4 The catch up effect Consider the hypothetical economies of

Last updated: 2/20/2023

4 The catch up effect Consider the hypothetical economies of Hestiatia and Pelhelm both of which produce cases of argo using only workers and tools Suppose that during the course of 30 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 2021 and 2051 Physical Capital Year Tools per worker 2021 19 2051 23 Year 2021 2051 Physical Capital Tools per worker 16 20 Hestiatia Labor Force Workers 60 60 Output Cases of argo 6 000 7 200 Pelheim Labor Force Workers 60 60 Output Cases of argo 4 800 7 200 Productivity Cases per worker Productivity Cases per worker Initially the number of tools per worker was higher in Hestiatia than in Pelheim From 2021 to 2051 capital per worker rises by 4 units in each country The 4 unit change in capital per worker causes productivity in Hestiatia to rise by a amount than productivity in Pelheim This illustrates the effect