Long Run Growth

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.
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?
Task #2 International Comparisons (6 marks). Choose three from the following five countries
• China
• India
• Japan
• South Korea
• United States
Intro Macro: Assignment #2 3
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.
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 K
1/3
it L
2/3
it
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 K
1/3
it (HitLit)
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

Sample Solution

ACED ESSAYS