5. The empirical fit of the production model: The table below reports per capita GDP and capital per person in the year 2017 for 10 countries. Your task is to fill in the missing columns of the table. (a) Given the values in columns 1 and 2, fill in columns 3 and 4. That is, compute per capita GDP and capital per person relative to the U.S. values. (b) In column 5, use the production model (with a capital exponent of 1/3) to compute predicted per capita GDP for each country relative to the United States, assuming there are no TFP differences. (c) In column 6, compute the level of TFP for each country that is needed to match up the model and the data. (d) Comment on the general results you find.

5. The empirical fit of the production model: The table below reports per capita GDP and capital per person in the year 2017 for 10 countries. Your task is to fill in the missing columns of the table. (a) Given the values in columns 1 and 2, fill in columns 3 and 4. That is, compute per capita GDP and capital per person relative to the U.S. values. (b) In column 5, use the production model (with a capital exponent of 1/3) to compute predicted per capita GDP for each country relative to the United States, assuming there are no TFP differences. (c) In column 6, compute the level of TFP for each country that is needed to match up the model and the data. (d) Comment on the general results you find.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

5. The empirical fit of the production model: The table below reports
per capita GDP and capital per person in the year 2017 for 10
countries. Your task is to fill in the missing columns of the table.
(a) Given the values in columns 1 and 2, fill in columns 3 and 4.
That is, compute per capita GDP and capital per person relative to
the U.S. values.
(b) In column 5, use the production model (with a capital exponent
of 1/3) to compute predicted per capita GDP for each country
relative to the United States, assuming there are no TFP
differences.
(c) In column 6, compute the level of TFP for each country that is
needed to match up the model and the data.
(d) Comment on the general results you find.

In 2011 dollars
(1)
Capital
Kenya
Ethiopia
Country
United States 175,075 54,807
Canada
153,390 42,540
France
136,004 38,841
Hong Kong
154,766 40,603
South Korea
142,891 36,521
26,620 10,598
16,469
41,866 17,070
4,179
3,069
2,938
1,596
Indonesia
Argentina 31,589
Mexico
Relative to the U.S. values (L
(2)
(3)
(4)
Per Capital Per
per
capita
per
person GDP person
(5)
capita Predicted
GDP
y*
1.000
1.000 1.000

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