Suppose a country is significantly richer than the others. According to the Solow growth model, what happens in the long run?

Question

Quizplus · Accepted Answer

According to the Solow growth model, in the long run, poorer countries will catch up to richer ones in terms of their capital stock and income levels. This is because poorer countries have higher marginal returns to capital investment, which means that they can grow at a faster rate than richer countries. As they accumulate more capital, their growth rate will slow down until it reaches the steady state, where the growth rate of output per worker is equal to the rate of population growth. Therefore, it is expected that the other countries will catch up to the rich one eventually.

Suppose a Country Is Significantly Richer Than the Others