Show transcribed image textIf multifactor productivity growth in both countries remained the same, the Dominican Republic would have a greater steady-state GDP per capita than Belize. This is in line with the available data, as the annual income per person in Belize in 2018 wa…View the full answerTranscribed image text: 4. [6 points] In the early 1990s, Belize and the Dominican Republic had similar saving rates of around 15% of GDP, and similar levels of income per capita (around $5,500 in 2011 dollars). In the 1990-2018 period, the saving rate fell below 10% in Belize, whereas it increased and fluctuated between 20% and 25% in the Dominican Republic. (a) Use the Solow model to predict the effects on the steady-state income per capita for both countries (assuming their multifactor productivity gains were exactly the same) and compare. (b) In 2018, income per capita was $7,700 in Belize, and $15,700 in the Dominican Republic. Is this consistent with your predictions in (a)?
