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Group 7- Nandana, Poorvika and Vedanti

ECON311
Professor Vidya Bharathi Rajkumar
Data Assignment- 1
29 March 2023
Data Assignment 1
Part 1
1.1
179 out of the 220 listed countries ( some being former nations) have data for the whole time
period. When it comes to measuring macroeconomic and development indicators, missing data
can be detrimental to the overall economic calculations. Incomplete or missing data can result in
an overestimation or underestimation of a country's indicators, which can have significant
economic and political consequences. For instance, this data gives us the breakup of GDP at
2015 constant prices, in this particular case, the Final Consumption Expenditure. In national
Income Accounting, final consumption expenditure includes the expenses related to goods and
services that directly satisfy individual or community needs and is a crucial component of the
national accounts. The missing data may result in over/underestimation of the Final consumption
expenditure, which may invoke inappropriate policy responses, further it can cause an
unnecessary change in GDP which may also trigger policy responses such as higher taxes or
lower interest rates, which could negatively affect economic growth
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1.2

I.
i.
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Usually, consumption and investment, move in the same direction. This is because, when
consumption increases, it indicates more demand, and as a result, firms find it favourable to
invest more in production to meet this newly increased demand. Similarly, if government
spending increases, it will create more opportunities for the overall economic growth of the
citizens, which will, in turn lead to an increase in consumption. This partially cyclical
relationship between the three components hints that these components usually follow similar
patterns of growth. Net exports, on the other hand, if negative, move in the opposite direction to
the other three components, indicating higher imports and lower exports, and net exports move in
the positive or similar direction as the other three components if exports are greater than imports.
When they move in the same direction, it may cause an increase in the GDP whereas, when they
move in the opposite direction, it hints at a reduction in the GDP. However, in no way do each of
these expectations imply causation, there can be situations where high govt spending and
consumption can abruptly inflate imports, and despite this, the GDP may not fall because the
increase in consumption and the govt spending may nullify the effect of the rise in imports.

ii. In the charts for both countries, we can see that the Household Consumption Expenditure (C )
has increased by a large amount over the time period for both countries. Especially between the
years, 2010-2020, the increase has been comparatively sharp. If we compare this to the
Government spending in both countries, it is clearly visible that consumption in both countries
has been considerably higher than the government spending throughout the time period. Further,
Capital Investments have very closely followed the trend of Consumption, indicating a
complementary relationship between the two. Net exports, on the other hand, in both countries
were almost stable until the mid-2000s; that is, the value of net exports indicated an equivalent
amount of imports and exports; however, post-mid-2000s, we can see a sharp decline in the net
exports in both the countries, indicating a higher level of imports. The charts and the data do
support the expectation about the behaviors of the components presented in part i.

iii. In Mongolia, we can see that post-2010, there was a decline in the net exports of the country.
One of the reasons for this could be the booming mining industry of Mongolia. This boom
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resulted in a 106% increase in the imports of the country, as noted in the Mongolia Quarterly
Economic Update - August 20111, by the world bank. This boom in the mining industry led to
significant growth and development in the country. Moreover, this also sits right with the visible
increase in investment and government spending around the same time in Mongolia.
2007 saw an increase in the exports of the country before a sharp decline starting during the
financial crisis, and continuing through 2010. Post 2010, the net exports have decreased for
Bhutan. In 2007, the commissioning of the ala Hydroelectric Power Plant (HPP) in Bhutan in
20072 had a significant impact on the country's exports and the overall economy. The
significantly high capacity plant boosted hydropower exports, of which the main market was
India. Additionally, the India-Bhutan Friendship Treaty of 2007, allowed free trade and
commerce between the territories, which made extensive exports a positive prospect for the
country. In fact, the hydroelectric power exports accounted for the highest3 share of the total
exports for the country!
Overall, the components of GDP in both countries have had similar trends, with Mongolia’s
component values being considerably higher than those of Bhutan. The most striking feature,
however is the decline in the net exports of the two countries while all the other components
were increasing steadily. While we could attribute some part of the decrease in net exports to the
Global Financial Crisis, it does not explain the increase in the other components of the GDP.

Part 2 - HDI as a measure of well-being

1 https://www.worldbank.org/en/news/feature/2011/08/24/mongolia-quarterly-economic-update-august-
2011
2 https://www.oecd.org/countries/bhutan/47177609.pdf
3 https://wits.worldbank.org/CountryProfile/en/Country/BTN/Year/2007/Summary
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2.2.d. The HDI and GNI ranks have a strong positive correlation since all the data points of the
two variables are close to the trendline (red). With an increase in HDI rank, the GNI rank also
goes up for the countries. A strong positive correlation on this type of scatterplot suggests that
countries with higher levels of human development tend to have higher levels of economic
development. This may be due to the fact that countries with higher levels of human
development tend to have more educated and skilled populations, better infrastructure, and more
stable political systems, all of which can contribute to higher levels of economic development.

However, as with any correlation, it's important to note that this does not necessarily imply
causation. Other factors, such as natural resources, government policies, and economic
structures, can also influence a country's level of economic development.

2.2.e.
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HDI
Low High

Burundi,
Central

GNI Low African Public Cuba, Tonga

Equatorial
Guinea, Switzerland,
High Botswana Singapore

Based on the above table, we would prefer to grow up in Singapore since it has high human
development as well as GNI. We would prefer Singapore over Switzerland, though it fares well
in both the factors since the former has better educational opportunities. Apart from that, there
are several benefits to growing up in a country with high HDI and GNI:

● Access to quality education: A nation with a high GNI and level of human development
usually provides better educational opportunities, with well-equipped schools, educated
staff members, and a variety of educational options. This enables people to advance their
knowledge and abilities and, if they so choose, to seek higher education.
● Better Healthcare: Nations with high levels of human development and GNI typically
have better healthcare systems, including hospitals that are well-equipped and qualified
medical personnel. Hence, people are more likely to receive timely and efficient medical
care when it is necessary, improving their chances of having good health.
● Better standard of living: A higher GNI translates into higher average income levels,
which increases the likelihood that people will have access to improved housing,
infrastructure, and modern technology.
● Safety and Security: Higher levels of human development and GNI can also result in a
more secure society with lower crime rates, better public safety infrastructure, and more
effective crisis management systems. This can be seen in Singapore, which fares well in
the safety index every year.
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Part 3- GDP & Life Satisfaction

3.1

Note- Italy and Canada are developed countries, Ukraine and Georgia are in transition, and
Bangladesh and Egypt are developing economies (UN Country Classification).
● Italy and Canada have the highest GDP ($35,000-$50,000) out of all countries, and their
life satisfaction scores lie between 6-8 for the years 2006 to 2020.
● Ukraine and Georgia have GDPs in the range of $8,000 to $15,000 over the years 2006 to
2020. Their life satisfaction scores range between 3.5 to 5.5.
● Bangladesh has the lowest GDP per capita out of all the countries, lying between $2000
to $5000. Even though Egypt is also considered a developing country, its GDP per capita
ranged between $8000 and $12,000 between 2006 and 2020. Bangladesh’s life
satisfaction scores lie between 4.5 and 5.5, whereas Egypt’s life satisfaction scores range
between 3.5 and 5.5.
● We can infer from the above information that developed countries with a high GDP tend
to have higher life satisfaction than countries in transition and developing countries. The
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life satisfaction scores of countries in transition and developing countries were almost in
the same range, even though there were differences in their national income. This goes
along with the key findings mentioned in the research “Happiness and Life Satisfaction”
by Esteban Ortiz-Ospina and Max Roser that “Richer countries tend to have higher
average happiness levels; and across time most countries that have experienced sustained
economic growth have seen increasing happiness levels.”

3.2
The above graph shows India’s life satisfaction scores between the range of 0-10 over the years
2006 and 2020, along with its GDP per capita over the years.
● In the graph, we can see that, even though GDP per capita is seen to increase over the
years 2006 and 2019, the life satisfaction curve is sloping downwards. In fact, the highest
life satisfaction score (5.1) is observed in the year 2006, when GDP was the lowest
compared to other years ($3453.1). The lowest life satisfaction score (3.2) was observed
in the year 2017 when GDP was at $6182.9.
● “Our World in Data,” said that based on the ranking of countries regarding their
happiness and life satisfaction score, there is a strong correlation between income and
happiness. It is said that countries that experience economic growth would also tend to
have growth in their happiness. However, some countries may experience periods of
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economic growth without an increase in life satisfaction, this is called the Easterlin
Paradox. This is observed in the case of India, as discussed earlier based on the graph
provided above. This could be due to income inequality in the country, where a majority
of the population does not necessarily benefit from economic growth.

Bibliography
● Ortiz-Ospina, Esteban. “Happiness and Life Satisfaction.” Our World in Data, 14 May
2013, ourworldindata.org/happiness-and-life-satisfaction#the-link-across-countries.
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● “Country classification”. United Nations.

https://www.un.org/en/development/desa/policy/wesp/wesp_current/2014wesp_country_
classification.pdf
● United Nations. “Documentation and Downloads.” Human Development Reports,
hdr.undp.org/data-center/documentation-and-downloads. “Bhutan Trade Summary 2007
Data”. World Integrated Trade Solution.
https://wits.worldbank.org/CountryProfile/en/Country/BTN/Year/2007/Summary
● Mongolia Quarterly Economic Update - August 2011. (2011, November 30). World
Bank. https://www.worldbank.org/en/news/feature/2011/08/24/mongolia-quarterly-
economic-update-august-2011
● OECD, Bhutan Energy Sector, 2010
https://www.oecd.org/countries/bhutan/47177609.pdf
● “Human Development Report 2021/2022”. UNDP. 2022
https://hdr.undp.org/sites/default/files/2021-22_HDR/hdr2021-22_technical_notes.pdf