You may use reference materials (e.g., books, videos, lectures, notes, etc.)
CHOOSE TWO OF THE THREE QUESTIONS
- Cross-country Differences in GDP per Capita
In 2015, saving rates in Germany and Italy were 10.6 and 0.7 percent, respectively. In the same year, GDP per capita was 41,323.92 USD in Germany and 30,180.32 USD in Italy. Are the presented data for Germany and Italy consistent with the Solow model? More generally, to what extent might differences in saving rates account for cross-country differences in GDP per capita if there are relatively few restrictions on capital and labor mobility across countries?
- Economic History
Beginning in the 9th century, Muslim scholars—as well as some with Jewish or Christian backgrounds—began translating books into Arabic and preserving them in a place in Baghdad known as the House of Wisdom. They also made many original contributions to mathematics, astronomy, medicine, chemistry, zoology, and geography—recording all of these new ideas in books kept there as well. Many believe the House of Wisdom had the largest selection of books in the world at the time.
In 1285 AD, Ilkhanate Mongol forces and allied troops sacked the city of Baghdad. The House of Wisdom was destroyed. Indeed, so many books were thrown into the Tigris River that it is said to have run black from the ink in the books.
Fortunately, Nasir al-Din al-Tusi is believed to have rescued roughly 400,000 manuscripts by moving them from Baghdad to Maragheh before the Mongol invasion.
Use the Solow model to predict the consequences of the Mongol invasion on output per worker and capital per worker in the long run. To keep your analysis simple, assume that the only impact of the Mongol invasion was the destruction of books (i.e., assume no labor nor capital was destroyed). Moreover, assume that the ideas contained within the pages of these books destroyed books were not available elsewhere. Finally, briefly explain how your analysis would change if Nasir al-Din al-Tusi had not preserved roughly 400,000 manuscripts.
- Case Study
Select a country that might reasonably be said to have experienced a growth miracle or growth disaster. Clearly explain what happened just prior to the change in their economic circumstances that set the miracle or disaster in motion. Use the Solow model to trace the effects of the shock you identify. Discuss the extent to which the effects predicted by the Solow model are consistent with the outcomes observed in the real world.
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