One of the Central Predictions of Neo-Classical Macroeconomic Growth Theory

question 19

Essay

One of the central predictions of neo-classical macroeconomic growth theory is that an
increase in the growth rate of the population causes at first a decline the growth rate of
real output per capita, but that subsequently the growth rate returns to its natural level,
itself determined by the rate of technological innovation.The intuition is that, if the
growth rate of the workforce increases, then more has to be saved to provide the new
workers with physical capital.However, accumulating capital takes time, so that output
per capita falls in the short run.
Under the assumption that population growth is exogenous, a number of regressions of
the growth rate of output per capita on current and lagged population growth were
performed, as reported below.(A constant was included in the regressions but is not
reported.HAC standard errors are in brackets.BIC is listed at the bottom of the table). Regression of Growth Rate of Real Per-Capita GDP on Lags of Population Growth, United States, 1825-2000.
$\begin{array}{|c|c|c|c|c|c|}\hline \begin{array}{c}\text { Lag } \\\text { number }\end{array} & \begin{array}{c}\text { Dynamic } \\\text { multipliers }\end{array} & \begin{array}{c}\text { Dynamic } \\\text { multipliers }\end{array} & \begin{array}{c}\text { Dynamic } \\\text { multipliers }\end{array} & \begin{array}{c}\text { (1) } \\\text { Dynamic } \\\text { multipliers }\end{array} & \begin{array}{c}\text { Dynamic } \\\text { multipliers }\end{array} \\\hline 0 & -0.9 & -1.1 & -1.3 & -0.2 & -2.0 \\& (1.3) & (1.3) & (1.7) & (1.7) & (1.5) \\\hline 1 & 3.5 & 3.2 & 1.8 & 0.8 & - \\\hline 2 & (1.6) & (1.6) & (1.6) & (1.5) & - \\\hline 3 & -1.3 & -3.0 & -2.2 & - & - \\\hline 4 & (1.7) & 1.6) & (1.4) & - & - \\\hline \text { BIC } & -234.4 & -236.1 & -238.5 & -240.0 & -241.8 \\\hline\end{array}$ (a)Which of these models is favored by the information criterion?

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Definitions:

Raw Materials Price Variance

The difference between the actual cost of raw materials and the standard cost multiplied by the actual quantity used.

Raw Materials Quantity Variance

The difference between the actual quantity of raw materials used in production and the estimated quantity, which can indicate inefficiencies or savings in material usage.

Materials Quantity Variance

The variance between the real amount of materials consumed in the manufacturing process and the anticipated amount, with this difference being multiplied by the per unit standard cost.

Milk Chocolate

A type of chocolate that includes milk powder or condensed milk, giving it a milder flavor and creamier texture than dark chocolate.