ASSIGNMENT

1. For this question apply solow growth model. China’s ambition towards becoming a developed country in the next decade is threatened by an aging population, high debt levels, slowing down in productivity growth thus the goal of achieving annual growth of 4% need to reach it’s ambitious goal, as suggested by studies is impossible as it is estimated that the growth is about 2.3%. it is further suggested that population growth will decline to 0.4% and productivity to 0.8%. savings rate in this country is also at about 0.4% and it’s capital share is also equal to savings rate.

1. Given the above information what would the model indicate that the steady state capital of GDP per worker is given TFP of $300. 2. What is the steady state growth rate for China expected to b and 3. If chinas GDP per capita is $10000 would you assume that it is still converging to a steady state.

2. The recent global pandemic caused various economic shocks including to the hospitality, entertainment and tourism sectors resulting in losses of income. In country UK it reached 15%. 1. If the effects were transitory how would you expect consumers to respond. 2. given that the UK put measures to reduce the impact of the pandemic such as stimulus checks, unemployment insurance, how would you expect consumers to respond to this income support. And is this consistent with theoretical analysis.

3. Pikketty believes in introducing tax for the wealthy bracket (1%) to reduce inequality. However many policy makers disagree with this proposal. Explain why this is and implore model such as solow and any other you may think is necessary

4. Xavier Sala I’Martin and Branco Milanovic seem to agree that poverty is falling and incomes converging. How can this be reconciled to Piketty, Saez and Zucman findings where the find that top 1% income share is rising in all countries