ECON10003 Introductory Macroeconomics Assignment #2
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ECON10003
Introductory Macroeconomics
Assignment #2
LoNc RUN GRowTH
In this assignment you will collect and interpret data on long run economic growth for Australia and a number of other countries. The best data for this purpose is the Penn World Tables (PWT) as dicussed below.
Task #1 Australia (4 marks). Use the Penn World Tables website
https://www.rug.nl/ggdc/productivity/pwt/
to download annual data covering the period 1950–2019 for the following variables
(i) real GDP [use ‘output-side real GDP at chained PPPs (in mil. 2017US$)’]
(ii) population
(iii) employment
(iv) average hours per worker
(v) the capital stock [use ‘capital stock at current PPPs (in mil. 2017US$)’]
Use a spreadsheet program to plot the levels of real GDP per person, real GDP per worker, real GDP per hour, and capital per worker for the Australian economy from 1950. Put all your plots on a log scale so that it is easier to spot changes in growth rates over time.
Calculate and report the average annual growth rate of real GDP per worker, real GDP per person, real GDP per hour, and capital per worker over the whole sample and over each decade (1950s, 1960s, . . . , 2010s). When did labour productivity grow quickly? When did it grow slowly? Has the Australian economy become more or less capital-intensive over this time? See the end of this document for more details on how to calculate growth rates, what years to include in a decade, etc.
Task #2 International Comparisons (6 marks). Choose three from the following five countries
. Bangladesh
. Brazil
. China
. India
. Indonesia
. Nigeria
For each of the three countries you choose, use the Penn World Tables to download annual data covering as much as possible of the period 1950–2019 for the same five variables (real GDP, population, employment, hours, capital) as disccussed for Australia.
Use a spreadsheet program to plot real GDP per person, real GDP per worker, real GDP per hour, and capital per worker for the three countries you choose. For each variable, put all three countries on the same plot to make it easier to compare them. Again put all your plots on a log scale .
Calculate and report the average annual growth rate of real GDP per worker, real GDP per person, real GDP per hour, and capital per worker over the whole sample and over each decade (1950s, 1960s, . . . , 2010s). If some data is missing, take averages over those dates for which the data is available.
Now suppose that each country i has a Cobb-Douglas production function of the form Yit = Ait Kit(1)/3 Lit(2/)3
where Yit denotes real GDP, Kit denotes capital, and Lit denotes the number of employed workers in country i on date t. Note that each country has the same share parameter α = 1/3 but they have different levels of total factor productivity (TFP) denoted Ait . Using this assumption, calculate and report the average annual growth rate of TFP over the whole sample and over each decade (1950s, 1960s, . . . , 2010s) — again, subject to data availability for each country.
Now suppose that the production function is instead
Yit = Ait Kit(1)/3 (Hit Lit )2/3
where Hit denotes average hours per worker, i.e., here the measure of labour input is total hours, not total employment. How if at all does this change your conclusions about TFP growth?
Briefly discuss the long run growth experiences of the three countries you choose. Which features of their experiences seem most important to you? Did these countries have similar or dissimilar experiences? Is their growth mostly due to capital accumulation or TFP growth? Explain.
Replication File. You must be able to replicate these calculations if we ask you to. To that end, you must keep a single spreadsheet recording the data you downloaded and the figures you made using this data. If we have questions about your assignment, we will ask you for this file.
Handling the data.
● Growth rates. For any variable Xt in year t, calculate the annual percentage growth rate as
Xt - Xt − 1
Xt − 1
The average annual growth rate over T years is then
T
1
gX,t
t=1
● Decades. Treat the decades as, for example,
1950s = (1950, 1951, 1952, 1953, ..., 1959)
● Rounding. Round final answers to 2 decimal places.
● Log scale. Put plots on a log scale so that it is easier to spot changes in growth rates over time. Your tutors will explain this in more detail.
2022-10-02