Paul Collier in his book the Bottom Billion outlines 4 potential traps of economic development that could cause a country to become/remain a bottom billion country. Your essay should address the below questions for your assigned country in relation to his book, while putting it in the context of the Solow model.
Is your country a bottom billion country? How does your country rank in terms of basic human development index indicators? Hint make sure to provide Collier's definition for a bottom billion country.
Discuss the reason your country has or has not experienced one of the four traps that Collier outlines in his paper. A well written paper will cite Collier's specific reasons for experiencing a trap and include short 1-2 two sentence quotations from the book to support your point. An excellent paper will provide data particular on GDP per capita growth to support that claim.
Provide in one half page a brief overview of the Solow model. Provide a link in every paragraph of the paper to Collier's book
Discuss assumptions on returns to scale and outcomes. Particularly what are the main long run conclusions.
In one-half to one-page write a discussion that will accompany a diagram of that model. You may hand draw the diagram and scan it or use (insert shapes in Microsoft word or the shapes below). On the diagram show where you believe your country is in terms of savings, capital per worker, production, population growth, and capital depreciation. (use Penn World Tables (linked here) to get this data, assume depreciation is the same in all countries and use investment data for savings). Then describe your choices in your written discussion. In addition on the same diagram, draw the relevant curves and points for the United States. Discuss the reasoning behind your choices. Compare the two countries prospects for GDP per capita (PPP) growth.
Use Population figures to calculate percentage population growth (see info below about how to calculate) [1st variable listed]
use GDP per capita PPP Converted GDP Per Capita, G-K method, at current prices (in I$)
[5th variable]
use ci use Investment Share of PPP Converted GDP Per Capita at current prices [cgdp], (%)
[10th variable]
To get you started here is an example for Canada
| |
|
Population in thousands
|
GDP Per Capita (CGDP)
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Savings/Investment Rate (CI)
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Change Population
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Change GDP
|
|
Canada
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1989
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27,379,300
|
19,568.276
|
24.229%
|
|
|
|
Canada
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2009
|
33,487,208
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40,465.548
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21.46
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22%
|
107%
|
The population, GDP per capita and savings rates are from Penn World Table. I calculate population change by taking (33487208 - 27379300)/27379300 and GDP per capita change by taking
(40,465.548 - 19,568.276)/19,568.276
-important do not calculate changes in the savings rate
Discuss how the trap from part (2) might be incorporated into the model. If it has not experienced any of the traps, discuss how one of the traps would have impeded growth if it happened.
Compare economic growth over the last 20 year between your country and the United States. Is it consistent (or inconsistent) with Solow's conclusion in terms of catching up? How would a trap influence these conclusions. Look up historic data in the Penn World Tables investment rates (a measure of savings) and estimated GDP per capita PPP growth to see if the theory is consistent with the data.