Questions

How well does the growth theory of the SGM "fit the facts"?

Choose two countries that interest you--one rich and one poor. What is the income per person in each country? Find some data on country characteristics that might help explain the difference in income: investment rates, population growth rates, educational attainment, and so on. (Hint: The web site of the World Bank is one place to find such data.) How might you figure out which of these factors is most responsible for the observed income differences?

Many demographers predict that the United States will have zero population growth in the twenty-first century, in contrast to average population growth of about 1 percent per year in the twentieth century. Use the Solow model to forecast the effect of this slowdown in population growth on the growth of total output and the growth of output per person. Consider the effects of both the steady state and the transition between steady states.

In the Solow model, population growth leads to steady-state growth in total output, but not in output per worker. Do you think would still be true if the production function exhibited increasing or decreasing returns to scale? Explain.

Scroll down to page 5 on this link to read my book review of Kotlikoff and Burns' The Coming Generational Storm: What You Need to Know About America's Economic Future.

This article on the Social Security Trustees report suggests that the system is in better shape than given credit. This article considers the importance of immigration for maintaining the part of the population that pays into the system. And here's Jay Bookman's less-than-positive take on Social Security, from the Atlanta Journal-Constitution.

Assume that the following data apply for the Chilean economy: n + g = 0.10, k = 2.5y, dk = 0.1y, and MPK x k = 0.3y. According to the Solow growth model, is savings rate in the Chilean economy (a) more than necessary to satisfy the golden rule criterion, (b) less than necessary to satisfy the golden rule criterion, or (c) just right to satisfy the golden rule criterion? Explain your answer in terms of consumption for current and future generations.

How does the status of the current account (i.e., a budget surplus or deficit) affect the level of capital worker and, by extension, the level of current savings relative to s*gold?

When did Social Security start in the United States, and what was its initial purpose with respect to encouraging worker retirement? What is the lump of labor fallacy? What is the earnings test?

What is the legal burden of Social Security payroll taxes? The economic burden?

Explain verbally and graphically why many economists argue that Social Security has had a negative effect on the capital stock.