The amount of education the typical person receives varies substantially among countries. Suppose you were to compare a country with a highly educated labor force and country with a less educated labor force. Assume that education affects only the level of the efficiency of labor. Also assume that the countries are otherwise the same: they have the same saving rate (s), the same depreciation rate (δ), and the same population growth rate (n), and the same rate of technological progress (g). Both countries are described by the Solow model and are in their steady states. What would you predict for the following variables?
a.) The rate of growth of total income.
b.) The level of income per worker.
c.) The real rental price of capital (MPK = r/p, where r/p is the real rental price of capital).
d.) The real wage (MPL = w/p, where w/p is the real wage).
If the production function is Cobb-Douglas (i.e., Y = AKαL(1-α) , the MPK = (1-α)AKαL-α and MPL = AKα-1Lα-1.