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ACCOUNTING FOR THE GROWTH OF THE UNITED KINGDOM, In this assignment, you will examine why the growth of the British, German, and the French economies differed. You will calculate and examine the growth of their real net national products, their labor forces, their real capital stocks, and their productivity. The data in your EXCEL file for the United Kingdom come from Charles Feinstein, National Income, Expenditure and Output of the United Kingdom, 1855-1965, Cambridge: Cambridge University Press, 1972. The data for Germany come from Walther Hoffman, Das Wachstum der Deutschen Wirtschaft seit der Mitte des 19. Jahrhunderts, Berlin: Spring-Verlag, 1965. The data for France are from Maurice Levy-Leboyer and Francois Bourguignon, L'economie Francaise au XIX siecle, Paris: Economica, 1985, for the period 1870-1913 and from J.-J. Carre, P. DuBois, and E. Malinvaud, La Croissance Francaise, Paris: Seuil, 1972 for the period 1913-1959 (with some interpolations by the instructor that I don't want to discuss!). The data obtained from these sources for this assignment are:1) NNP or Net National Product. (Gross National Product less Depreciation of capital stock.) For the UK this is measured in millions of pounds sterling,for Germany in millions of marks, and for France in millions of francs. 2) Labor Force. This is the number of individuals in the population who participate in the work force (even if they are currently un- or under-employed) and is measured in thousands. 3) Capital Stock represents the plant, equipment, buildings and inventories used in production. For the UK this is measures in millions of pounds sterling, for Germany in billions of marks, and for France in millions of francs. 4) Labor Income and 5) Capital Income represent the income accruing to each factor of productions. Millions of pound sterling for the UK and millions of marks for Germany. There are no figures available for France. The sum of Labor Income and Capital Income is Gross Domestic Income at factor cost (GDI). GDI = NNP + depreciation - Net income from abroad This means that the two sources of income will not, except by accident, add up to Net National Product. 6) NNP Index and 7) Capital Index are price indices for NNP and the Capital Stock, respectively. The base year for these indices is 1913. PLEASE NOTE: The first table in the file is for the United Kingdom, the second table in the file is for Germany, and the third is for France. You must complete all three of these tables. 1. You will first need to calculate the real net national product or REAL NNP. You will be familiar with this process as you have already completed Assignment 1. You will do this by dividing the nominal NNP by the NNP INDEX and multiplying by 100. Compose a Lotus 1-2-3 formula for this in the first cell of the row and enter the result. Then copy this cell to the remainder of the row (note that it extends to column L which is off the screen to the right). 2. Next you will calculate the real capital stock or REAL CAPITAL. You will do this by dividing the nominal CAPITAL STOCK by the CAPITAL INDEX and multiplying by 100. 3. Labor's share of total income (gross domestic product at factor cost) is calculated by dividing labor's income or LABOR INCOME by the sum of LABOR INCOME and CAPITAL INCOME for each year. Capital's share of total income or CAPITAL SHARE is calculated by dividing CAPITAL INCOME by the sum of LABOR INCOME and CAPITAL INCOME. 4. For the growth rates of REAL NNP, REAL CAPITAL, and LABOR, again use the RATE function from EXCEL. [=RATE(number of periods, , -start cell, final cell)]. Note that the growth rates over each interval are placed under the starting date (so the average growth rate of real NNP from 1870 to 1880 is placed under 1870). Also note that the length of the intervals (term) varies from 1910 on, so you cannot simply copy the calculation from the first cell to the end of the row as with the previous calculations of price indexes and income shares. Instead, copy the first cell to the end of the row and then move the highlight to column F (1910-1913), press the F2 key (Edit function), and change the third figure inside the parentheses from "10" to "3". Press <Enter> and repeat the editing on columns G-L, changing "10" to the correct number of years in each case. 5. The AV LABOR SHARE and the AV CAP SHARE are the average share of labor income and of capital income over the different periods examined. The first blank is the average of the figures for 1870 and 1880. You can then copy this to the rest of the row for each country. 6. The total factor productivity is calculated by subtracting from the growth rate of NNP the growth rates of labor and capital, each weighted by its average share in national income over the time interval in question. This may be written as: Since we have no factor share figures estimated directly for France, we must make do with indirect estimates. One is to use the shares .7 for Labor and .3 for Capital that Carre, DuBois and Malinvaud suggest. Another is to use the figures for Germany, as a roughly similar economy. To compare the growth of the three economies over time, you will find it convenient to make an index of real NNP, setting 1913=100. If you place this calculation under the actual real NNP for each country in the worksheet, the graph named "NNP1913=100" will show the relative growth of each economy before and after 1913. From the tables you have completed (and printed out) for both the United Kingdom and Germany, answer the following questions. You will find it very useful to look at the graphs, especially "CAPITALGROWTH", "LABORGROWTH", "NNPGROWTH", and "PRODYGROWTH". 1. Before 1913, which country enjoyed a higher rate of growth? Looking at the contributing factors, which one added to the higher rate of growth in each country before 1913? 2. Between the two World Wars, which country enjoyed a greater rate of growth before the Great Depression? After the Great Depression? Which of the contributing factors added to the higher rate in each period? 3. After World War II, which country enjoyed the greatest rate of growth? Which of the contributing factors added to the higher rate? 4 Although one country may have had higher rates of economic growth in different periods, do you notice any common pattern to the increases and decreases in the rate of growth of the three countries? Are these rates correlated? 5. Compare the rates of technological changes as measured by total factor productivity in the three countries. From your reading, why should there be such a difference before 1913? After 1913?
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