Determinants of the National Income of Countries from a Keynesian Perspective - Research Proposal Example

Determinants of the national income of countries from a Keynesian perspective CHAPTER ONE INTRODUCTION Every countryin the world has a practical experience in the fact that economic progress never moves on an even-course. From time to time, wide fluctuations have been recorded in national income. Early economists viewed the issue of economic progress from the viewpoint that, a prosperity period was always sure to be followed by one of depression. During a depression, an economy recovers automatically to enter into the period of boom. Most people believed that the economy was usually operating under the employment levels of a country. However, Keynes contradicted this theory, holding the opinion that economies, which operate at equilibrium levels, do not necessarily have a high employment level. Millions of citizens probably could be out of employment. Therefore, countries wishing for high employment levels can do this only via changes in investment magnitude, which will in turn increase national income. This research proposal seeks to develop an in-depth analysis into the need for studying the determinants of national income of any given country. The determination of how the national equilibrium level in a country is determined is a core and fundamental fact that was developed by John Maynard Keynes. In this study I shall also present the methods by which national income can be estimated. In estimating the national income of a country, first we count the goods and services produced and exchanged for money in the country. Computation of the national output can be at the Research QuestionS 1. Which group of activities would constitute productive activity in Keynesian theory? 2. At what points do aggregate demand equal aggregate supply? 3. What determines the level of national income? 4. What is the correlation between level of national income and the well-being of the population of the country?  Research objectives 1. To determine the group of activities which would constitute a productive activity in the Keynesian theory. 2. To find out the point where aggregate demand can equal the aggregate supply of an economy. 3. To find out the determinants of the level of national income. 4. To determine the correlation between the level of national income and the well being of a given country’s population. CHAPTER TWO LITERATURE REVIEW This chapter explores empirical and policy-related literature focusing on the level of a country’s national income as well as the determinants of this national income from a Keynesian perspective. The chapter also explores theoretical models on national income determinants from a Keynesian point of view with a view of identifying a framework within which findings of the study can be contextualized. Background Literature Based on the research questions set, four major literature sources are selected for corresponding data review. The first is Forni et al 145, who writes on national and global activities that constitute productive activity. Even though some of these are generally mentioned to include inflation and employment, the writers narrow their research to the Keynesian theory and this is what makes this particular source useful to the proposal. Fatas, 200 also agrees more or less with the Keynesian economists who argue that at no point in time do aggregate demand and aggregate supply become equal. Due to the corresponding opinion held by the writer, it is useful to the proposal and directly linked with the aim of the research in finding the determinants of national income. The third is Kimball (1995) who mentions a number of determining factors that make up the national income determinant. More importantly, the writer argues that the determinants are always changing and varies from one country to the other. The proposed research would therefore look at conditions that create the variations and whether an economic principle can help in achieving stability. The final who is Erceg et al (2000) draw a relation between levels of national income and the well-being of the population and states that unless wealth is evenly distributed, a higher level of national income would not necessarily represent a well-being population. CHAPTER THREE RESEARCH METHODOLOGY 3.1 Introduction This chapter shall provide details on the research design and methodology that was applied to source, process and analyze the requisite data. The chapter also shall provide highlights on various methodology items, including target population, sampling procedures and sample size, research instruments, validity and reliability issues, pilot testing, data collection procedures as well as data processing and analysis techniques. 3.2 Research Design This study applied a cross-sectional survey design, which allows the collection of requisite information from target population at a single point in time. The design is the most commonly used form of survey design; as the name suggests, cross-sectional surveys cross-analyze respondents’ background information such as age, gender, ethnicity, as well as opinions and attitudes. The design had two key dimensions, the quantitative and qualitative. The quantitative approach consisted of structured questions, which elicited information used for descriptive and inferential purposes. The qualitative approach shall consist of open-ended questions, which shall obtain in-depth information for validating descriptive and inferential statistics. These two dimensions are expected to be complementary and allow simultaneous usage for high quality data. The design applied in this study has been used by various scholars. Cross-sectional survey designs are cheaper than longitudinal designs in terms of finances and time. This quality makes cross-sectional designs most appropriate for academic researchers, who in most cases, are limited by budgetary constraints (Rindfleisch, Malter, Ganesan & Moorma, 2008). Unlike longitudinal designs, cross-sectional designs are not vulnerable to confounding factors such as social, political or cultural changes because data is collected at one point in time. According to Bryman and Cramer (1997), cross-sectional designs are capable of providing a wider range of information on population characteristics than other survey designs. It is also applauded for its ability to enhance validity of the data by subjecting all participants to standardized data collection instruments. Cross-sectional surveys are appropriate for studies that “examine concrete and externally-oriented constructs, sample highly educated respondents, employ a diverse array of measurement scales, and are strongly rooted in theory” (Rindfleisch, et al., 2008, p. 2). Nevertheless, cross-sectional survey designs have two inherent weaknesses. First, they are likely to suffer high non-response rate because they are conducted based on voluntary participation. Where respondents are not fully informed or motivated to give information, cross-sectional designs may be underproductive. To cope with this limitation, all the respondents shall be consented before taking part in the study. The consenting processes shall involve a detailed explanation about purpose of the study, participants’ rights, expectations, potential risks and confidentiality guarantee. Secondly, cross-sectional designs are likely to yield socially desirable responses. There is a psychological tendency of respondents to provide socially acceptable responses rather than ones that reflect their own true opinions. To overcome this limitation, participants will be encouraged to be as honest with their responses as possible. They will be assured that the information obtained would be used for research purposes only and that their identity would be protected. More still, the questionnaires are to be designed for self-administration to avoid the possibility of interviewer bias creeping into the results. The proposed research topic is highly academic and has many data on it in literature works rather than in professional practice. For this reason, the qualitative research method with a corresponding document analysis research design shall be used. This research design is selected because it will offer a detailed secondary data collection process from which the researcher shall select a number of reliable sources to sample data on answering the number research questions that have been posed. Once the researcher uses a qualitative research method, he will be offered the opportunity to undertake a subjective critique of sources selected. 3.3 Secondary Data Collection Secondary data collection is selected for the proposed research over primary data collection for a number of reasons. In the first place, because there will be non-numeric presentation of data, the researcher would need as many text-based data as possible. Such text-based data are certainly available through the review of existing literature, otherwise known as secondary data. In the second place, a literature log shall be developed by the researcher to select as many appropriate sources that address the research goals and research questions as possible. Thereafter, four major critical themes shall be developed based on the research goals and research questions. The sources shall then be grouped and critically analyzed according to the themes. 3.4 Data Analysis Plan This chapter shall present the findings of the study, which shall be organized and discussed under various thematic sub-sections in line with the study objectives. A qualitative data analysis technique shall be used to analyze all data that shall be collected. Specifically, the researcher intends to use the NVivo software for qualitative data analysis. With this software, the data collected shall be compared with as many empirical data and facts as possible to give vivid interpretation of the data. This way, even though the researcher in using qualitative research has access to subjective analysis of data shall still achieve validity and reliability in the data analysis to take place. 3.5 Real Data Analysis The independent variable in the research study is the wellbeing of the population while the dependent variable will involve the national income level and its determinants. The independent variable will change with varying levels of employment and investment that determine the national income level. Most of the data on the determinants is to be found in literary works, and government records, therefore, there will be minimal reliance on data from professional practice. This will necessitate qualitative research to integrate document analysis into the research design. The research will be interested in identifying the determinants of national income and the way the income correlates with the population’s national wellbeing. 3.6 Analysis of the data Both quantitative and qualitative techniques will be applied to process, analyze and interpret data. Quantitative data processing involved coding open-ended data, entry, cleaning, transformation, analysis and interpretation. Quantitative analysis will be carried out at three distinct levels, namely univariate, bivariate and multivariate. Univariate analysis yielded frequency distributions, percentages and measures of central tendency as appropriate; while bivariate analysis obtained crosstab distributions with Chi square (χ2) significance tests. The χ2 statistic establishes the statistical association between two variables both of which must be in nominal or ordinal scales. The use of the χ2 test necessitates preparation of cross-tabulations of the variables, which then generates significance test results. The χ2 test can only show the presence or lack of statistical association; it cannot determine the magnitude and direction of such associations (Nachmias & Nachmias, 1996) Through combining with data on population, national income, can give a clear measure of wellbeing based on the country’s per capita income, as well as its growth with time. National income can also be combined with data on the country’s labor force in the assessment of productivity’s level and rate of growth. National income could also give, in combination with monetary and financial data, a guide to the country’s level of inflation. Conclusion The study’s conclusion reveals that in the presence of full equilibrium of employment scarce resources can be allocated to alternative employments, as well as preservation of free enterprise, which would see income being distributed on input market pricing factors. This would come with appropriate safeguards for the disadvantaged, which would improve general wellbeing of majority of the population. The necessary determinants were provided that could be used to explain the manner in which a capitalist economy could be managed to eliminate the inherent deficiencies. Works Cited Erceg, C. John, Henderson, D. William & Levin, A. Thomas. Optimal monetary policy with staggered wage and price contracts: Journal of Monetary Economics 46(2), 381-413, 2000. Print. Fatas, A. & Mihov, I. Fiscal Policy and business cycles: An empirical investigation. INSEAD, mimeo, 2002. Print. Forni, L. Monteforte, L. & Sessa, L. The general equilibrium effects of fiscal policy: Estimates for the euro area. Banca d’Italia, Tema di discussione 652, 2007. Print. Kimball, M. The quantitative analytics of the vasic neo-monetarist model: Journal of Money, Credit and Banking 27, 1241-1277, 1995. Print. Nachmias, C.F and Nachmias, D. (1996). Research Methods in the Social Sciences, 5thEdition. London: Arnold. Rindfleisch, A., Malter, A.J., Ganesan, S. and Moorman, C. Cross- Sectional Versus Longitudinal Survey Research. Journal of Marketing Research, Vol. 45, No. 3, pp. 1-23, 2008. Print. Read More