In 1950, GDP per capita in Germany was only $4,281. GDP per capita in Argentina that same year was $4,987. So, in 1950 Argentina was actually “richer” in per capita terms than Germany. By 1992, however, GDP per capita in Germany was $19,351, whereas GDP per capita in Argentina was only $7,616. a. By what total percentage did per capita GDP in each country increase between 1950 and 1992? b. Explain how a country that has a lower GDP per capita than another country in some year can end up with a larger GDP per capita in later years. (All data are in real terms) 2, China’s economy is one of the fastest growing economies in the world. Growth in China is primarily driven by investment and exports. You are discussing the sustainability of China’s growth model with your friend. He says that, according to the aggregate production function, all China needs to do to ensure sustainable economic growth is to continue to increase its physical capital stock. Do you agree? Explain.
The chapter discusses Max Weber’s argument that the origins of industrialization in Western Europe could be traced to Protestantism. According to Weber, the Protestant work ethic was crucial to the development of a market economy and economic growth. Weber, however, also claimed that religions like Confucianism in China and Hinduism in India were not conducive to the development of capitalism. Given that India and China are now among the fastest-growing economies in the world, how effective do you think the culture hypothesis is in explaining economic development?
Suppose the country of Burondo is one of the poorest countries in the world. Its economy is heavily reliant on income from the export of oil. There are only two oil-extracting companies in Burondo. Both are owned by the government. A large part of the earnings from oil exvports goes toward financing the president’s lifestyle and entourage. Burondo has not had a single democratic election ever since it gained independence 50 years ago. Although Burondo is said to have abundant oil resources, only a small proportion is extracted every year because the extraction process is so inefficient. Transporting goods in and out of the country is costly, as Burondo is surrounded by lofty mountain ranges. School enrollment in this country is very low and as a result, most of the adult population is illiterate. Life expectancy is also quite low. Agriculture is collectivized in Burondo and so food shortages are common in the country. Using the information given, distinguish between the fundamental and proximate causes of prosperity (or its absence) in Burondo.
Zimbabwe, formerly known as Rhodesia, was a British colony for around ninety years. It became independent in 1980. The prime minister of newly formed Zimbabwe, Robert Mugabe, implemented a forced land redistribution policy, in which commercial farms were confiscated from white farmers. Mugabe also proceeded to confiscate shares in companies owned by whites. In the following years, agricultural production in the country fell sharply. Zimbabwe, the country that used to be called the breadbasket of Africa, is now seeing food shortages in certain parts of the country. a. Would Zimbabwe be considered to have extractive or inclusive institutions? Explain your answer. b. Why would a government undertake policies that would adversely affect the lives of its citizens? Explain your answer with reference to the Zimbabwean situation.