WORKING WITH MACROECONOMIC
For data to use in these exercises, go to the Federal Reserve Bank of St. Louis FRED database at fred.stlouisfed.org.
1. This problem asks you to do your own growth accounting exercise.
Using data since 1960, make a table of annual growth rates of real GDP, the capital stock (private fixed assets from the Fixed Assets section of the BEA website, www.bea.gov, Table 6.2), and civilianDATA
employment. Assuming aK = 0.3 and aN = 0.7, find the productivity growth rate for each year.
a. Graph the contributions to overall economic growth of capital growth, labor growth, and productivity growth for the period since 1960. Contrast the behavior of each of these variables in the post-1973 period to their behavior in the earlier period.
b. Compare the post-1973 behavior of productivity growth with the graph of the relative price of energy, shown in Fig. 3.11. To what extent do you think the productivity slowdown can be blamed on higher energy prices?
2. Graph the U.S. capital-labor ratio since 1960 (use private fixed assets from the Fixed Assets section of the BEA website, www.bea.gov, Table 6.2 as the measure of capital, and civilian employment as the measure of labor). Do you see evidence of convergence to a steady state during the postwar period? Now graph real output per worker and real consumption per worker for the same period. According to the Solow model, what are the two basic explanations for the upward trends in these two variables? Can output per worker and consumption per worker continue to grow even if the capital-labor ratio stops rising?
3. According to the Solow model, if countries differed primarily in terms of their capital-labor ratios, with rich countries having high capital-labor ratios and poor countries having low capital-labor ratios, then countries that have a lower real GDP per capita income should grow faster than countries with a higher real GDP per capita.
(This prediction of the Solow model assumes that countries have similar saving rates, population growth rates, and production functions.) You can test this idea using the Penn World Tables at www.rug.nl/ggdc/productivity/pwt/. Pick a group of 10 countries and examine their initial levels of real GDP per capita in a year long ago, such as 1960. Then calculate the average growth rate of real GDP per capita since that initial year. Do your results suggest that countries that initially have lower real GDP per capita indeed grow faster than countries that initially have a higher real GDP per capita?4. In FRED, get data on the levels of real GDP per capita for both the United States and China for the most recent year that such data are available for both countries. By what percentage does real GDP per capita in the United States exceed real GDP per capita in China? Next, calculate and report the average growth rate of real GDP per capita for the past 25 years for both countries. Which country is growing faster? If these growth rates for the past 25 years were to continue into the future, how many years will it be before China's real GDP per capita exceeds U.S. real GDP per capita?
More on the topic WORKING WITH MACROECONOMIC:
- References
- References (incomplete)
- REFERENCES
- Conclusion
- Keynes and Keynesianism, May 1946
- The End of the NRPB
- Education
- Schumpeter and Samuelson
- EXERCISE
- Conclusions