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ProblemSet1 Growth

The document presents a problem set focused on economic growth and business cycles, specifically analyzing GDP per person and labor productivity among G7 countries. It includes statements regarding labor supply, hours worked, and output per person that require true/false justification based on statistical data from 1970-74 and 1993-96. Additionally, it contains growth calculations for GDP per capita under different growth rates and the impact of capital growth on output.

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11 views2 pages

ProblemSet1 Growth

The document presents a problem set focused on economic growth and business cycles, specifically analyzing GDP per person and labor productivity among G7 countries. It includes statements regarding labor supply, hours worked, and output per person that require true/false justification based on statistical data from 1970-74 and 1993-96. Additionally, it contains growth calculations for GDP per capita under different growth rates and the impact of capital growth on output.

Uploaded by

10621077
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Economic Growth and Business Cycles

Problem Set 1: Growth


Johannes Van Vlodrop

1. GDP per person and labor productivity


Table 1 reproduces results as reported by Prescott (2004). It reports output, labor supply,
and productivity statistics of the G7 countries relative to the United States for the periods
1970–74 and 1993–96. Comment on each statement (true/false) and briefly justify. The
identity
GDP Labor force Employment Hours worked GDP
= · · ·
Population Population Labor force Employment Hours worked
may be useful.

(a) For 1993–96, labor supply is much higher in Japan and the U.S. than in Germany,
France, or Italy.
(b) Hours worked fell in all non-U.S. countries between the 1970s and the 1990s.
(c) U.S. output per person is about 25% higher than in France or Germany.
(d) Cross-country differences in output per person are mainly accounted for by differ-
ences in productivity.
(e) The results contradict the hypothesis of convergence within the G7.

Table 1: Output, Labor Supply, and Productivity


Country Output per person Hours worked per person Output per hour worked
Germany 74 75 99
France 74 68 110
1993-96

Italy 57 64 90
Canada 79 88 89
United Kingdom 67 88 76
Japan 78 104 74
United States 100 100 100
Germany 75 105 72
France 77 105 74
1970-74

Italy 53 82 65
Canada 86 94 91
United Kingdom 68 110 62
Japan 62 127 49
United States 100 100 100
U.S. = 100. Selected Countries in 1993-96 and 1970-74. Persons aged 15-64.

1
2. Growth calculations
(a) Suppose GDP per capita grows at constant rate g. How long to double? Evaluate
for g = 10% and g = 2%. (Hint: ln 2 ≈ 0.7)
1/3
(b) Let Yt = Kt L2/3 with constant L. If K grows by 3% between t and t+1, what is
gY ?

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