Economics of Transition      Aug - Dec 2003        Economics 232  

Exercise #3

Growth in the U.S.A. vs. U.S.S.R.

(Due Wed, Sept 10th, in class)

In this exercise you will practice some basic macroeconomic concepts. You will also compare the macroeconomic performance of the U.S.

with that of the U.S.S.R for most of the 20th century. 

The following data has information on real output, capital stock and labor input for the U.S. and U.S.S.R.  

The source of the data for U.S.S.R. is a paper by Bill Easterly and Stanley Fischer (whole economy, Western estimates).  

The data for U.S. GDP and capital stock come from the Bureau of Economic Analysis and the labor input series is from the Bureau of Labor Statistics.

The exercises below involve calculating differences, growth rates, and averages.  They can be done in Excel or with basic statistical packages such as 

Stata or SAS.  Use whichever you prefer.  See me if you have questions about using such software.  

The data are available in three formats: delimited text file (growth.txt);  excel spreadsheet (growth.xls); or Stata dataset (growth.dta).  

There are five variables in the dataset in the following order: 

1. country 
2. year 
3. ry = real GDP (for the U.S. in billions of 1996 Dollars; for the U.S.S.R. in billions of 1973 Rubles) 
4. rk = real capital stock (for the U.S. in billions of 1996 Dollars; for the U.S.S.R in billions of 1973 Rubles) 
5. l   = labor input (for the U.S. in thousands of workers; for the U.S.S.R index with 1928=100) 

Answer the following questions: 
1. Is output per worker, also known as labor productivity, a good measure of overall efficiency of production?  Why or why not?
2. Using the above data, calculate average output per worker for the U.S. and the U.S.S.R.  

	Does it make sense to compare the two numbers? Why or why not? 
3. Calculate average growth rates of output per worker for the U.S. and the U.S.S.R.  

	Does it make sense to compare the two numbers? Why or why not? 
4. Does the comparison of labor productivity growth in the preceding question surprise you?  Why or why not? 
5. Using the capital stock series, calculate the annual net investment series.  Calculate the share of net investment in output by year.

	Graph the trends in investment share for the U.S. and the U.S.S.R.  Compare the average shares of investment in total output 

	in the U.S. and the U.S.S.R.  Which country has relatively higher investment?  

	What does this imply for aggregate consumption in the two countries? 
6. Calculate the average share of investment in total output in the U.S. and the U.S.S.R. for the 1950's, 60's, 70's and 80's.  

	Is there a difference between the pattern of the investment share in the U.S. and in the U.S.S.R. during the period 

	between the 1950's and the 1980's?  Was the Soviet trend sustainable?  Why or why not?