Assignments

Analysing the GDP Growth Rate and Per Capita income of Three Country
Impact of Human Capital on Economic Growth
Impact of human capital and physical capital on economic growth

SUBMITTED TO:
Dr. Nasir Iqbal & Dr. Shujaat Farooq

SUBMITTED BY:
Adnan Saqib
(MPhil Econometrics 3rd Semester)

Registration No:
PIDE2019FMPHILETS07

DEPARTMENT OF ECONOMICS & ECONOMETRICS

Pakistan Institute of Development Economics, Islamabad
 Assignment 1
GDP Growth GDP growth per capita annual
30 %
25 15
20
10
15
10 5
5 0

1961
1965
1969
1973
1977
1981
1985
1989
1993
1997
2001
2005
2009
2013
2017
0
1961
1964
1967
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
2006
2009
2012
2015
2018
-5
-5
-10 -10
Qatar Turkey Pakistan Turkey Pakistan Qatar

Countries:Turkey, Qatar, Pakistan.

Data Source: World Development Indicators

Pakistan: Reasons for Decline in DGDP
a
According to World Bank Pakistant real GDP growth is -1.4 in FY 2020 which of course big was
due to corona lockdown which affected
a the economy badly, services sector contracted by 1% and
on demand side there is private consumption have contracted. Political Tension is also problem
for the current government. To bring back economy on its tracks following sector are target to
revive economy: transforming the energy sector, supporting private sector development,
Reaching out to the underserved, neglected, and poor, Accelerating improvements in service
delivery[CITATION Wor201 \l 1033 ]. 
Turkey: Reasons for down fall in GDP per capita and Growth
Excessive current account deficit. Large amounts of private foreign-currency denominated debt.
Sanctions imposed by the US and current political tension with Middle east countries[ CITATION
And20 \l 1033 ]. Other main cause of low economic growth is weak aggregate demand from
consumer which constitute half of the GDP. Contribution of Agriculture and Manufacturing to
GDP has dropped. Turkey shifted its focus on industrialization especially defense industry which
increased 3-fold from $437 Million to $1.6 Billion in 2016 plus the support from people by
consuming only local goods surely help the country [ CITATION Erk20 \l 1033 ].
Qatar: Reasons for Decline in GDP
Relation with Saudi Arabia became tense when Aljazeera Leading news channel made some
allegation against Muhammad Bin Salman and result in cutting ties with Saudi Arabia. Decline
in the market activity and confidence due to the boycott by Egypt, Saudi Arabia, UAE and
Bahrain. Sharp drop in imports, which in return resulted in a rise in the cost of transferring
goods. Shifting from an oil base economy to natural gas production to revive its
economy[ CITATION Alm20 \l 1033 ].
 Assignment 2
Countries: Pakistan, Turkey, Qatar Data Source: World Development Indicator
(WDI) Data Time Period: 1980-2019

Country Coefficien t-values D.W Prob Std. Error R-Square

t Values
Turkey 0.45 2.41 1.84 0.02 0.18 0.13

Result Interpretation: The coefficient value is positive which means that if there is 1% increase
in the investment the GDP will increase by 0.45%.
Situation in Turkey: It is evident from historical evidence that 2002 has been a turning point in
recent Turkish economic history. After 2002, Turkey began a new stabilization program proved
by the IMF and the World Bank, with solid disinflation, fiscal discipline, banking sector
structural reforms and privatization goals. In addition to the stabilization program, the integration
process of the European Union (EU) has sponsored both political and structural changes, as the
European Council approved 3 October 2005 as the starting date for accession negotiations in
December 2004. Both political and structural reforms have been rooted in the current EU
integration system, fostering strong changes in longer-term standards and trust in the
sustainability of the reforms[ CITATION Meh08 \l 1033 ]. Current industrial growth of 8% is helping
the country gaining its momentum to accumulate capital.[ CITATION Erg20 \l 1033 ]
Country Coefficien t-values D.W Prob Std. Error R-Square
t Values
Pakistan 0.38 2.02 1.04 0.05 0.19 0.097

Result Interpretation: The coefficient value is positive which means that if there is 1% increase
in the investment the GDP will increase by 38%.
Situation in Pakistan: The capital formation has decreased over time due to terrorism, energy
shortages, financial instability, and political instability, with some macroeconomic indicators as
control variables [CITATION Sad18 \l 1033 ]. Gross fixed investment dropped to 13.8pc of GDP in
2018-19 from 15.1pc a year ago. Significant factors contributing to declining GFCF growth are
plummeting rates of domestic savings and investment, liquidity problem and falling production
[ CITATION Jaw19 \l 1033 ].

Country Coefficien t-values D.W Prob Std. Error R-Square

t Values
Qatar 0.7 3.66 1.51 0.0019 0.47 0.44

Result Interpretation: The coefficient value is positive which means that if there is 1% increase
in the investment the GDP will increase by 70%.
Situation in Qatar: Qatar high capital accumulation showing a rise in capital accumulation
despite the boycott by the Arab nation because their transformation from oil economy to gas
producing economy further the Football cup in 2022 is making it a hotspot for the investors.
[ CITATION MOO \l 1033 ]
 Assignment 3
The conventional standard to measure human capital stock has been largely categorized into
three parts: Output-, Cost-, and Income-based approach. School enrollment data has been taken
as proxy for human capital[ CITATION DAE09 \l 1033 ]. Data has been taken from the World Bank.
Relationship of GDP growth with human capital stock and capital accumulation.
Turkey Co-efficient T-value Std. Error
Investment 0.62 2.98 0.24
Education 0.06 2.01 0.30
The positive relation of Turkey economic growth with capital accumulation and physical capital
is explained by following factors. Almost five decades of industrialization and considerable
intervention and protectionist import substituting policies in domestic capital formation in the
early 1980 Turkey entered a new era of export-led economic growth[ CITATION Cec94 \l 1033 ].
From 2010 to 2018, its average growth rate was more than 5% thanks mainly to a construction
boom driven by cheap capital following the global financial crisis [ CITATION Erk20 \l 1033 ].
Education have also played its positive role in Turkey economic development. For this purpose,
Turkey made 8 years compulsory primary education, which makes highest literacy rate between
24 to 65 years of age and result is knowledge base economy[ CITATION Kor12 \l 1033 ].
Qatar Co-efficient T-value Std. Error
Investment 0.91 1.98 0.24
Education 0.81 2.32 0.30
Investment and Education have positive relation with GDP growth of Qatar. Economic blockade
on the State of Qatar in June 2017 from the Arab Nations, during which the national economy
demonstrated its resilience and ability to overcome the challenges of the blockade in a short
period of time. In 2018, the real GDP grew by 1.5%, and its growth rate stabilized by a negative
0.2% in 2019, due to a decrease in the production of the hydrocarbon sector by about negative
1.8%, which exceeded the positive growth achieved in (non-hydrocarbon) sectors by 1.3%, also
there is decline in the construction industry which is because of the completion of 2020 world
cup project. Investment on gas and LNG have bring positive effects on GDP[ CITATION Alm20 \l
1033 ].

Pakistan Co-efficient T-value Std. Error

Investment 0.30 2.89 1.91
Education -0.03 1.87 0.11
As the result in the above table showed that in case of Pakistan about 30% share in growth rate is
due to human capital, as Pakistan is considering a developing country, so physical capital with
combined to labor force contributing a major portion in GDP growth rate. The remaining portion
of showed the impact of Technology and other factors[ CITATION Sia10 \l 1033 ]. According to
literature Enrollment rate have a strange relationship with GDP growth rate. [ CITATION Luq12 \l
1033 ] stated that no of enrollment and GDP have negative relationship. It is suggested to build
new schools to increase enrollment and to avoid the over crowdedness of the class. As size of the
class plays important role in determining the quality of knowledge to be conveyed so it should be
selected carefully.
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