The introduction of human capital to the Solow neoclassical growth model ________ the predicted rate of return on investment in rich countries relative to poor countries.

Question

Quizplus · Accepted Answer

The introduction of human capital to the Solow neoclassical growth model reduces the predicted rate of return on investment in rich countries relative to poor countries because it accounts for differences in productivity and investment in education, which can be higher in richer countries, thus lowering the marginal returns compared to poorer countries.

The Introduction of Human Capital to the Solow Neoclassical Growth