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country gdppc_2010 gdppc_1960 growthpc invrate growthpop school Algeria 2231.98 1280.385 0.0111146 0.3342425 0.0237818 0.4368667 Argentina 10749.33 5251.861 0.0143252 0.2101571 0.0134522 0.6514226 Australia 25249.06 9393.286 0.0197759

country gdppc_2010 gdppc_1960 growthpc invrate growthpop school

Algeria 2231.98 1280.385 0.0111146 0.3342425 0.0237818 0.4368667

Argentina 10749.33 5251.861 0.0143252 0.2101571 0.0134522 0.6514226

Australia 25249.06 9393.286 0.0197759 0.2772571 0.0154944 1

Austria 26693.7 7434.184 0.0255668 0.2581322 0.0034867 0.9438034

Bangladesh 558.0624 254.8251 0.0156779 0.160085 0.0217564 0.2529874

Belgium 24518.01 7454.843 0.0238109 0.2336798 0.0034848 0.9233246

Benin 377.0443 256.9788 0.0076674 0.1574922 0.0259357 0.1600268

Bolivia 1232.689 894.757 0.006408 0.1665765 0.0217025 0.473708

Botswana 4189.535 237.5136 0.0574024 0.2953562 0.0268577 0.3669361

Brazil 4716.613 1447.839 0.0236204 0.1998397 0.0197115 0.5631877

Burkina Faso 282.6969 122.2078 0.016773 0.1705111 0.0243184 0.058345

Burundi 138.2482 116.0099 0.0035075 0.1046809 0.0209522 0.0574938

Cameroon 713.6434 508.9939 0.0067589 0.1814973 0.0257479 0.1959727

Canada 25575.2 9374.891 0.0200718 0.2218715 0.0128952 0.9638103

Central African Republic 239.516 355.8209 -0.0079161 0.1328002 0.0214808 0.0946261

Chad 300.1061 253.9442 0.0033404 0.1696105 0.026703 0.0700245

Chile 6430.058 1841.08 0.0250126 0.2033742 0.0160993 0.6924723

Colombia 3233.427 1188.254 0.0200212 0.1946495 0.0212429 0.5084967

Congo, Dem. Rep. 105.5317 324.9032 -0.0224903 0.1261393 0.0291376 0.1980835

Congo, Rep. 1253.323 617.8512 0.0141461 0.2871082 0.0276694 0.4174214

Costa Rica 5226.566 1797.966 0.021342 0.2054916 0.0250118 0.4823301

Cote d'Ivoire 587.8569 550.6874 0.0013063 0.1618427 0.0338199 0.1732325

Denmark 30528.6 11390.67 0.0197174 0.2190146 0.0038354 0.9745273

Dominican Republic 4049.039 912.4695 0.0298016 0.1931292 0.0219732 0.4259138

Ecuador 1728.052 820.3111 0.0149013 0.1927537 0.0236248 0.4808476

Egypt, Arab Rep. 1975.553 430.3645 0.0304794 0.2135478 0.0213441 0.5460164

El Salvador 2555.888 1448.829 0.0113529 0.1589986 0.0160691 0.3835045

Finland 27114.01 7306.041 0.026227 0.2495549 0.0038254 0.9936931

France 22758.16 7499.891 0.0222007 0.2171164 0.0066628 0.8861901

Ghana 359.932 281.805 0.004894 0.1581956 0.0257175 0.4073795

Greece 13578.44 3385.66 0.0277787 0.2816611 0.0061221 0.829343

Guatemala 1862.667 959.1566 0.0132742 0.1522306 0.0248239 0.2416193

Guyana 1210.57 688.8562 0.0112763 0.2701464 0.0059556 0.764949

Honduras 1392.316 751.1958 0.0123411 0.2275751 0.0267061 0.2891267

India 794.8013 180.9617 0.0295961 0.2187354 0.0201187 0.3639202

Israel 22239.1 5827.836 0.0267841 0.2274293 0.0256531 0.8613328

Italy 18943.05 5847.465 0.0235086 0.2258614 0.0037272 0.7772114

Kenya 468.6997 260.83 0.0117219 0.1983576 0.0321816 0.328142

Lesotho 495.6617 132.2258 0.0264276 0.3260746 0.0187196 0.2208798

Liberia 260.5462 608.0255 -0.0169487 0.0959886 0.0255062 0.2016204

Madagascar 242.6797 409.1064 -0.0104447 0.133378 0.0280169 0.1769435

Malawi 185.1166 98.63486 0.0125912 0.1965641 0.0288293 0.1853939

Mauritania 609.1711 373.8769 0.0097635 0.2445053 0.0279766 0.1105228

Mexico 6105.276 2455.952 0.0182128 0.2217191 0.0216515 0.4988056

Morocco 1874.973 647.8941 0.0212524 0.2240249 0.0202194 0.2954443

Nepal 269.2452 139.081 0.0132113 0.1709681 0.0224711 0.2622626

Netherlands 26552.79 8562.937 0.0226338 0.2318937 0.0073829 0.9149601

Nicaragua 907.0311 914.4466 -0.0001628 0.2230798 0.023664 0.3717444

Niger 179.2932 313.9102 -0.0112017 0.134525 0.0312593 0.048521

Norway 39970.33 10695.36 0.0263665 0.2685001 0.0062266 0.936202

Oman 11345.43 966.5243 0.0492573 0.2377494 0.0321527 0.3462616

Pakistan 668.545 187.4651 0.0254302 0.1789945 0.0265962 0.2136914

Panama 6109.585 1710.511 0.0254613 0.2407149 0.0227355 0.5759574

Papua New Guinea 744.2106 425.5578 0.0111785 0.2218937 0.0249793 0.1238075

Paraguay 1621.039 662.8561 0.0178853 0.2090325 0.0243974 0.349555

Peru 3181.498 1647.251 0.0131649 0.2447776 0.0214885 0.6119521

Portugal 11747.67 2368.674 0.0320265 0.2662683 0.0036616 0.6645736

Puerto Rico 16910.46 3767.415 0.0300309 0.183954 0.0091288 0.8463691

Rwanda 337.3222 225.4166 0.0080618 0.1365356 0.026878 0.1113496

Senegal 561.7209 615.2308 -0.0018198 0.1538688 0.0281198 0.1482832

Sierra Leone 268.3073 223.3528 0.0036676 0.1289886 0.0197359 0.1630919

South Africa 3753.453 2203.729 0.0106505 0.2175425 0.0211122 0.7164113

Spain 15457.72 3711.115 0.0285355 0.2550389 0.0082787 0.8393697

Sri Lanka 1308.784 273.7067 0.0312959 0.2170143 0.0147146 0.641354

Sudan 679.0657 399.2486 0.0106227 0.1618084 0.0279207 0.1757149

Sweden 32507.45 11360.41 0.0210267 0.2151269 0.0045105 0.9099407

Syrian Arab Republic 1525.809 482.4969 0.0230261 0.2128636 0.02998 0.4786823

Togo 264.739 176.569 0.0081007 0.1871364 0.0268082 0.2248916

Trinidad and Tobago 10513.53 3342.313 0.02292 0.2251771 0.0093335 0.6609367

Turkey 5355.994 1582.569 0.0243833 0.1814962 0.0189828 0.4700245

United Kingdom 28033.79 10059.52 0.0204978 0.1870619 0.003439 0.8694245

United States 37329.6 13723.23 0.0200139 0.192059 0.0107559 0.9085448

Uruguay 9096.795 4182.119 0.0155421 0.1698724 0.0055902 0.7452299

Venezuela, RB 5528.369 5437.469 0.0003316 0.2480929 0.0267681 0.5293587

Zambia 432.2461 544.4534 -0.0046157 0.215827 0.0289172 0.1758664

Zimbabwe 320.7603 389.0158 -0.0038585 0.1532292 0.0241808 0.279039

1. Estimate the equation for per capita GDP growth derived from the Harrod-Domar model and provide a test statistic for the null hypothesis that the effect of population growth in the data is the same as what is predicted by the model.

2. Suppose the capital/output ratio in the economy is fixed and equal to 6. Based on the estimate you computed for Q1, can you reject that the coefficient on the savings/investment rate is equal to the model-implied coefficient at the 5% significance level?

3.Estimate the steady-state output per capita equation for the Solow model using the investment/savings rate and population growth. Assume that g+depreciation = 0.05, and remember to transform the variables in the data so they correspond to the objects in the Solow steady state equation. What is the coefficient on the investment rate?

4. Estimate the Solow model steady-state question like in the last question, only now include the log schooling enrollment rate as a control to capture "human capital." What is the coefficient on the savings/investment rate now?

5. What can we conclude from comparing the estimates from Q3 and Q4?

Question 5 options:

a
R squared increased when going from Q3 to Q4 which is the only thing we should think about when evaluating the model

b
Adding human capital accumulation to the Solow model reduced the importance of measurement error in the investment rate

c
Adding human capital accumulation to the Solow model improves the fit of the model in terms of the reasonablesness of the share of physical capital in output

d
Human capital investment rate is likely to be negatively correlated with the physical capital savings/investment rate but positively correlated with output per capita

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Previous Question Next Question

country	gdppc_2010	gdppc_1960	growthpc	invrate	growthpop	school
Algeria	2231.98	1280.385	0.0111146	0.3342425	0.0237818	0.4368667
Argentina	10749.33	5251.861	0.0143252	0.2101571	0.0134522	0.6514226
Australia	25249.06	9393.286	0.0197759	0.2772571	0.0154944	1
Austria	26693.7	7434.184	0.0255668	0.2581322	0.0034867	0.9438034
Bangladesh	558.0624	254.8251	0.0156779	0.160085	0.0217564	0.2529874
Belgium	24518.01	7454.843	0.0238109	0.2336798	0.0034848	0.9233246
Benin	377.0443	256.9788	0.0076674	0.1574922	0.0259357	0.1600268
Bolivia	1232.689	894.757	0.006408	0.1665765	0.0217025	0.473708
Botswana	4189.535	237.5136	0.0574024	0.2953562	0.0268577	0.3669361
Brazil	4716.613	1447.839	0.0236204	0.1998397	0.0197115	0.5631877
Burkina Faso	282.6969	122.2078	0.016773	0.1705111	0.0243184	0.058345
Burundi	138.2482	116.0099	0.0035075	0.1046809	0.0209522	0.0574938
Cameroon	713.6434	508.9939	0.0067589	0.1814973	0.0257479	0.1959727
Canada	25575.2	9374.891	0.0200718	0.2218715	0.0128952	0.9638103
Central African Republic	239.516	355.8209	-0.0079161	0.1328002	0.0214808	0.0946261
Chad	300.1061	253.9442	0.0033404	0.1696105	0.026703	0.0700245
Chile	6430.058	1841.08	0.0250126	0.2033742	0.0160993	0.6924723
Colombia	3233.427	1188.254	0.0200212	0.1946495	0.0212429	0.5084967
Congo, Dem. Rep.	105.5317	324.9032	-0.0224903	0.1261393	0.0291376	0.1980835
Congo, Rep.	1253.323	617.8512	0.0141461	0.2871082	0.0276694	0.4174214
Costa Rica	5226.566	1797.966	0.021342	0.2054916	0.0250118	0.4823301
Cote d'Ivoire	587.8569	550.6874	0.0013063	0.1618427	0.0338199	0.1732325
Denmark	30528.6	11390.67	0.0197174	0.2190146	0.0038354	0.9745273
Dominican Republic	4049.039	912.4695	0.0298016	0.1931292	0.0219732	0.4259138
Ecuador	1728.052	820.3111	0.0149013	0.1927537	0.0236248	0.4808476
Egypt, Arab Rep.	1975.553	430.3645	0.0304794	0.2135478	0.0213441	0.5460164
El Salvador	2555.888	1448.829	0.0113529	0.1589986	0.0160691	0.3835045
Finland	27114.01	7306.041	0.026227	0.2495549	0.0038254	0.9936931
France	22758.16	7499.891	0.0222007	0.2171164	0.0066628	0.8861901
Ghana	359.932	281.805	0.004894	0.1581956	0.0257175	0.4073795
Greece	13578.44	3385.66	0.0277787	0.2816611	0.0061221	0.829343
Guatemala	1862.667	959.1566	0.0132742	0.1522306	0.0248239	0.2416193
Guyana	1210.57	688.8562	0.0112763	0.2701464	0.0059556	0.764949
Honduras	1392.316	751.1958	0.0123411	0.2275751	0.0267061	0.2891267
India	794.8013	180.9617	0.0295961	0.2187354	0.0201187	0.3639202
Israel	22239.1	5827.836	0.0267841	0.2274293	0.0256531	0.8613328
Italy	18943.05	5847.465	0.0235086	0.2258614	0.0037272	0.7772114
Kenya	468.6997	260.83	0.0117219	0.1983576	0.0321816	0.328142
Lesotho	495.6617	132.2258	0.0264276	0.3260746	0.0187196	0.2208798
Liberia	260.5462	608.0255	-0.0169487	0.0959886	0.0255062	0.2016204
Madagascar	242.6797	409.1064	-0.0104447	0.133378	0.0280169	0.1769435
Malawi	185.1166	98.63486	0.0125912	0.1965641	0.0288293	0.1853939
Mauritania	609.1711	373.8769	0.0097635	0.2445053	0.0279766	0.1105228
Mexico	6105.276	2455.952	0.0182128	0.2217191	0.0216515	0.4988056
Morocco	1874.973	647.8941	0.0212524	0.2240249	0.0202194	0.2954443
Nepal	269.2452	139.081	0.0132113	0.1709681	0.0224711	0.2622626
Netherlands	26552.79	8562.937	0.0226338	0.2318937	0.0073829	0.9149601
Nicaragua	907.0311	914.4466	-0.0001628	0.2230798	0.023664	0.3717444
Niger	179.2932	313.9102	-0.0112017	0.134525	0.0312593	0.048521
Norway	39970.33	10695.36	0.0263665	0.2685001	0.0062266	0.936202
Oman	11345.43	966.5243	0.0492573	0.2377494	0.0321527	0.3462616
Pakistan	668.545	187.4651	0.0254302	0.1789945	0.0265962	0.2136914
Panama	6109.585	1710.511	0.0254613	0.2407149	0.0227355	0.5759574
Papua New Guinea	744.2106	425.5578	0.0111785	0.2218937	0.0249793	0.1238075
Paraguay	1621.039	662.8561	0.0178853	0.2090325	0.0243974	0.349555
Peru	3181.498	1647.251	0.0131649	0.2447776	0.0214885	0.6119521
Portugal	11747.67	2368.674	0.0320265	0.2662683	0.0036616	0.6645736
Puerto Rico	16910.46	3767.415	0.0300309	0.183954	0.0091288	0.8463691
Rwanda	337.3222	225.4166	0.0080618	0.1365356	0.026878	0.1113496
Senegal	561.7209	615.2308	-0.0018198	0.1538688	0.0281198	0.1482832
Sierra Leone	268.3073	223.3528	0.0036676	0.1289886	0.0197359	0.1630919
South Africa	3753.453	2203.729	0.0106505	0.2175425	0.0211122	0.7164113
Spain	15457.72	3711.115	0.0285355	0.2550389	0.0082787	0.8393697
Sri Lanka	1308.784	273.7067	0.0312959	0.2170143	0.0147146	0.641354
Sudan	679.0657	399.2486	0.0106227	0.1618084	0.0279207	0.1757149
Sweden	32507.45	11360.41	0.0210267	0.2151269	0.0045105	0.9099407
Syrian Arab Republic	1525.809	482.4969	0.0230261	0.2128636	0.02998	0.4786823
Togo	264.739	176.569	0.0081007	0.1871364	0.0268082	0.2248916
Trinidad and Tobago	10513.53	3342.313	0.02292	0.2251771	0.0093335	0.6609367
Turkey	5355.994	1582.569	0.0243833	0.1814962	0.0189828	0.4700245
United Kingdom	28033.79	10059.52	0.0204978	0.1870619	0.003439	0.8694245
United States	37329.6	13723.23	0.0200139	0.192059	0.0107559	0.9085448
Uruguay	9096.795	4182.119	0.0155421	0.1698724	0.0055902	0.7452299
Venezuela, RB	5528.369	5437.469	0.0003316	0.2480929	0.0267681	0.5293587
Zambia	432.2461	544.4534	-0.0046157	0.215827	0.0289172	0.1758664
Zimbabwe	320.7603	389.0158	-0.0038585	0.1532292	0.0241808	0.279039

a	R squared increased when going from Q3 to Q4 which is the only thing we should think about when evaluating the model
b	Adding human capital accumulation to the Solow model reduced the importance of measurement error in the investment rate
c	Adding human capital accumulation to the Solow model improves the fit of the model in terms of the reasonablesness of the share of physical capital in output
d	Human capital investment rate is likely to be negatively correlated with the physical capital savings/investment rate but positively correlated with output per capita