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Countries Starting With Same Production Function


Why did some countries fare better in the recent financial crisis? Can early warning indicators help predict which countries will be most vulnerable in an economic crisis such as the one that occurred in 2008-09?

From the data found in the Excel sheet attached, we want to focus on the following five countries:
·    Australia
·    China
·    Iceland
·    Japan
·    United States


Using per-worker production functions from the economic growth model, explain how two economies starting with the same production function and same initial levels of (Y/L) and (K/L) can experience very different economic outcomes 30 years later (focus on real GDP per hour worked as the outcome). Assume that the first economy is a centrally planned economy and the second economy is a market economy.


The question belongs to Economics and it discusses about how two economies starting with same production function and same initial levels can experience different economic outcomes 30 years later. This has been discussed in the solution in detail.

Total Word Count 300

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