Economic Development

2019-I
Professor Alejandro Mina Calvo

Final Project

Due Dates: April 10th (indicators), May 24th (essay)

General guidelines

The purpose of this assignment is to use the theory you have learned to analyze two different
countries: one with high income and other with a low income. The analysis will focus on the long
term (in areas such as the productive potential of an economy, and economic growth and
development), short run economic fluctuations, and the current economic development.

You should write your report in the form of a short business memo in which you inform the
reader about those countries and what their economic potential is. A possible structure is
suggested below and the memo should be 4-5 pages long plus graphs. Most of the work
involves getting the correct information from the World Development Indicators variables. Other
sources of information are the International Monetary Fund and the CIA fact book.

Structure

You are free to use the one you prefer but I expect you to include the following:

Introduction: What are the major resources in each country?

• Land.
Arable land per person.
• Labor and Human Capital.
What percentage of population is working?
Do women play an important role in this country’s labor force?
What share of the labor force has a degree above high school?
What is the literacy rate of the population?
• Institutions
Index of economic freedom, ease of doing business, corruption perception indexi.

1. GDP accounting.

What is the importance of consumption (C) and investment (I) in the Aggregate Demand for
your countries? Does government spending on goods and services play an important role? How
about net exports? What are the main exports? Provide a graph of the contribution of these
various components to GDP over time and discuss any major changes.
2. Long Term economic growth.

What is the annual rate of growth of real GDP per capita since 1970ii? (Or the earliest year for
which you can find information). Using the rule of 70, discuss how many years it would take your
country to double its GDP per capita. (The best indicator is real GDP per capita with PPP).
Where are both countries on Sachs’ ladder of economic developmentiii (not on the ladder, the
first rung, etc.)? Has the low income economy experienced convergence with the high income
one or is it struggling to gain ground?

3. The recent business cycle.

Try to provide a graph of real GDP and unemployment over the past 20 years. Did the “Great
Recession” affect those countries? How has the unemployment rate evolved since 2007? Is
growth back in the positive range? Have the economies experience large swings in
unemployment and real GDP or have they been stable?

4. The Human Development Index

Calculate the HDI using the data from the United Nations. Is the index high, medium, or low?
What areas must be improved on in the developing country?

Conclusion
See if you can reach a conclusion about an answer to this question: which conditions are most
important for a country’s ability to grow, achieve rising GDP per capita and move up the ladder
of economic development?

Countries

I will email a spreadsheet with all the eligible countries for this assignmentiv.

i Those indices are calculated by the Heritage Foundation, the World Bank, and Transparency
International.
1
ii 𝐹𝑖𝑛𝑎𝑙 𝐺𝐷𝑃 # 𝑜𝑓 𝑦𝑒𝑎𝑟𝑠
𝐴𝑣𝑒𝑟𝑎𝑔𝑒 𝑔𝑟𝑜𝑤𝑡ℎ 𝑟𝑎𝑡𝑒 = (𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐺𝐷𝑃) −1

iii
Sachs, J. (2006). The end of poverty: economic possibilities for our time. Penguin. You can find the first
chapter online.

iv Notable absents include: United States, China, India, Bangladesh, and Malawi