In the island of Europa, taxes and regulations in the past have reduced hours worked per-capita, h-bar, relative to the neighboring island Amerika. After decades, output per-person in Europa is now lower than in Amerika.

Economist A argues that the behavior of Europa's economy is in line with the predictions of the Solow Model. She explains that all determinants of long-run output levels are the same across the two economies, expect for hours worked. Economist B explains that this cannot be possible; something else must be going on since output per-hour worked is the same across the two economies.

Using the Solow Model, carefully explain who is right.

Hint: define labor in the Solow Model as L = N*h-bar, where N stands for the number of people (workers).