Download Lab 3B

Labs for Weil, Economic Growth: Lab 3B
Lab 3B
Exploring Savings Rates
Assignment
This lab investigates the relationships between savings rates and several other country
characteristics and considers the implications of your findings for the Solow model. The data for
this lab is available in an Excel spreadsheet and a Stata data set on the textbook web page.
1.
Calculate the average level of the savings rate (domestic savings as a percentage of GDP)
in 2000 for all the countries in the data set. Describe the variation in the savings rate
across countries. What is the minimum savings rate? What is the maximum?
2.
Make a scatter plot that shows the relationship between savings rates and income per
capita in 2000. Do poor countries save more or less than rich countries? Give two
different reasons that the correlation you find might exist.
3.
Calculate the growth rate of real GDP per capita from 1960 to 2000. Make another
column that calculates the average of the saving rate in 1960 and the saving rate in 2000.
Make a scatter plot that shows the relationship between the average savings rates and the
growth rate of income per capita. Does this graph support the Solow model?
4.
Make a scatter plot that shows the relationship between savings rates and secondary
school enrollment rates. Do countries that have higher secondary school enrollment rates
have higher savings rates? Explain the relationship you see with economic theory.
5.
Make a scatter plot that shows the relationship between savings rates and the number of
children the average woman can be expected to have (the fertility rate). In countries in
which women have more children, is the savings rate higher or lower? Why might this
be true?
6.
What relationship would you expect to find between savings rates and age dependency
ratios (the ratio of people who are not of working age/working age population.)
Graphically show the relationship between the age dependency ratio and the savings rate.
(Hint: How would you expect savings behavior to vary with age?) Does the graph
support your expectations?
7.
Using the results of your graphs, write two paragraphs that summarize your conclusions.
How do savings rates vary across countries? What country characteristics are associated
with higher savings rates? Can you make policy recommendations based on your
results? Relate your conclusions to the Solow model. How would your policy
recommendations change if higher income caused higher savings rates and not the other
way around? What would the future hold for developing countries in this case?
Excel Hints for Lab 3
See the “Introduction to Excel” instructions for step-by-step instruction on creating scatter plots.
Excel hints at the bottom of lab 1 contain instructions for calculating growth rates.
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Labs for Weil, Economic Growth: Lab 3B
Stata Hints for Lab 3
See the “Introduction to Stata” instructions for step-by-step instructions on creating scatter plots
and generating new variables in Stata.
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