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Diminishing marginal productivity of capital

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Macroeconomics 2000 words

Pick a country. Use the Solow model to analyse the economic growth of the country of your choice. 2000 words essay

Introduction

Thesis statement.

Brief summary or outline of the main topics/arguments/points made in the essay

Conclusion

Restatement or summary of the main points made in the body paragraphs and a final comment (if appropriate).

No new ideas are to be included in the conclusion. You write the introduction and conclusion last.

Main Body

• The Solow Growth Model (SGM)

1. Brief overview of model - production function, savings-investment function, breakeven investment function, steady state equilibrium.

2. Predictions/factors affecting SGM

i. Diminishing marginal productivity of capital.
ii. Change of saving rate and shift of savings-investment function
iii. Change of population growth rate and shift of breakeven investment function.
iv. Technological progress as driver of sustainable economic growth

3. Measurement of technological progress (TFP) using Solow residual.

• Introduction /Data / Graphs / Discussion of your chosen country (1970 - 2013)

1. Demographics
2. GDP growth and government policies from 1970 to 2013

Row 4: Years

Row 49: Share of household consumption

Row 50: Share of government consumption

Row 51: Share of investment

Row 52: Share of net exports

Plot as 100% Stacked Column graph with Years on x-axis.

(c) Marginal productivity of capital

Row 4: Years

Row 7: Total Factor Productivity

Row 9: Labour Productivity (based on number of employment) Row 10: Capital Productivity

Plot as line graph with Years on the axis.

4. Investment and relationship with economic growth

Row 41: Per capita GDP at constant prices

Row 51: Share of investment

Plot Row 41 on y-axis (labelled as Real GDP per person) and Row 51 on axis (labelled as Investment as % of Output) as scatter graph

5. Population growth rates and relationship with economic growth

Row 41: Per capita GDP at constant prices

Row 30: Labour input (as proxy for population growth rate)

Plot Row 41 on y-axis (labelled as Real GDP per person) and Row 30 on axis (labelled as Population Growth) as scatter graph

6. Contribution of TFP, capital and labour growth to economic growth

Row 4: Years

Row 23: Contribution of capital input

Row 26: Contribution of labour input

Row 31: Total Factor Productivity

Plot as 100% Stacked Column graph with Years on x-axis.

You may integrate the data / graphs / evidence for your country as you are discussing the various predictions of the SGM.

You can also present other relevant data in graphical or table format for your country to support your discussion.

•Bibliography and In-text referencing.

Reference no: EM131262938

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