Long-run Economic Growth: Analysis of GDP per Capita Convergence

This assignment is prepared to check your understanding of economic growth and disparities between countries’ levels of development based on empirical evidence. You are expected to extract the data for this purpose of analysis from relevant credible sources. Originality and clarity in your work are highly valued.

Long-run Economic Growth

Extract the data for GDP per capita of all sovereign countries for selected years of 1960, 1990 and 2020 from global databases (like the IMF or World Bank) and perform a convergence data based on the following questions. You can use any data analysis programming language that you are convenient with for this term paper. You can also use the programing language which we used in the class, Gretl.

In this work, focus on the following key contents:

1. Introduction

• Discuss Long-Run Economic Growth
• Will the poor countries catch up to rich countries by growing faster?

2. Background

• Provide a summary statistics table for all countries for the years from 1960 to 2020.
• Select 10 sample countries from the data (5 poor and 5 rich) and explain what important

key historic or economic issues have happened during the years under consideration and how is this reflected in their per capita GDP, inflation, unemployment rate and the policy measures in these countries during this time? Note, the major economic shocks to consider during this time could be financial crisis, pandemic, war, political instability, hyperinflation, etc.

3. Data Analysis

• Using data of GDP per capita provided in the dataset, plot histograms of GDP for all the years between 1960 and 2020 and describe how the distribution of income evolves. If there are any outliers, omit them. In a case where you encounter any outlier, then provide economic intuition for evaluating these countries as outliers.

• Calculate the Growth rate of GDP per capita for each of the countries in the years under consideration. Show boxplots of incomes for all the countries in each year. What happened? Is there any evidence for convergence? Discuss the notions of conditional and unconditional convergence in this regard (Hint.: Use logs instead of levels).

• Split the data into two groups of poor and rich. The split should be done according to the median income in 1990. Then show boxplots of incomes for both groups in each year. What happened? Is there any evidence for convergence? (Hint.: Use logs instead of levels. Start with splitting the sample: poor in 1960, 1990 and 2020, then the same for the rich. Plot boxplots for each).

4. Regression Analysis

Extract the GDP, employment rate, investment, education, political stability or other socio-political, institutional and economic factors for all the economies. Run the regression analysis both for the conditional and unconditional convergence for a sample of developed countries and developed countries, each separately and an aggregate analysis for the global economy. The selection for the development level categories can follow regional divisions or international organization membership, etc…. (For e.g. OECD, Western Economies, OPEC, BRICS, etc) . Plot the respective convergence analysis scatter plots depicting the convergence behaviour. (Use the average per capita GDP growth between 1990 and 2020 as a dependent variable and GDP growth rate in 1960 as the independent variable for the unconditional regression analysis. For the conditional convergence, use additional explanatory variables in addition to the GDP growth rate in 1960 ).

Note :

a) Unconditional convergence: (e.g. for the years between 1960 - 2000)

ΔGDP2000-1980 =α + βΔGDP1960

lnGDP2000-1980 =α + βlnGDP1960

b) Conditional convergence (e.g. for the years between 1960 - 2000)

ΔGDP2000-1980 =α + βΔGDP1960 +γX1960

where X1960 is a set of country-specific controls (education, fiscal and monetary policy, competition level, etc.) - we compare countries with similar starting characteristics

5. Discussion and Implications Explain the structure of the data provided and how it characterizes the countries under consideration over the years that are taken into account. Using your own words, explain why you believe that the poor countries in the data can (cannot) catch up with the rich countries? Your argument should be based on the convergence analysis you made from the data. You can support your argument by citing relevant works that are in line with your analysis.

6. Conclusion

In summing up your analysis; provide a summary of the main points in your paper in connection with the macroeconomic theories covered in the class.

Note:

• Please, provide a proper citation of any resource used in this work. Use APA Standard for the format of your final submission.
• You need to answer question no of 3. Data Analysis & 4. Regression Analysis only. Question no 1, 2, 5 & 6 I will answer.
• Word count for both question no 3 & 4 is 1200 (Suitable amount for analyzing) No word count is specified.