Question

Part II: 27. Growth history. The data below are based on research by Brad DeLong Population GDP per person year (million) ($/person) 1600 545 141 1700 720 164 1750 900 178 1800 1200 195 1850 1325 300 Give all of your answers below as decimals (e.g. 2% growth is 0.02) First note that all of these numbers are adjusted for inflation. People were very poor in 1850. None of them had cell phones, cars, ever used antibiotics to cure an infection, and when it was hot out they suffered in the heat since A/C didn't exist. China alone today has more people than the entire world had in 1850. Remember that in general if you have values for X and X, then the (per period) growth rate gx is given by X, = X(1 + 9x). You can use this equation to calculate X, based on X, and gx like in the Romer model or work backwards from data on X and X, to calculate the growth rate like in this problem. i. What was the per year growth rate of GDP per person 1600 to 1700? ii. What was the per year growth rate of GDP per person 1700 to 1800? iii. What was the per year growth rate of GDP per person from 1800 to 18507 iv. (short response) How are the growth rate of GDP per person and the population related in the Romer model? Are these data consistent with the Romer model?

Answer 1

Year	Population (million)	GDP per person
1600	545	141
1700	720	164
1750	900	178
1800	1200	195
1850	1325	300

We use the given formula: X_t = X₀(1 + g_x)^t

i) [(164/141) – 1] = 0.163

ii) [(195/164)^1/2 – 1] = 0.0904

iii) [(300/195) – 1] = 0.538

iv) As per Romer Model, the level of output per person depends upon growth rate of knowledge and proportion of workers that produce output. The growth rate of ideas is not decreasing and hence it provides economic growth. Here, the data is thus consistent with Romer Model.