(solution) Prove Proposition 19.4. Proposition 19.4 Consider a world economy with identical neoclassical…

(solution) Prove Proposition 19.4. Proposition 19.4 Consider a world economy with identical neoclassical…

Prove Proposition 19.4. Proposition 19.4 Consider a world economy with identical neoclassical preferences across countries and free flows of capital. Suppose that countries differ according to their productivities, the Aj s. Then, there exists a unique steady-state equilibrium in which capital-labor ratios differ across countries (in particular, effective capital-labor ratios, the kj s, are equalized).