In this problem set you will practice some basic macroeconomic concepts. You will also have an opportunity to compare the macroeconomic performance of the U.S. with that of the U.S.S.R for most of the 20th century.

The following data has information on real output, capital stock and labor input for the U.S. and U.S.S.R.  The source of the data for U.S.S.R. is a paper by Bill Easterly and Stanley Fischer (whole economy, western estimates).  The data for U.S. GDP and capital stock comes from the BEA and labor input from the BLS.  The exercises below involve calculating differences, growth rates and averages.  Hence, they are simple enough to be done in Excel almost as quickly as with statistical software such as STATA.  You can use whichever you prefer.  The data is available in three formats: delimited text file (growth.txt);  excel spreadsheet (growth.xls); and STATA dataset (growth.dta).  There are five variables in the dataset in the following order:
 

• country
• year
• ry - real GDP (for the U.S. in billions of 1996 Dollars; for the U.S.S.R. in billions of 1973 Rubles)
• rk - real capital stock (for the U.S. in billions of 1996 Dollars; for the U.S.S.R in billions of 1973 Rubles)
• l   - labor input (for the U.S. in thousands of workers; for the U.S.S.R index with 1928=100)

1. Is output per worker, also known as labor productivity, a good measure of overall efficiency of production?
2. Using the above data calculate average output per worker for the U.S. and the U.S.S.R.  Does it make sense to compare the two numbers? Why or why not?
3. Calculate average growth rates of output per worker for the U.S. and the U.S.S.R.  Does it make sense to compare the two numbers? Why or why not?
4. Does the comparison of labor productivity growth in the preceding question surprise you?  Why or why not?
5. Using the capital stock series calculate, annual net investment.  Compare the average shares of investment in total output in the U.S. and the U.S.S.R.  Which country has relatively higher investment?  What does this imply for aggregate consumption in the two countries?
6. Calculate the average share of investment in total output in the U.S. and the U.S.S.R. for the 50's, 60's, 70's and 80's.  Is there a difference between the pattern of the investment share in the U.S. and in the U.S.S.R. during the period between the 50's and the 80's?  Was the Soviet trend sustainable?  Why or why not?