00:01
So here we are talking living standards, right? and remember that when we talk about living standards, we are usually thinking about gdp per capita, right, at least in economics.
00:12
And gdp per capita is y over l, right? the amount of output per the number of workers.
00:17
So let's think about each of these countries in turn, right? we're going to think about a.
00:22
A, y, over l.
00:24
Well, what is y? well, it says to use a production function.
00:27
So i'm going to assume cobb douglas.
00:28
Let's imagine that my production function looks something like this, a standard cobb douglas function, featuring diminishing returns to capital and labor.
00:41
So here we have a, k to the alpha, l to the 1 minus alpha over l, which is a, k to the alpha over l to the minus alpha.
00:57
So for country a, the capital stock is going up...