To decompose what explains the difference in per capita GDP between any two countries, say, 1 and 2, we would use:
A) $\frac { y _ { 1 } ^ { * } } { y _ { 2 } ^ { * } } = \frac { \bar { A } _ { 1 } } { \bar { A } _ { 2 } } \times \left( \frac { \bar { k } _ { 1 } } { \bar { k } _ { 2 } } \right) ^ { 1 / 3 }$
B) $\frac { y _ { 1 } ^ { * } } { y _ { 2 } ^ { * } } = \frac { \bar { A } _ { 1 } } { \bar { A } _ { 2 } }$
C) $\frac { y _ { 1 } ^ { * } } { y _ { 2 } ^ { * } } = \left( \frac { \bar { k } _ { 1 } } { \bar { k } _ { 2 } } \right) ^ { 1 / 3 }$
D) $\frac { y _ { 1 } ^ { * } } { y _ { 2 } ^ { * } } = \frac { \bar { A } _ { 1 } } { \bar { A } _ { 2 } } \div \left( \frac { \bar { k } _ { 1 } } { \bar { k } _ { 2 } } \right) ^ { 1 / 3 }$
E) $\frac { y _ { 1 } ^ { * } } { y _ { 2 } ^ { * } } = \left( \frac { \bar { A } _ { 1 } } { \bar { A } _ { 2 } } \right) ^ { 1 / 3 }$

Question

Quizplus · Accepted Answer

The correct formula to decompose the difference in per capita GDP between two countries involves both the total factor productivity ratio and the capital per worker ratio raised to the power of 1/3, as shown in choice A.

To Decompose What Explains the Difference in Per Capita GDP