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Description Consider two economies, 1 and 2. Both economies have a production function of the type ...

Description Consider two economies, 1 and 2. Both economies have a production function of the type Y = ÀK1/3 L2/3. The two economies have the same labor force, L1= L2= 1. The capital stock in country 2 is 8 times larger than the capital stock in country 1 the GDP in country 2 is 6 time larger than GDP in country 1. How mach (in percentage terms) of the GDP differences across countries 1 and 2 are explained by TFP differences relative to capital differences?

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