00:01
Now in today's question we are given a production model wherein around 10 countries are with the data of the per capita gdp, capital per person in the year 2017.
00:13
We need to calculate the capital per person and per capita gdp and the predicted y star for all the remaining 9 countries except usa because its data is available to us.
00:26
So in order to calculate that, to compute the per capita gdp and the capital per person relative to the usa values, we divide the values in the column 1 and column 2 by the corresponding values of the united states.
01:11
So the country per capita gdp and the capital per person relative to the per capita gdp relative to the capital per tfp.
01:20
Similarly, the united states values are given as 1750755487 as the per capita gdp, capital per person is equal to 1, per capita gdp is also equal to 1 and the predicted y star is also equal to 1.
01:55
So for the remaining countries, canada, the per capita gdp value is given as 42540 and the capital per person is available to us as 153390.
02:18
Therefore, the other, the capital per person will be equal to 0 .876 and 0 .776.
02:33
For france, the capital per person value will be equal to 0 .777 and the per capita gdp will be equal to 0 .709.
02:47
For hong kong, the values will be 0 .884 and 0 .742.
03:05
Next for south korea, the values are 0 .816 and 0 .667.
03:20
Indonesia, the values are 0 .152 and 0 .193.
03:33
You can calculate these values in an excel so that it will be far easier for you to compute them.
03:41
Mexico, values are 0 .180 and 0 .300.
03:55
For kenya, it is 0 .024 and 0 .056.
04:06
And lastly for ethiopia, 0 .017 and 0 .029.
04:19
Now for the part b of the question which states to find the predicted gdp per capita or the predicted y star using the production model.
04:30
In order to predict the gdp per capita in the column 5 related to the united states, we have the production model assuming that there are no tfp differences.
04:49
The tfp is the total factor productivity differences between the other countries and the united states.
04:55
So the production model equation will be y star equals, this is for the part b, y star equals k upon k star raised to the power alpha, where y star is the predicted gdp per capita relative to usa.
05:29
The k is for the capital per person relative to the united states and the k star here represents the capital per person in usa and the alpha is the capital exponent used in the model.
06:18
Now let's assume that if alpha's value is equal to 1, assuming alpha is equal to 1, we can compute the predicted gdp per capita by plugging in the values in the column 4.
06:39
For the usa, the values are already available.
06:58
So for canada, the values will be 0 .844.
07:08
For the france, it will be 0 .578.
07:27
Hong kong, 0 .660.
07:36
South korea, 0 .511.
07:44
Indonesia, 0 .037.
07:55
Argentina, 0 .065.
08:05
Mexico, 0 .055...