Question 5 Chapter 12 The catch-up effect
Consider the economies of Sporon and Gribinez, both of which produce gobs of goo using only tools and
workers.
... [Show More] Suppose that, during the course of 10 years, the level of physical capital per worker rises by 4 tools
per worker in each economy, but the size of each labor force remains the same.
Complete the following tables by entering productivity (in terms of output per worker) for each economy in
2017 and 2027.
Year
Sporon
Physical Capital Labor Force Output Productivity
(Tools per worker) (Workers) (Gobs of goo) (Gobs per worker)
2027 15 30 3,600
Points: 1 / 1
Year
Gribinez
Physical Capital Labor Force Output Productivity
(Tools per worker) (Workers) (Gobs of goo) (Gobs per worker)
2027 12 30 3,600
Explanation:
Points: 1 / 1
Close Explanation
In 2017, there are 11 tools for each worker in Sporon. You can compute productivity in the following
way:
In 2027, capital per worker rises to 15 tools per worker, and output per worker rises to 120 gobs per
120
120
2017 8 30 2,400 80
smaller
Explanation: Close Explanation
The disparity in the growth of productivity reflects the fact that capital is subject to diminishing returns
(that is, the increase in output generated by an increase in capital is less than the increase in output
generated by previous increases in capital). In Gribinez, where workers have relatively few tools to
work with, additional tools substantially increase productivity. In Sporon, workers already have a
relatively large quantity of tools to work with, so adding more tools results in more modest productivity
growth.
This hypothetical example illustrates a real-world phenomenon known as the catch-up effect. The
catch-up effect is when higher productivity growth in countries with less capital per person helps those
countries grow faster and catch up to the per-capita incomes of countries with more capital per person.
Initially, the number of tools per worker was higher in Sporon than in Gribinez. From 2017 to 2027, capital
per worker rises by 4 units in each country. The 4-unit change in capital per worker causes productivity in
Sporon to rise by a amount than productivity in Gribinez. This illustrates the concept of
up to those with higher output.
, which makes it for countries with low output to catch
Points: 1 / 1
diminishing returns
worker ( ). In Sporon, a 4-unit change in capital per worker causes output per worker
to rise by 20 gobs per worker.
Similarly, in 2017, there are 8 tools for each worker in Gribinez, and output per worker is 80 gobs of
goo per worker ( ). In 2027, capital per worker rises to 12 tools per worker, and
Gribinez's output per worker rises to 120 gobs per worker ( ). In Gribinez, a 4-unit
change in capital per worker causes output per worker to rise by 40 gobs per worker.
easier [Show Less]