Download An Analysis of the Factors Contributing to Economic Success or

Economics 207
Prof. M. Dohan
Comparative Economic and Financial Systems
March 23, 2013
Assignment: Report #4 (60 pts)
An Analysis of the Factors Contributing to Economic Success or Failure of an Economic System
A Study of six African Economies.
Due April 11th, 2013
Note each of you should prepare your report independently.
You may not consult with any other student on this report. Each student’s report will most likely be quite different.
Failure to do independent work will result in a “ZERO” for this report. This report has double the weight (60 points) of the
other reports you have done so far. Try to write a clear and grammatically correct report.
In preparation for doing this assignment, you will first be reading in preparation for your midterm (April 9, 2013). Read the whole assignment several times before starting your report.
Background For the first half of this semester, I focused on three subjects. First, economic
systems, most of which are market systems today, have had highly differing rates of success which
cannot be explained by traditional growth models as revealed in the large differences in total factor
productivity (TFP) of the inputs available to the economy. So, there must be other factors causing these
differences. One explanation, of course, is original resource endowment, such as oil deposits, forest or
large amounts of arable land per person. These differences in original resources have not, to my
knowledge, been addressed systematically in the study of comparative economic performance. We
shall look at this factor in Report 5.
Second, I have focused on the conditions and institutions which evolved with the development
of market economies from the traditional economies of both antiquity and the early middle ages.
Third, recent lectures have emphasized understanding the concept and conditions of economic
efficiency (which contribute to economic performance), institutions, decision making structures,
information structures, and incentive structures, as well as enforcement mechanisms, organization and
public choices. I have also stressed in class the “conditions” required for a market economy and for
capital accumulation. For example, to have internally generated savings and investment, a country must
have a per capita output above subsistence level and a way to “capture” a portion of this “surplus”
output and convert it into physical and human capital. Gregory and Stuart’s new book on comparative
economic systems entitled, “The Global Economy and Economic Systems” (2014) develop the above
concepts and also emphasize the importance of “governance”. To this I would add “factors affecting the
ease and security of doing business” in a market economy and the existence of a functional
infrastructure.
The purpose of this report is to have you apply the concepts discussed in lecture and covered in
readings to explain the differences in economic performance of six African “mixed market economies.””.
You will be analyzing and comparing the factors which you think contribute to the widely differing
performance of three “good” African economies and three African economies that have done very
poorly. Consider this an exercise in “critical and analytical thinking”.
Before starting this report, please do the following things. 1) Read Heilbroner, chapters 1-4 and the new
Gregory and Stuart 2014 The Global Economy and Its Economic Systems, chapters 1-4 and chapter 5 to
page 119. The Gregory and Stuart chapters are posted on my website. I hope to add the graphs and
Tables during the week, but they are not crucial for doing the 4th Report. 2) Read through the newly
revised list entitled “Success Indicators (new), Conditions, Institutions, and Infrastructure”. 3) Look at
the Total Factor Productivity and Capital Productivity charts for the positions of Algeria, Egypt, South
Africa and Liberia, Niger and Zimbabwe. These are found by using the links under Report 4. 4) Read the
general articles in Wikipedia on Algeria, Eqypt and South Africa and then on Niger, Liberia, and
Zimbabwe. Read also also the separate articles on the economies of these countries. Take notes on any
specific conditions or factors mentions in these articles.
Explanation of the report. The three African economies which have done relatively well as evaluated by
GDP per capita in US $ at 2000 prices and GDP per capita evaluated in 2005 purchasing power parity
(ppp)are Algeria, Egypt, and South Africa (high GDP per capita). The three economies which have done
very poorly are Liberia, Niger, Zimbabwe (low GDP per capita). My teaching assistant and I have
selected most of the time series of data for you and organized them into tables. This information is
provided in four Excel tables. In a general sense, I am asking you what explains the vast differences in
economic performance between these two groups.
Data provided: First I provide a list of the names of the times series of data that I am giving you with
occasional comments on how they might affect the socio-economic development of the country. Table
1 contains the majority of these time series. In the first column of Table 1 will be two letters: “I”
denoting an indicator of socio-economic performance and “f” a factor which may help explain their
socio-economic performance. Not all factors are relevant for each country. Indeed, in some cases,
maybe none of them are and you will have to refer to your reading on the country to determine why it
has or has not progressed.
The first time series in Table 1 are various indicators of socio-economic development. In general, those
in green are the countries (Algeria, Egypt, and South Africa) which are relatively better off. Those in red
are for the countries that are relatively poor (Liberia, Niger, and Zimbabwe).
These are followed by a list of time series that are factors, conditions, institutional behavior that may
have contributed to the relatively good performance or poor performance. Tables 2, 3, and 4 contain
short lists of other of time series on infrastructure, institutions and other conditions (corruption,
difficulty of doing business, etc.).
Written Assignment: Write a page or more (single spaced) for each of the six economies. Try to explain
the differences in their socio-economic performances by identifying specific factors that have
contributed to their good or poor socio-economic performance. Start a new sentence for each factor
which you think is important. At the beginning of the sentence write the name or condition of the factor
in bold. After the reading, writing the report should take about six hours.
Your last paragraph should summarize your basic findings on what factors contributed to good or poor
performance.
I think that you will actually be surprised and maybe even enjoy the results of your work. Please
do all your work independently and do not consult with one another.
Some Hints
Hint #1: The poor socio-economic performance of each country is probably due to a number of
factors which have prevented them from growing over the last ten years or even five years so that they
may be “locked” into poor socio-economic performance until these factors can be changed. It may be
useful to focus on the last five years first and then look at trends over the past twenty years.
Hint #2: Start working on this report by reexamining the “Indicators for the successful
economies” and the factors which may have explained their performance. Then, for the poor
performing economies, look at the same time series. For which ones do they differ? Describe how
these and other factors and conditions might explain the difference between each of the poor
performing economies and the good performing economies and how they prevent improvement in
socio-economic performance. Are there unique factors contributing to poor economic performance?
Hint #3: Do not overlook such factors as high population growth rates relative to GDP growth
rates, initial low levels of labor productivity compared to subsistence levels (hint: look at poverty rates),
wars and civil unrest, corruption, and AIDS. There may be other such factors as well.