Long-run Economic Growth & Convergence - GDP per capita analysis of sovereign countries

Extract the data for GDP per capita of all sovereign countries for selected years of 1960, 1990 and 2015 from global databases (like the IMF or World Bank) and perform a convergence data analysis 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, accessible for free download at?http://gretl?.sourceforge.net?.

1. Introduction

• Discuss Long Run Economic Growth

• Will the poor countries catch up rich countries by growing faster?

• Identify between conditional and unconditional convergence

2. Background

• Provide a summary statistics table for all countries

• Select 10 sample countries from the data (5 poor and 5 rich) and explain what important key historic or economic factors have happened during the years under consideration and how is this reflected in their per capita GDP? Make an economic analysis of the characteristics of these countries under consideration.

3. Data Analysis

• Using data of GDP per capita provided in the dataset, plot histograms of GDP for all the years between 1960 and 2015 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 2015, then the same for the rich. Plot boxplots for each).

4. Extract the GDP, investment, education, political stability or other socio-political 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 2015 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 ).

NB:

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

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

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. Explanation of Economic growth and Convergence

Explain the structure of the data provided and how it characterises 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 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 theory of long run economic growth and convergence.

The general content and flow of the paper should follow:

1. Introduction

2. Background

3. Data Analysis

4. Explanation of Economic growth and Convergence

5. Conclusion

6. References