ECON 333: Economic Development Base on Excel answer questions of ECON like growth rates of GDP per capita and you can find it in the Excel tab labeled Question 1.

ECON 333: Economic Development, Spring 2021

College of Business and Economics

Assignment 1

Due March 4th before class starts (upload to Canvas)

Download the Excel file “Assignment1.xlsx” from Canvas. This contains data for 8 countries (Brazil, China, Germany, India, Japan, Mexico, Spain and the U.S.) from 1970 to 2019.

The variables included in the worksheet are, for the first question: Real GDP per capita at 2017 $US (PPP); and for the second question: Real aggregate GDP at constant national prices (in mil. 2017 $US), number of employees (in millions), annual hours worked per employee, a human capital index; capital stock at constant national prices (in mil. 2017 $US), and labor compensation as a share of GDP. All the data is from the Penn World Table (version 10). Save this file as “YourLastName YourFirstName Assignment1.xlsx”. All your answers should appear in this file.

(1) (40 points) The first question concerns growth rates of GDP per capita and you can find it in the Excel tab labeled Question 1.

(1.a) (10 points) For each country and for each year compute the growth rates of GDP per capita. They should appear along the column labeled 1.a in the cells that show up grey. As an example, to get the growth rate of per capita GDP in the U.S. in 1971, which should appear in the

row for year 1971 and in the column labeled 1.a, compute GDP.pcUS1971 GDP.pcUS

1970 − 1 ' 2.42%.

(1.b) (10 points) For each country and for each decade compute average growth rates of GDP per capita. They should appear every 10 years along the column labeled 1.b in the cells that show up grey. As an example, to get the average growth rate of per capita GDP in the U.S. in the 1980s, which should appear in the row for year 1990 and in the column labeled 1.b, compute(

GDP.pcUS1990 GDP.pcUS

1980

) 1 10

−1 ' 2.41%. Once you’ve done this for all countries and all decades, write the name and decade of the country that grew the least over a decade in the grey cell just below Answer in the column labeled 1.b.

(1.c) (10 points) Compute average growth rates of GDP per capita for each country, for the entire period from 1970 to 2019. They should appear once for every country along the column labeled 1.c and along the rows for year 2019 in the cells that show up grey. As an example, to get the average growth rate of per capita GDP in the U.S., which should appear in the row for year

2019 and in the column labeled 1.c, compute

( GDP.pcUS2019 GDP.pcUS

1970

) 1 49

− 1 ' 1.89%. Once you’ve done this for all countries, write the name of the country that grew at the fastest average rate over the whole period in the grey cell just below Answer in the column labeled 1.c.

(1.d) (10 points) In the column labeled 1.d compute, from 1970 to 2019, the ratio of the

Brazilian GDP per capita to the US GDP per capita, that is: GDP BRAt GDP USt

, for t = 1970 to t = 2019.

Next, plot the series you computed (on the y-axis) against the years (on the x-axis) in the area labeled PUT CHART FOR 1.d AROUND HERE.

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(2) (60 points) The second question is on growth accounting and the goal is to compute the contribution of factor accumulation and TFP for GDP growth across these countries over time. You can find it in the Excel tab labeled Question 2.

(2.a) (10 points) The first step is to compute, in the Excel sheet, for each year (starting in 1970 and ending in 2019) and for each country, effective labor (in the column labeled Labor). To do this you will need to multiply Employees by Annual hours worked and by the Human Capital Index. All the grey cells should be filled. As an example, in the US in 1970, Labor is 490, 185.12.

(2.b) (10 points) Next, compute, for each year (starting in 1971 and ending in 2019) and for each country, the yearly growth rate of real aggregate GDP (in the column labeled gY ), the yearly growth rate of the capital stock (in the column labeled gK ), and the yearly growth rate of the labor aggregate you just computed in part (2.a) (in the column labeled gL). All the grey cells should be

filled. As an example, the growth rate of U.S. GDP in 1971 is GDP US1971 GDP US

1970 − 1 ' 3.29%.

(2.c) (10 points) Next, compute, for each year (starting in 1971 and ending in 2019) and for each country, the contribution of each factor for growth: WL×gL and WK ×gK . Recall that WL is the labor compensation share of GDP, that shows up in the column labeled Labor share (WL), and that WK = 1−WL. Your computations should appear in the columns labeled W K*g K and W L*g L that are grey. As an example, for the U.S. in 1971, WK ×gK ' 1.11%.

(2.d) (10 points) You are now ready to compute, for each country and for each year (starting in 1971 and ending in 2019), the growth rate of TFP, or Solow residual. This should show up in the column labeled g A and is given by: gA = gY − WL × gL − WK × gK. As an example, for the U.S. in 1971, gA ' 2.03%.

(2.e) (10 points) Next, compute the share of output growth that is accounted for by growth in the capital stock sK =

WK×gK gY

, by growth in labor sL = WL×gL

gY , or by total factor productivity

(TFP) growth, sA = gA gY

for each country and year from 1971 to 2019. These should appear, respectively, in the columns labeled s K, s L, and s A. For your reference, in 1971 in the United States sA = 61.52%. Note that these contributions are not all going to be between zero and 100% (although most are). They can be negative or greater than 100%. As a check, verify that for every year and for every country: sA + sL + sK = 100%.

(2.f) (10 points) In this final part you will compute, for each country, the average (over all years from 1971 to 2019) contribution of capital, labor, and TFP for growth in the bounded cells in the row labeled 2.f Average all years. Start by computing the averages for gY , gK , and gL,

by using the formula ( x2019 x1970

) 1 49 − 1. For your reference, the average gY in the US was 2.79% and

should appear in the column labeled g Y and along the row labeled 2.f Average all years. Then, use the average gK and average gL, together with the average WL and average WK , to compute the averages WL ×gL and WK ×gK (note that the average WL and average WK are computed as simple arithmetic averages since they are not growth rates). For your reference, for the US, the average WL × gL was 0.96%. Next compute the average gA by subtracting the averages WL × gL and WK × gK from the average gY . Finally, compute the average sK , sL and sA, by dividing the averages WK×gK , WL×gL and gA, respectively, by the average gY . In particular, do not, compute the averages for sK , sL and sA by averaging over the whole years. For your reference the average sA for the US was 32.20%.

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