Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A data problem. Use the famed Penn World Tables. Report the (Pearson) correlation between 2015 GDP per capita (rgdpe/pop) and: (a) Capital per capita (cn/pop)

A data problem. Use the famed Penn World Tables. Report the (Pearson) correlation between 2015 GDP per capita (rgdpe/pop) and:

(a) Capital per capita (cn/pop)

(b) National investment rate (csh i)

(c) TFP (ctfp)

(d) Labor share of income (labsh)

Also, report scatterplots of each of these relationships, with GDP per capita on the Y-axis. You'll see that the correlation between capital per capita and GDP per capita is really high-indeed, it's pretty close to a linear relationship, not a diminishing returns one! This is what the Solow model predicts in steady state, if TFP differences (or to be more precise, labor-augmenting productivity differences) are the big difference across countries: Double the labor-augmenting productivity creates creates double the capital in the long run. Suggestion: When you download Penn, you'll see you can just filter the 2015 data and drop the rest (you might want to cut-and-paste the 2015 data into a new sheet, since the filter tool seems to just hide the other observations). That's probably the easiest way to set up the data before creating the correlations and scatterplots. I used Excel.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Macroeconomics Policy And Practice

Authors: Frederic Mishkin

2nd Edition

0133424316, 978-0133424317

More Books

Students also viewed these Economics questions

Question

Why do we favor composition over inheritance

Answered: 1 week ago

Question

1. What is the meaning of the information we are collecting?

Answered: 1 week ago

Question

3. How much information do we need to collect?

Answered: 1 week ago

Question

2. What types of information are we collecting?

Answered: 1 week ago