Consider the economies of Hermes and Gobbledigook, both of which produce gaggles of gop using only tools and workers. Suppose that, during the course of 40 years, the level of physical capital per worker rises by 5 tools per worker in each economy, but the size of each labor force remains the same. Complete the following tables by entering productivity (in terms of output per worker) for each economy in 2014 and 2054.
Hermes
Year Physical capital Labor force Output Productivity
(Tools per worker) (workers) (gaggles of gop) (gaggles per worker)
2014 11 30 1,800
2054 16 30 2,160
Year Physical capital Labor force Output Productivity
(Tools per worker) (workers) (gaggles of gop) (gaggles per worker)
2014 8 30 900
2054 13 30 1,620
Initially, the number of tools per worker was higher in Hermes than in Gobbledigook. From 2014 to 2054, capital per worker rises by 5 units in each country. The 5-unit change in capital per worker causes productivity in Hermes to rise by a amount than productivity in Gobbledigook. This illustrates the concept of , which makes it for countries with low output to catch up to those with higher output.