Economics 448Descriptive Statistics on Economic Growth

September 6, 2012

Introduction

I Today will introduce some basic measures to measurewell–being. I expect many/most are familiar to you.

I Look at patterns across countries and within countries (e.g.,US) over time.

I To gain a sense of magnitudes involved beta rich and poorcountries.

Additional Resouces:

While I can give an introduction I strongly encourage you toinvestigate other sources.

The best single source is the World Bank for measures on thestandard of living and development broadly defined. InternationalMonetary Fund (IMF) is the primary source of monetary andfinancial data on countries.

World Bank has a number of reports, written for differentaudiences (academic, policy, public).

For example, each year since the late 1970s the World Bankpublishes an Annual World Development Report. I have putreadings from a couple of reports on the reading list.

Sources

Since the DE is old, I have used materials from two othertextbooks:

1. David Weil (2012) Development Economics, 3rd Edition.Pearson Education.

2. Daron Acemoglu (2008) Introduction to Modern EconomicGrowth. Princeton University. Press.

Many other textbooks. Authors stress different aspects of growthand development. The Library Congress number is on thecopyright page. Go to that section in the library find one find all.Virtually all with the catchy titles e.g., “Economic Growth”.

Other interesting (MASSIVE picture) books:

I Karl Polanyi (1944) The Great Transformation. The Politicaland Economic Origins of Our Time.

I Jared Diamond (1997) Guns, Germs, and Steel: The Fate ofHuman Societies.

I Jared Diamond (2011) How Societies Choose to Fail orSucceed: Revised Edition.

I Kenneth Pomeranz (2000) The Great Divergence: China,Europe, and the Making of the Modern Economy.

I Daron Acemoglu and James A. Robinson (2012) Why NationsFail. The Origin of Power, Prosperity, and Poverty.

Figures and Tables from Weil (2012)

The next several slides are from D. Weil (2012) Economic Growth,3rd. Edition, Addison–Wesley. (From Chapter 1.)

Figures and Tables from Acemoglu (2010)

The next several slides are from D. Weil (2012) Introduction toModern Economic Growth, Princeton University Press. (FromChapter 1.)

Link to D. Ray web page.

I will put a link to D. Ray’s web page. He presents similar (butagain slightly different) material.

Cost of Living Indicies

I How does the Bureau of Labor Statistics calculate the cost ofliving index?

I Large number of consumer goods (500+) q. Surveyhouseholds to obtain information on prices paid for thesegoods, p. Cost of basket of goods x = p · q =

∑i piqi .

I BLS aggregates across locality (weighted by population).

I Detailed answer: http://www.bls.gov/cpi.

I Has different series (different basket of goods) for subgroups(e.g., urban areas) produces cost of living for “representativehousehold”.

Exchange Rate vs. PPP

I Assume have defined a baseline of goods to use for eachcountry.

I Calculate cost of living for each country.

I Fine within country, how to make comparisons acrosscountries?

I Two ways:

1. Market Exchange rates.2. Purchase power parity (PPP).

I Give different answers. Why?

I Which procedure is preferred to compare differences inwell–being across countries?