Question

Suppose there are 2 countries i,j where both the countries are identical in every aspect excepting quality of education. Although both the countries have same levels of factors of production, however the quality of education per person in country i is better than that in country j.

Find the development accounting equation in the current scenario and explain how the quality difference will influence the development accounting equation.

Answer 1

Thus we can see that due to the different levels of the quality of education, both the countries have different production functions and thus the change in the capital per capita at steady state condition is also different. Therefore, the level of capital per capita level would also be different in both the countries.