Practice final.                                                              Spring 2005

Name:_______________________                            Economics of Development

 

Each question is worth the total number of points in parentheses; sub-questions are allocated an equal share of the total points per question.  Final is worth 30 points.

 

1)  Population issues (3 points)

a.  What is meant by the hidden momentum of population growth?

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

b.  Draw and describe the demographic transition.

2)  True or False (6 points)

Statement

Circle whether the statement is true or false

The informal sector is defined as the sector in an economy that deals in illegal activities.

 

True               False

Import substitution strategies can increase the incentive to locate production in the largest city of a country.

 

True               False

Evidence suggests that taller people earn more than shorter people.

 

True               False

There is a negative correlation between GNP rank and the WHO ranking of health system performance.

 

True               False

The Harris-Todaro migration model suggests urban job creation schemes may increase the urban unemployment rate.

 

True               False

The social rate of return to education is highest at the university level for Asia.

 

True               False

The poverty gap measure is constructed as an index of depravations associated with poverty. 

 

True               False

Educated females have lower total fertility rates than uneducated females overall.

 

True               False

Urbanization is a concern in development since evidence suggests a higher share of total population living in urban areas is negatively correlated with GNI per capita.

True               False

The current population of the world is estimated to be around 6.1 billion people.

 

True               False

Food production per capita in Africa has decreased since 1970.

 

True               False

Some countries in the world are currently experiencing negative population growth rates.

 

True               False

 

3) Poverty measures. (3 points)

 

Person number

Income per day

1

$0.05

2

$0.45

3

$0.50

4

$1.50

5

$2.50

6

$2.75

7

$3.25

8

$14.00

TOTAL INCOME                                            $25.00

a)  What is the total poverty gap, the average poverty gap, and the normalized average poverty gap if the poverty line is defined as $1 per person per day?

 

 

 

 

 

 

 

 

 

 

 

b)  What is the headcount and the headcount index if the poverty line is defined as $2 per person per day?

 

 

 

 

 

 

 

c)  What share of total income is held by the lowest quartile and what share is held by the highest quartile?

4)  Can the “inverse farm size – productivity” relationship be used to justify in efficiency terms a land redistribution policy in a latifundio-minifundio agrarian system?  Why or why not.  (1 point)

 

 

 

 

 

 

 

 

 

 

 

 

5)  Inequality.  (2 points)

a. Draw and interpret an education Lorenz curve. 

 

 

 

 

 

 

 

 

 

 

 

 

 

b. Explain how to derive a Gini coefficient from this Lorenz curve.

 

 

 

 

 

 

 

 

 

 

c. Does cross country evidence suggest that a country’s education Gini coefficient is positively or negatively related to the country’s average years of education?   Explain. 

 

6) Health issues. (2 points)

 

Statement

Circle whether the statement is true or false

Overnutrition is categorized as a type of malnutrition.

 

 

True               False

Weight for age measures are used to identify current malnutrition.

 

True               False

The Bhargava et al article in the reader reports that they find no evidence that improved health leads to faster GDP growth rates in low-income countries

True               False

Estimates suggest over 40% of the global disease burden as measured by DALYs occurs in the developed world.

True               False

 

 

7)  Tragedy of the commons. (3 points). 

Fisherperson A and fisherperson B can choose to put 1,2, or 3 fishing boats in the waters off the coast of their village.  Payoffs are as described in each cell of the matrix, with payoff to fisherperson A on the left hand side, payoff to fisherperson B on the right hand side.

 

                                     Fisherperson B

Fisherperson A

 

1

2

3

1

10          10

  9            15

  8        18

2

15           9

14            14

10        16

3

18           8

16            10

13        13

 

a)  What is the Nash equilibrium outcome of this game if each fisherperson plays best response to the other?

 

 

 

 

 

 

 

 

b)  Is the Nash equilibrium result the socially optimal result? Why or why not.

 

 

 

 

 

 

 

c)  What types of policies are commonly proposed to deal with the tragedy of the commons?

 

 

 

 

 

 

d)  What is the “tragedy” in this tragedy of the commons?

8)  Poverty traps. (3 points)

a)  Explain the “stages of progress” method Krishna used to define poverty in the article in the reader.

 

 

 

 

 

 

 

 

 

 

 

 

b)  Are Krishna’s poverty transition matrix findings suggesting that concerns about “churning”, that is where individual households move across the poverty threshold in offsetting ways so that net poverty remains roughly constant, are not warranted in his study area?

 

 

 

 

 

 

 

 

 

 

 

c)  What did Krishna find with regard to the link between escaping poverty and the informal sector?

9)  Education (3 points).

Statement

Circle whether the statement is true or false

Evidence indicates that public expenditure per student in Africa is allocated to the educational level with the highest social rate of return.

True               False

Evidence suggests the education gender gap has decreased worldwide since the 1970s.

 

True               False

Evidence on spending patterns of public resources on education categorized by occupational status of the family indicate that education is a vehicle for promoting greater equality.

True               False

Evidence suggests that the education component of the HDI and the income component of the HDI are positively correlated.

True               False

If education is used as a “signaling device”, this is a good indicator that public investments in education are efficiently allocated across primary, secondary, and tertiary education.

True               False

An education Gini coefficient summarizes information about the relative distribution of education in a population.

 

True               False

 

10)  Define and contrast (3 points).

a.  Income poverty and asset poverty.

 

 

 

 

 

 

 

 

 

 

 

b.  Transitory poverty and chronic poverty.

 

 

 

 

 

 

 

 

 

c.  Ex Ante risk management strategies and ex post risk coping strategies with regard to income diversification strategies at the household level.

 

 

 

 

 

 

 

 

 

 

 

d.  Urban giantism with first city bias.

11)  Environment (1 point)

a.  Describe the idea behind “land sparing” agricultural technology, and discuss why it may have an unintended non “land sparing” impact overall.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

b.  Why might increased access to credit lead to poverty reduction and environmental benefits for poor rural farmers?

Extra Credit:  (1 point, no partial credit)

 

Describe how common property systems can be viewed as risk management systems, and also discuss how land tenure programs in the presence of weak states can reduce tenure security.