Problem
Suppose, in the Solow growth model, that learning by doing is captured as a cost of installing new capital. In particular, suppose that for each unit of investment, r units of goods are used up as a cost to firms.
(a) Determine how r affects the steady state quantity of capita per worker, and per capita income.
(b) Now suppose that r differs across countries. How will these countries differ in the long run? Discuss.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.