ECON 7040代写 Project ECON 7040

Project ECON 7040

ECON 7040代写 You must submit to Turnitin a final report for the project that contains all your answers, including graphs and tables…

Instructions ECON 7040代写

You must submit to Turnitin a final report for the project that contains all your answers, including graphs and tables (when necessary). The report must contain a list of references used in the analysis/discussion of results. There is no page limit. However, brevity and clarity will be valued and excessively long and unclear reports will be penalized. Students also submit (to Blackboard instead) their replication data and codes.

Part A: Income Accounting (5 marks) ECON 7040代写

In this section, you are asked to repeat the analysis in Hall and Jones (1999). As seen in Lecture 5, the production function in country i is

Y_i = K^α(A_iH_i)1−α,

where Y_i is output, K_i is capital, and H_i represents human capital. The importance of capital in production is α. Hall and Jones assume that α = 1/3 for all countries. They also assume that human capital is

H_i = e^φ(Ei)L_i, (1)

where E_i is years of schooling in country i, L_i is labor, and φ(E_i) is a piecewise linear function. In particular, φ(·) implies that in the first 4 years of school, each year yields a return of 13.4%. In the next four years, each year yields a return of 10.1%, while beyond the 8th year of schooling each year returns 6.8%. The production function can be rearrange as ECON 7040代写

where y_i and h_i are per-worker output and human capital, respectively. Taking logs we have

1. The excel file “DATA_HALL_JONES_1999_QJE.xls” contains the original data inHall and Jones (1999). For each country, we have output per-worker (y_i), capital to GDP ratio (K_i/Y_i), and years of schooling E_i. Your first job is to obtain, for each country, a measure of ln h_i. You will need to use equation (1) and the assumptions about φ(). Plot a graph with ln y_i in the vertical axis and ln h_i in the horizontal

axis. What can you say about the relationship between human capital per-worker and output per-worker?

2. Now, use equation (2) to obtain a measure of countries’ productivity levels ln A_i. Ex-plain the meaning of this  Does ln A_i vary too much across-countries? In particular, what is the mean and the standard deviation of ln A_i?
3. Plot a graph with ln y_iin the horizontal axis and ln A_i in the vertical axis. Is the relationship between ln y_i and ln A_i weaker or stronger than the relationship between ln y_i and ln h_i? Report both correlations.
4. Pick two developing countries (call them country B and C) and compare them toAustralia (call it country A). In particular, what are the ratios y_B/y_A and y_C/y_A. Then what are the ratios of all the other components (A_i, ^Ki , and h_i). What is the main source of income differences between countries B and C and Australia? ECON 7040代写

Part B: Macrohistory database (5 marks) ECON 7040代写

In this section, you are asked to use the Macrohistory database. These data have a much smaller number of countries but a much larger number of years per country. First of all, familiarize yourself with the dataset and variables. All the relevant information is here: https://www.macrohistory.net/database/.

1. After familiarizing with the dataset, select a subgroup of variables that you considerare relevant to understand the drivers of countries’ GDP per-capita. To make this decision use the models we used in lectures as a guide. However, you are free to think out of the box and look for relevant relationships we have missed so far.1
2. Provide descriptive statistics on your variables (mean, median, standard deviation).Discuss how much variation overtime you observe within country. Also, discuss how much variation across countries you observe for a given
3. Proceed to estimate the relationship between (log) GDP per-capita or GDP growth(your choice) and the variables of interest that you selected. Start by estimating a simple OLS regression with all the countries pooled together. Interpret the coefficients of the regression and discuss econometric and economic issues behind the results. Can you make sense of the results using any existing theory? Are your results consistent with previous literature? ECON 7040代写

1Relevant topics that are being investigated, and that might be of interest for you are the role of public debt, the role of international trade, and the role of financial markets development, among others.

4. Extend the previous analysis and estimate a panel fixed-effect regression to control forcountries’ unobserved heterogeneity that might shape the observed heterogeneity in GDP per-capita (growth).2 How different are the results compared to 3)? Are your results consistent with previous literature?
5. Using the econometric model in 4) investigate how the relationship between GDP per-capita and your “X” variables have changed overtime. In particular, how different are the results of the model when you restrict the sample before 1945 (regression using sample 1870-1945) and after 1945 (regression using sample 1946-2016? Discuss your results from an economic perspective, considering the major economic episodes during each subperiod.
6. Finally, investigate how important is the sample of countries in determining your re- For example, do your results change substantially when excluding US or Aus- tralia or Japan from the sample? Discuss potential explanations for your findings.

2These slides are a useful source to refresh your knowledge on OLS and panel fixed-effect regression https://ssrc.indiana.edu/doc/wimdocs/2011-10-07_mcmanus_panel_slides.pdf. This is relevant to understand and interpret your results.