Issues in Econ omic Growth an d Development

EC 491: Issu es in Econ omic Growth an d Develop ment
M i d t e r m S t u d y G ui d e
Ju l y 2 9 , 2 0 1 4
Th i s i s a l i st of t op i cs you sh ou l d b e fam i l i ar wi t h , as wel l as t h e m o d el s an d p r ob l em s I
ex p ect you t o b e ab l e t o sol ve. You sh ou l d ex p ect a m i x of an al y t i cal p r ob l em s, wh i ch wi l l
b e s i m i l a r t o t h e h o m e wo r k , a s we l l a s s h o r t a n s wer q ue s t i o n s w h i ch t e s t yo u r u n d e r s t a n d i n g
of the concepts we’ve covered.
C ha pt e r 1 : G r ow t h Fa ct s
• G i ve n i n f o r m a t i o n o n b e g i n n i n g a n d e n di n g q u a nt i t i e s , c a l c u l a t e ave r a g e g r ow t h r a t e s .
• Un d e r s t a n d t h e u s e o f l o g s c a l e s .
• Cal cu l at e PPP GD P gi ven a t ab l e; u n d er st an d why we u se PPP GD P for cr oss-cou nt ry
di ↵erences.
C ha pt e r s 2 -3 : So l ow G r ow t h M o de l
• B e a b l e t o wo r k w i t h C o b b – D o u g l a s s p r o d u c t i o n f u n c t i o n s – e x p r e s s i n g in t e r m s o f
output p er worker, etc.
• Be ab l e to an al yze cross-cou ntry d i↵ eren ces i n m argi n al p ro d u ct of cap i tal .
– We d i d a n e x a m p l e i n c l a s s . An e x a m p l e p r o bl e m : S u pp o s e two c o u nt r i e s h ave
identical pro duction functions ( y = k
0.5
)butcountry2hashighercapitalper
wo r k e r (k
2
=3k
1
). Derive the ratio of the two countries’ marginal pro duct of
c a p i t a l a n d e x pl a i n w h a t t h i s m e a n s f o r i nt e r n a t i o n a l c a p i t a l fl ow s .
• Gi ven a p r o d u ct i on fu n ct i on , d er i ve t h e cent r al eq u at i on of t h e S ol ow m o d el , an d sol ve
for t h e st ead y st at e l evel of cap i t al p er wor ker an d ou t p u t p er wor ker .
• Us e t h e g ra p h i c a l ve r s i o n o f t h e S o l ow g r ow t h m o d e l t o a n a l y ze ch a n g e s i n o u t p u t a n d
cap i t a p er wor ker d u e t o ch an ges i n d ep r eci at i on an d sav i n g r at es b ot h i n an d ou t of
st ead y st at e.
• Cal cu l at e gol d en r u l e r at e of sav i n gs
1
– Ex am p l e p r ob l em : S u p p ose y = k
0.5
, ! =0. 05. Derive an expression for consump-t i o n p e r wo r ke r . Wh a t va l u e o f ” maximizes steady state consumption?
• Un d e r s t a n d an d e x p l a i n t h e d i↵e r e n c e b e twe e n c o n d i t i o n a l a n d u n c o n d i t i o n a l c o nve r -g e n c e . B e a b l e t o e x p l a i n t h e e v i d e nc e f o r o r ag a i n s t e a ch .
• Us e t h e S o l ow g r ow t h m o d e l t o c a l c u l a t e a n d a n a l y z e i n c o m e r a t i o s d u e t o d i↵e r i n g
sav i n g r at es.
C ha pt e r 4 -5 : Po pul a t i o n a nd E co no m i c G r ow t h
• Be ab l e to u se th e Mal thu si an m o d el to an al yze vari ou s scen ari os, as i n you r h om ework
and in class exercises.
– Ex am p l e p r ob l em : sh ow t h e sh or t r u n an d l on g r u n e↵ect s of a n ew for m of
pesticide that allows for higher yields for every acre of land.
• Un d e r s t a n d r e a s o n s w hy t h e M a l t hu s i an m o d e l n o l o n g e r a c c u r a t e l y r e fl e c t s t h e p o p u l a i t o n -income relationship.
• Define and describ e the demographic transition and its comp onents, in b oth the de-ve l o p e d a n d d e ve l o p i n g wo r l d .
• Describ e reasons why b oth the mortality and fertility transitions o ccurred (including
the several reasons for the decline in desired fertility.)
• Be ab l e to p erform th e sam e S ol ow m o d el tasks (sol vi n g for stead y state, grap h i cal
analysis, income ratios) as in the previous chapter, but with the addition of nonzero
population growth rates.
• Describ e the ”missing women” phenomenon. Describ e in general terms how to calculate
the numb er of missing women. Explain reasons why unexp ectedly high sex ratios might
occur (as in India, etc.)
C ha pt e r 6 : H um a n C a pi t a l
• Be ab l e to an al yze th e e↵ ects of exogen ou s ch an ges i n p ro d u cti vi ty, h eal th ou tcom es
on health and income in the income-and-health mo del of chapter 6.
• Gi ven a r et u r n s t o ed u cat i on sch ed u l e, cal cu l ate t h e wages t h at a wor ker wou l d b e
ex p ect ed t o ear n for a l evel of ed u cat i on . Cal cu l at e t h e wage sh ar e of hu m an cap i t al ,
and, given a value for ↵ , t h e s h a r e o f n a t i o n a l i n c o me a c c r u i n g t o hu m a n c a p i t a l .
• B e a b l e t o c a l c u l a t e t h e a m o u nt o f hu m a n c a p i t a l i n pu t g i ve n ye a r s o f e d u c a t i o n a nd
areturns toeducationschedule.
• S e t u p a n d b e a b l e t o s o l ve t h e S o l ow g r ow t h mo d e l w i t h hu m a n c a p i ta l . B e a b l e t o
analyze income ratios due to human capital endowments.
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• E x p l a i n r e a s o n s w hy c o g n i t i ve s k i l l s ( o r t e s t s c o r e s ) m i g ht b e t t e r c a p t u r e hu ma n c a p i t a l
than years of scho oling.
C ha pt e r 7 : P r o duct i v i ty
• Be ab l e to an al yze i n com e rati os d u e to d i ↵ eren ces i n p ro d u cti vi ty, an d b e ab l e to
perform development accounting tasks (i.e. given capital and output measurements,
cal cu l at e a m easu r e of p r o d u ct i v i ty. ) You sh ou l d b e ab l e t o d o t h i s b ot h for a si n gl e
cou nt r y, as wel l as for i n com e r at i os b etween two cou nt r i es.
• Be ab l e to p erform growth accou nti n g tasks: b e ab l e to cal cu l ate th e growth rate of
pro ductivity given growth rates of capital and output.
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