Question

3. Use the standard assumption of Harrod-neutral technology to answer the following. According tothe World Bank, measured in terms of purchasing power parity (PPP), the living standard in theU.S. is approximately 7x that of the Philippines. a. In the Solow model, determine how the Philippine savings rate would need to compare with the U.S. savings rate in order to explain this difference. Assume that A, g, n ( = g.), and 8 are the same for the U.S. and the Philippines, so that differences in savings rates account for the entire difference in the level of living standards. b. Solow assumes that technical change is a public good, so that A and g are equally accessible to all countries. Given your finding in (a) is this assumption plausible? Explain

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