(2.5 pts) Assume the income per worker in the United States in a particular year

Question

(2.5 pts) Assume the income per worker in the United States in a particular year was $98,195 and the income per worker in the UK that same year was $71,603. The income per worker in the UK if the technology were at US level would be $85,548. 4. (2 pts) Compute the total gap in income per worker between the US and the UK. What part of the income per worker gap between the US and the UK can be explained by differences in technology? What part of the income per worker gap between the US and the UK can be explained by differences in human capital and physical capital? (0.5 pt) Assume years of schooling underestimate the skills of workers in the US. Discuss the effect of this measurement error on the decomposition you computed in part a a. b.

Explanation / Answer

Part-1) Total gap in income per worker between US and UK: 26,592

Part of the income per worker gap between the U.S. and U.K. that is explained by differences in technology: 13,945

Part of the income per worker gap between the U.S. and U.K. that is explained by differences in human capital and physical capital: 12647

Working:

98,195 - 71,603 = 26,592;

85,548 - 71,603 = 13,945;

98,195 - 85,548 = 12,647

PART-2) Because the schooling underestimate the skills of workers in the U.S. thus as a result the above calculations will differ as there is unestimation of income per worker in U.S

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.