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Regular Homework 3 Economics 2000 Assigned Tuesday, October 15th , 2013 Due: Tuesday, October 22nd , 2013 1. Investment is the largest category of expenditure for China. What fraction of growth is being driven by investment in China? Calculate the contribution of Gross Fixed Capital Formation (another name for investment) to growth in China over the last decade. Data on the dollar value vtk of gross fixed capital formation from 2001 to 2012 is available in table 1 along with the inflation vector for investment, ptk ptk1 , for 2001-2012. k=Gross Fixed Capital Formation vtk 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 3,775,450,000,000 4,363,210,000,000 5,349,070,000,000 6,511,770,000,000 7,423,290,000,000 8,795,410,000,000 10,394,860,000,000 12,808,440,000,000 15,667,979,284,579 18,361,516,223,000 21,520,000,000,000 ptk ptk1 qtk qtk1 gtq GFCF % vtk Vt gtRe alGDP wtk1 gtq 1.023 1.054 1.086 1.019 1.050 1.042 1.124 0.983 1.048 1.086 Average a. Use the data in Table 1 to calculate the gross growth rate of the quantity of gross fixed capital formation (fixed investment) qtk qtk1 , for China for the years 2002-2011. Calculate the net growth rat in percentage terms, g qGFCF t qtGFCF qtGFCF 1 % 100% and calculate the average for the years 2002-2011. qtGFCF 1 b. Get data from the United Nations National Accounts Database (Link). Under Data Selection: Basic Data Selection. Select Step 1 Countries) China, People’s Republic of for dollar expenditure. Step 2 Series) GDP by Expenditure, Percentage Distribution (Shares) and Step 3 Years) 2001-2010. Divide GFCF as a percentage of GDP by 100 to get wtk vtk Vt . Multiply gtq GFCF % by wtk to get GDP growth caused by k investment spending. Calculate the average for years 2002-2011. c. Get data from the same source on GDP, Annual Rate of Growth – Percentage for the years 2002-2011. Calculate the average. On average what fraction of China’s GDP growth is driven by investment growth? 2. The following table reports data on the salary of locally trained petroleum engineers in a number of Asian economies for 2011. These have been converted into US$ using exchange rates. Compare the purchasing power of these salaries. Get data on exchange rates and PPP conversion factors from the World Bank World Development Indicators: 1) Go to the Databank; 2) Select the appropriate countries; 3) Go to Series and select Financial Sector Exchange Rates and Prices and select DEC alternative conversion factor (LCU per US$) (S); From Economic Policy & Debt Purchasing Power Parity and select PPP conversion factor GDP (LCU per International $). Choose 2011. China India Indonesia Malaysia Philippines Singapore South Korea Thailand Vietnam US$ Salary $68,300 $38,900 $45,200 $47,200 $35,600 $84,900 $81,400 $49,400 $53,300 S PPP Local Currency Purchasing Power Convert those salaries back into local currency terms by multiplying by the exchange rate. Convert back into local purchasing power by dividing by PPP. Calculate where petroleum engineers have the most purchasing power. 3. GINI Coefficient for Planet Earth Measure changes in Global Income Distribution by calculating a GINI coefficient for the world economy. Go to World Bank World Development Indicators Databank. From Country select Aggregates and then select High Income, Upper Middle Income, Lower Middle Income, and Low Income countries. From Economic Policy & select GDP per capita, PPP (constant 2005 international $) and GDP, PPP (constant 2005 international $). Choose 1990 and 2012 and Download to Excel. a. In each year, calculate the total population in each group as the ratio of GDP(Intl$)/GDP per Capita. Calculate the share of the world’s population that falls in each group. Debt Purchasing Power Parity b. Sum up the total GDP(Intl$). Calculate the share of the world’s GDP that goes to each of the four groups. c. Calculate a Lorenz curve for world Income. What fraction goes to the lowest percentile (i.e. Low Income countries)? What fraction goes to the lowest two groups (i.e Low Income and Lower Middle Income countries)? What fraction goes to the lowest three groups (i.e Low Income, Lower Middle Income, and Upper Middle Income countries)? d. Use the Lorenz curve to construct four trapezoids. Use the share of population in each group as the width of the trapezoid. Calculate the area of each trapezoid. Sum the area of the trapezoids e. Calculate the World GINI coefficient for 1990 and 2012. 1990 Group 0 Low income 1 Lower middle income 2 Upper middle income 3 High income 4 Share of Poplulation Share of Lorenz Income Curve Trapezoid Area 0 1 Sum 2012 Group 0 Low income 1 Lower middle income 2 Upper middle income 3 High income 4 Share of Poplulation Share of Lorenz Income Curve Trapezoid Area 0 1 Sum