In the Solow growth model, if two countries are otherwise identical (with the same production function, same saving rate, same depreciation rate, and same rate of population growth) except that Country Large has a population of 1 billion workers and Country Small has a population of 10 million workers, the steady-state level of output per worker will be _____, and the steady-state growth rate of output per worker will be _____.

Question

Quizplus · Accepted Answer

The steady-state level of output per worker is determined by the production function, saving rate, depreciation rate, and rate of population growth. Since these are the same in both countries, the steady-state level of output per worker will be the same in both countries. The steady-state growth rate of output per worker is zero, since the economy is in a steady state.

In the Solow Growth Model, If Two Countries Are Otherwise