Why are workers still poor after decades of growth? Explain this based on the Lewis theory of development.
- Suppose the Canadian Parliament enacts legislation that encourages saving and investment. As a result, suppose the investment rate increases permanently from sl to s2 where sl <s2 ). Examine the policy change in the Solow model, assuming that the economy begins in a steady-state. Sketch a graph of how output per worker evolved over time with and without the policy change.