A = 400/150 = 8/3

Hence,A=8/3

Increase in annual factor accumulation growth = (8/3-2)*100/2 = 33.33 %

annual productivity growth = (400 - 50)*100/50 = 700 %

Twilightia :

CALULATING FOR Twilightia 1990 :

25 = A(8)^1/2(128)^1/2

50 = A(1024)^1/2

=>A = 50/32 = 25/16

Hence,A=25/16

CALULATING FOR Twilightia 2010 :

300 = A(48)^1/2(768)^1/2

400 = A(16*3*3*256)^1/2

=>A = 400/192 = 25/12

Hence,A=25/12

b)Increase in annual factor accumulation growth = (8/3-2)*100/2 = 33.33 %

Increase in annual factor accumulation growth = (25/12-25/16)*100/25/16 = 33.33 %(equal to Avataria)

c)Annual productivity growth = (400 - 50)*100/50 = 700 %

Annual productivity growth = (300 - 25)*100/25 = 1100 % (higher than Avataria)

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.