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Module 1 - Assignment Answer

The difference in growth rates can be attributed to high income countries having higher rates of machinery and equipment investment, more skilled labor, better access to finance, and more developed business environments which allow for greater adoption of technology and more productive management practices.

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Kerjaan Fira
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18 views

Module 1 - Assignment Answer

The difference in growth rates can be attributed to high income countries having higher rates of machinery and equipment investment, more skilled labor, better access to finance, and more developed business environments which allow for greater adoption of technology and more productive management practices.

Uploaded by

Kerjaan Fira
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Module 1 – exercises

1. Using what you learned on how to estimate growth rates (pp. 8-10), calculate the
average rate of growth of output per worker (i.e. labour productivity) for low and high
income countries over the last 29 years (1991-2019). The data is provided below.

Hint: use the formula from p. 9.

Output per worker


Country income (constant 2011
year
group international $ in
PPP)
Low income 1991 3482.6
Low income 1992 3315.2
Low income 1993 3211.1
Low income 1994 3142.9
Low income 1995 3211.5
Low income 1996 3270.2
Low income 1997 3290.7
Low income 1998 3311.8
Low income 1999 3308.2
Low income 2000 3300.0
Low income 2001 3349.3
Low income 2002 3403.9
Low income 2003 3399.4
Low income 2004 3484.5
Low income 2005 3589.2
Low income 2006 3664.8
Low income 2007 3786.0
Low income 2008 3874.6
Low income 2009 3991.2
Low income 2010 4139.1
Low income 2011 4163.0
Low income 2012 4118.0
Low income 2013 4169.9
Low income 2014 4257.0
Low income 2015 4165.9
Low income 2016 4105.7
Low income 2017 4152.5
Low income 2018 4227.6
Low income 2019 4310.9
High income 1991 64452.8
High income 1992 65951.3
High income 1993 67009.1
High income 1994 68619.2
High income 1995 69921.8
High income 1996 71360.5
High income 1997 72856.4
High income 1998 74145.0
High income 1999 75683.1
High income 2000 77712.8
High income 2001 78335.1
High income 2002 79305.3
High income 2003 80530.3
High income 2004 82486.7
High income 2005 83544.7
High income 2006 84751.8
High income 2007 85709.6
High income 2008 85434.4
High income 2009 83992.4
High income 2010 86488.2
High income 2011 87611.9
High income 2012 88078.1
High income 2013 88701.9
High income 2014 89422.6
High income 2015 90399.5
High income 2016 90670.4
High income 2017 91411.4
High income 2018 93011.8
High income 2019 94671.5

2. Based on what you learned this week and using your results above, compare the
average labour productivity growth rate of both groups and share your views about
what could possibly explain the difference in growth rates.

Answer:
1. The Average rate of growth of labour productivity in low income countries from
1991 to 2019 is:
𝑔 =¿- 1
𝑔 =1.007−1=0.007=0.7 %

While, The Average rate of growth of labour productivity in high income countries
from 1991 to 2019 is:
𝑔 =¿- 1
𝑔 =1.013−1=0.013=1.33 %

2. Based on the calculation results in the first question, the average rate of growth of
labor productivity in low-income countries over the period 1991-2019 is 0.7%, while
the average labor productivity growth rate in high-income countries is 1.33%. The
difference in growth rates between low-income countries and high-income countries
can be attributed to the difference in technology and efficiency. Some groups of
countries may have a higher average rate of growth of labor productivity due to
higher rate of machinery and equipment investment, and also have more skilled
labor to operate new/high technology machines so that it is more efficient in
producing goods. While other groups of countries may face an obstacle to adopting
conventional/new technologies due to lack of access to finance and lack of skilled
labor to operate high tech machines. The process to achieve higher productivity is
driven by a wide range of factors, some of which are business environment
improvement, management quality improvement, and external factors. Groups of
countries with a higher rate of productivity may have a better business climate due
to the availability of adequate educational institutions and skill development, more
inclusive and flexible labor markets, better access to credit and financial services,
and others. Also, the enterprise in countries with higher productivity may have
better management practices, which is crucial to increase productivity, since it
encourages operational efficiency gains. It can enable firms to close the gap between
its real and potential levels of production thus fostering firms’ growth. Moreover,
efficient management practices may contribute to improving quality control of goods
and services, which will lead to productivity gains and economic benefits through
higher prices or savings. There are at least 6 key factors related to productivity-
oriented management practices, such as Communication-oriented organizational
climate, Flexibility in the workspace, Economic incentives for productivity/employee
performance, and others.

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