Download There are three important concepts we explored in Chapter 1:

Chapter 1
Concepts in development
Text
There are four important concepts we explored in Chapter 1:
1. The PPP exchange rate
2. The convergence club
3. The HDI and its components
4. Time to double GDPpc
The objective of this exercise is to explore these three concepts empirically, using data
principally coming from the World Bank, World Development Indicators, available on
line.
1. GDPpc at the official and PPP exchange rates
You are given in worksheet “1. GDPpc” data for 132 countries in year 2005 on:
o GDPpc in local currency units (LCU)
o Official exchange rate e in LCU/US$
o PPP exchange rate PPPe in LCU/US$
Comparing wellbeing across countries requires putting income per capita not only in the
same monetary unit (the US$) using the official exchange rate e, but also adjusting
income for differential purchasing power using the PPPe as prices differ across countries.
a.
Calculate GDPpc at the official exchange rate and at the PPP exchange rate for
each country.
b.
Compare the two measures by computing the ratio of GDPpc in PPP to GDPpc at
e.
c.
Why is it equal to 1 in the United States?
d.
What are the three most expensive countries compared to the US? Give their
names and GDPpc at PPPe/GDPpc at e.
e.
If you are planning a vacation and want to maximize purchasing power per dollar
spent buying local goods and services, which 2 ̶3 countries would you consider going to?
Give their names and GDPpc at PPPe/GDPpc at e.
Paste your answer sheet in your report.
2. The Convergence Club
In worksheet “2. Convergence Club,” you are provided with PPP-adjusted GDPpc (in
constant 2005 international $) for 89 non-OECD countries, as well as for the OECD
group as a whole for the period 1990–2010. Countries are classified by region:
1: ECA (Europe and Central Asia)
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2: EAP (East Asia and Pacific)
3: LAC (Latin America and Caribbean)
4: MENA (Middle East and North Africa)
5: SA (South Asia)
6: SSA (Sub-Saharan Africa)
7: OECD members.
a.
In one sentence, define for the period 1990 ̶ 2010 what is meant by “Convergence
Club” relative to the OECD group of countries.
b.
For each country, calculate the average annual growth rates over the 1990 ̶ 2010
period. What was the average annual growth rate for the OECD group during the period?
c.
How many Sub-Saharan countries were members and non-members of the Club
during the period, and which were the three leading countries?
d.
Calculate the (unweighted) average annual growth rate in each region. Indicate
which regions were members of the Convergence Club in the 1990 ̶ 2010 period.
e.
Draw the convergence triangle plot for the period 1990 ̶ 2010. Which country has
been the top converger?
f.
Growth has accelerated in Sub-Saharan Africa in the last decade. Calculate the
average annual growth rate for the OECD and SSA countries in the period 2000 ̶ 10, and
the regional average. How many Sub-Saharan countries were members of the
Convergence Club in 2000 10?
Paste your answer sheet in your report.
3. Calculating the HDI
The HDI (old definition) is a weighted average of a health index (here measured as life
expectancy at birth), an education index (here measured as mean years of schooling), and
PPPGDPpc. In each case, the index for country k is:
IndexCountryk - IndexMinimum
IndexMaximum - IndexMinimum
You are given data for the BRICS (Brazil, India, China, and South Africa) in worksheet
“3. HDI”. You are also given the data for the country with the minimum and maximum
index for each of the three indicators.
a.
Calculate the health, education, and income indices for each country.
b.
Which country is best for each?
c.
Calculate the HDI for each country.
d.
Which is the winning country?
e.
Was it best in all indicators?
f.
Explain why the HDI ranking gives this peculiar result.
Paste your answer sheet in your report.
4. Time to double GDPpc
You are given in worksheet “time to double” annual data on total population and on GDP
at constant 2005 US$ for China, India, Brazil, Ghana, and Zambia for the period 1960 to
2013, taken from the World Development Indicators. We will contrast the performance in
GDPpc growth across decades for each country, paying attention to the relative roles of
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GDP growth and population growth. We will assess this in terms of time to double, the
“70-year rule.”
a.
Calculate the annual GDPpc in constant 2005 US$ for each country
b.
Calculate the average annual growth rate of population and GDP for each decade.
For the last period, we will use 2000 ̶ 13. Use for this the LOGEST formula since you
have a time series of data.
c.
For each country, calculate the time to double for each of the three variables for
each of the 5 periods. Note that you cannot calculate a time to double for periods where
growth or per capita growth has been negative.
d.
Discuss your findings on time to double using the roles of GDP growth and of
population growth in explaining GDPpc growth. In particular, discuss the performance of
China over time and where it came from in terms of growth and population. Do the same
for India. Discuss as well what has been happening to Ghana and Zambia over the last
period compared to their prior performances.
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