Download Lab 7B - Pearson Higher Education

Lab 7B
Productivity Growth: Causes and Consequences
Assignment
In this lab, you will investigate the relationship between productivity growth and the growth of
per capita income. You will also explore the potential causes of productivity growth. The data
for this lab is available in an Excel spreadsheet or Stata data set on the textbook web page.
1. Describe the variation in productivity growth across countries over the period 1970 2005. What is the minimum? What is the maximum? What is the average? Sort the
data by rates of productivity growth. Do countries that have the ten highest rates of
productivity growth have above average real income per capita growth?
2. Explain the assumptions that were necessary in order to obtain the estimates of
productivity growth you used in answering question 1. For countries with relatively fast
growing physical capital stocks, how would your estimate of productivity growth change
if the assumed value of alpha increases to 0.5? Would it become bigger or smaller? How
would your estimate of productivity growth change in countries with relatively fast
growing human capital stocks? Explain.
3. Make a scatter plot of the relationship between productivity growth over the period 1970
- 2005 and real GDP per capita in 1970. Is there evidence of a systematic relationship
between initial income and subsequent productivity growth? Explain a hypothesis that
would be consistent with this evidence.
4. Calculate the average of the investment rate in 1970 and in 2005 and make a scatter plot
showing the correlation between investment rates and productivity growth. Explain
what you would expect to find in this graph and what you do find. Do countries with
higher rate of investment have greater productivity growth?
5. Formulate and explain a hypothesis about the relationship between the level of education
and productivity growth. Provide a scatter plot that that shows the relationship between
these two variables. Did you find what you expected?
6. How do you expect the use of computers to be related to productivity growth? Explain
your theory and use a scatter plot to provide evidence for your ideas.
7. Summarize the results of the answers to the questions above for policy makers. Is
productivity growth important for growth? What factors are associated with productivity
growth?