Countries A and B have the same Cobb-Douglas production function with = 1/3, and identical rate of depreciation of 0.05 (5%). Country A has an investment rate of 10% and a population growth rate of 8%. Country B has an investment rate of 8% and a population growth rate of 5%.
a. Without calculating the GDP per capita for each country, explain why it is impossible to tell which country would have the higher GDP per capita.
b. Now, using the information given, find which country has the higher steady-state GDP per capita and by how much?