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Two countries, Rhodia and Rubium, have identical production functions in the form Y = A K0.25 ...

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Two countries, Rhodia and Rubium, have identical production functions in the form Y = A K0.25 ...

Two countries, Rhodia and Rubium, have identical production functions in the form Y = A × K0.25 × H0.75, where Y denotes total output, A denotes the level of technology, K denotes the physical capital stock, and H denotes the efficiency units of production. Both countries have the same amount of physical capital stock and use the same technology. However, the total efficiency units of labor in Rhodia is higher than that in Rubium. Which of the following is likely to be TRUE in this case?

▸ The poverty rate in Rhodia is likely to be higher than that in Rubium.

▸ The Human Development Index of Rhodia is lower than that of Rubium.

▸ The GDP of Rubium is higher than that of Rhodia.

▸ The GDP of Rhodia is higher than that of Rubium.

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Macroeconomics

Edition: 3^rd

Authors: Acemoglu, Laibson, List

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