Differences between U.S. and Pakistan

Differencesbetween U.S. and Pakistan

Differencesbetween U.S. and Pakistan

Withthe end goal of this question, the U.S. is selected as the richnation and Pakistan as the poor country analyzed. From the &quotQuickReference Tables&quot link in the &quotData and Statistics&quotsection of the World Bank`s site, income per individual was $46,060in the U.S. in 2007 and $860 in Pakistan for that year (Haider,2013). As the content notes, the most imperative variables to clarifythis 46-fold contrast in income per capita are differences in labor,technology and capital. The Solow development model gives a structurefor considering the significance of these elements.

Oneclear contrast crosswise over the two nations is in instructiveachievement, which could reflect differences in wide `human capital`or in the level of innovation (e.g. in the event that the work forceis more educated, better innovations can be executed) (U.S.Department of State, 2015). Here, instruction will be considered as&quotinnovation&quot in that it permits more yield per laborer forany given level of physical capital per laborer. Table 1 outlinesthis information for both nations considered.

Table1

UnitedStates and Pakistan: Macroeconomic performance

Tablecourtesy of World Bank (World Bank Group, 2015)

Selected Variables

Labor Force growth(1994-2000)

Investment/GDP (1990)- in %

Illiteracy (%of population 15+)

United States

1.5

18

0

Pakistan

3.0

19

54

Itappears to be unlikely that the little contrast in investment/GDPclarifies the huge distinction in per capita income, leavingwork-force development and lack of education (i.e., innovation) asthe imaginable guilty parties. To comprehend this in a more formalmanner, the Solow model can be utilized. As in the book, assume thatthe two nations have the same production technology:

Y=K1/2L1/2(this will decide whether contrasts in saving and populationdevelopment can clarify differences in income per capita if not,then contrasts in innovation will stay as the presumableclarification.

Thesteady-state value of capital is derived from sf (k)-(n + Ω) k=0.Since y=f (k) =k (World Bank Group, 2015)

Then:

K=()²

Sothat Y = (S/n+ s/)² Assuming that the United States and Pakistan are in consistentstate and have the same rate of devaluation –say, 5 percent-thenthe proportion of income per capita in the two nations is:

YUS/y Pakistan= {S US/ S Pakistan} {n Pakistan +0.05/n US +0.05}

Fromthis equation, it can be inferred that if the U.S. saving rate hadbeen twice that of Pakistan, at that point U.S. wage per laborerwould be twice Pakistan`s level (ceteris paribus). Given that theU.S. has 46-times higher wage per laborer yet fundamentally the samelevels of speculation in respect to Gross domestic product, thisvariable is not a main consideration in the correlation. Indeed, evenpopulation development can just clarify a component of the perceiveddifference (Ifitweremyhome.com, 2015). The remaining culprit isinnovation, and the abnormal state of absence of education inPakistan is consistency with this conclusion.

Pakistan`sfinancial standpoint is the same. After quite a long time the amountsraised from taxes missed the mark concerning the total cash for thefinancial plans. The outcome, the government ran spending planshortages every year. The IMF and different banks have been aware ofthe rising obligation levels in Pakistan and have subsequentlycautioned of desperate outcomes. This proves to be major differencebetween the two nations.

References

Haider,M. (2013). Pakistan versus America: We are not all that different.Dawn.com. Retrieved 26 October 2015, fromhttp://www.dawn.com/news/1050094/pakistan-versus-america-we-are-not-all-that-different

Ifitweremyhome.com,.(2015). Compare The United States To Pakistan. Retrieved 26 October2015, from http://www.ifitweremyhome.com/compare/US/PK

U.S.Department of State,. (2015). Pakistan. Retrieved 26 October 2015,from http://www.state.gov/r/pa/ei/bgn/3453.htm

WorldBank Group,. (2015). World Bank Group. Retrieved 26 October 2015,from http://www.worldbank.org/