ESSAY TOPIC: Using your compiled dataset and basic statistical analysis based on a scatter plot (with a linear fit)[1] answer the following two questions:

1. Discuss whether your data supports the predictions of the Solow type model in relation to the effects of the savings rate (or investment rate) and population growth on GDP per capita.
2. Is there any evidence of convergence among the countries in your sample? Discuss.

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INTRODUCTION

Economic growth is a phenomenon desired by most countries because of the many benefits associated with it such as increased standard of living, favourable balance of payments etc. Sustained economic growth is even more desirous as it leads to development (Felipe, Kumar, Abdon, 2010).Although sustained economic growth is considered a necessity for development, ‘there are large differences in income per capita and output per worker across countries today’; industrialised countries are over 30 times as rich as bottom developing countries (Acemoglu, 2007).

These differences in growth rates amongst countries has led to many scholars’ publications all in a bid to explain why countries have different growth rates, to determine if the growth rates amongst countries converge i.e do poorer countries eventually catch up with richer countries and to suggest ways through which economic growth can be increased. Earlier economists made efforts to explain these differences. However, the birth of modern inquiry into explaining different growth rates amongst countries can be attributed to the publications of economist, Robert Solow.

This next section will look at the Solow model, its predictions and the findings of other scholars on Solow’s predictions, the third section contains data analysis using data from 24 developed countries and 15 developing countries (Sub-saharan Africa, Asia, Latin America and the Carribbean), the fourth section comprises of discussion of results and this essay will conclude in secton 5