1.
For
this task on the economic way of thinking and economic indicators I have chosen
data from the Kingdom of Bahrain on employment, wages, real GDP and inflation. I am going to ask you a series of questions
that you will answer using these data and some of the essentials of the
economic way of thinking.
Indicator |
2020Q1 |
2020Q4 |
2021Q1 |
Total Employment |
743,620 |
687,700 |
685,204 |
Bahraini Employment |
156,746 |
152,678 |
153757 |
Non-Bahraini Employment |
586,874 |
535,022 |
531,447 |
Monthly Wage, Public Sector |
BD702 |
BD705 |
BD714 |
Monthly Wage, Private Sector |
BD441 |
BD447 |
BD455 |
Real GDP in billions of BDs |
BD3.151 |
BD3.086 |
BD3.064 |
The inflation rate in Bahrain between
2020Q1 and 2021Q1
(year-over-year) was -2.7%; obviously prices in general fell.
Here
are the questions I want you to answer.
a)
When
we look at economic data we do so to elicit signals. First, I want you to define what we in this
course call a “direct signal” and what we call and “indirect signal”. Once done take a look at the level of total
employment and tell me, for that row, how many direct signals are there? List them and briefly explain why they are
direct signals.
b)
Let’s
consider using these same employment figures to draw inferences about real GDP,
i.e., an indirect signal. Assume that you have only these total
employment figures. Might you be able to draw an inference about what happened
to RGDP over the same period based on these labor numbers, (i.e., what is the story that would allow
you to infer?)? Why or why not? If so,
what would be your guess as to the direction of change in RGDP over the
period? Do the data on RGDP concur with
your inference?
c)
Now
take a look at employment during the pandemic on a year-over-year basis. Which sector took the biggest hit in absolute
and percentage terms over this period?
Provide the figures. Does this outcome
surprise you or is it what one would expect, given the nature of the Bahraini
workforce? Explain.
d)
Note
the difference between the wages in the public (i.e., government) and private sectors and the nationality of those
who dominate those sectors. Does this wage gap surprise you? Whether it does or does not, what economic and/or
social factors might explain this 60% difference in wage levels?
e)
Now
let’s consider the issue of real versus nominal. Take a look at the wages of the two
sectors. Did they rise or fall in
nominal terms year-over-year (2020Q1 to 2021Q1) and if so by how much, by
sector? However, what really matters in
economics are real values. What were the
changes in real wages earned by the two sectors? Explain how you came to this conclusion.
f)
In
part c you will note that the public wage is much greater than the private but
the percent changes in wages in real terms were not identical. Speculate on why
the wages of the private sector rose more than public in this particular
period.