Practice final

Practice final. &= nbsp; &nbs= p; &= nbsp; &nbs= p; &= nbsp; Spring 2005

Name:______________________= _ &= nbsp; &nbs= p; 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 p= oints.

1) Popul= ation issues (3 points)

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

The population structure may lead to continued population growth even if the total fertili= ty rate is reduced to replacement level. This continued growth occurs as the size of the pre-reproductive fem= ale cohort is larger than current or post reproductive cohorts. The new population equilibrium wil= l be reached only after this cohort works through the population.=

b. Draw and describe the demographic transition.

You have the g= raph in your notes (or see page 275 of the book).&= nbsp; As noted, I describe it as having four phases compared to the book’s three:

I. = High birth rate, high death rate. = Stable or slowly growing population.

II. High birth = rate, declining death rate. Slowly = leads to rapid growth in population.

III. Declining birth= rate, low death rate. Rapid leads to slowly growing population.

IV. Low birth rate, l= ow death rate. Stable or slowly growing population.

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 e= conomy that deals in illegal activities.	True &nbs= p; False
Import substitution strategies can increase the ince= ntive to locate production in the largest city of a country.	True &nbs= p; False
Evidence suggests that taller people earn more than shorter people.	True &nbs= p; False
There is a negative correlation between GNP rank and= the WHO ranking of health system performance.	True &nbs= p; False
The Harris-Todaro migration model suggests urban job creation schemes may increase the urban unemployment rate.	True &nbs= p; False
The social rate of return to education is highest at= the university level for Asia.	True &nbs= p; False
The poverty gap measure is constructed as an index of depravations associated with poverty.&nb= sp;	True &nbs= p; False
Educated females have lower total fertility rates th= an uneducated females overall.	True &nbs= p; False
Urbanization is a concern in development since evide= nce suggests a higher share of total population living in urban areas is negatively correlated with GNI per capita.	True &nbs= p; False
The current population of the world is estimated to = be around 6.1 billion people.	True &nbs= p; False
Food production per capita in Africa has decreased since 1970.	True &nbs= p; False
Some countries in the world are currently experienci= ng negative population growth rates.	True &nbs= p; 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 &nbs= p; &= nbsp; &nbs= p; &= nbsp; $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 per= son per day?

The TPG =3D($0.95 person 1, $0.55 person two, $0.50 person thr= ee) =3D $2.00

NPG=3DTPG/N, or 2/8=3D$0.25 so that the NAPG=3D$0.25/$1.00=3D(1/= 4) or 0.25

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

H=3D(person 1, person 2, person= 3, person 4) =3D 4

HI =3DH/N=3D4/8=3D50%<= /p>

&n= bsp;

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

Quartiles, so 4 groups, thus two people per group. Lowest quartile is p= ersons one and two, highest is persons 7 and 8.&n= bsp;

Lowest quartil= e has ($0.50/$25.00) or 2%.

Highest quarti= le has ($17.25/$25.00) or 69%

4) Can t= he “inverse farm size – productivity” relationship be used to justify in efficiency terms a land redistribution policy in a latifundio-minifundi= o agrarian system? Why or why n= ot. (1 point)

Yes. The basic idea is that smaller far= ms are more efficient / use resources better.&nbs= p; So we can justify land redistribution in efficiency terms if the inv= erse farm size productivity relationship holds.

5) Inequality. (2 points)=

a. Draw and interpret an education Lorenz curve.

See Figure 8.6, page 387

It maps out the cumulative percentage of schooling completed by the cumulative percentage of the population, when population is ordered across the x axis = from lowest to highest educational attainment (implicitly, that is, since the x = axis is just about cumulative percent in the population)

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

[OK, from here on out rushi= ng since I want to get this up now, so= the following answers are terse, and could be a bit more elaborate, but I am looking for something along the following lines.]

Area under the 45 degree li= ne of perfect equality and above the Lorenz curve divided by the whole area under= the line of perfect equality is the gini coefficient. A/(A+B) as drawn in class.

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

See figure 8.7 in the book, page 388.

One, there is only so much education you can have so t= here is an upper limit as the average goes up.&= nbsp;

Also, it suggests that at low mean, a few people get l= ots of education while the rest gets none.

6) Health issues. (2 points)

Statement	Circle whether the statement is true or false
Overnutrition is categorized as a type of malnutriti= on.	True &nbs= p; False
Weight for age measures are used to identify current malnutrition.	True &nbs= p; False
The Bhargava et al artic= le in the reader reports that they find no evidence that improved health leads = to faster GDP growth rates in low-income countries	True &nbs= p; False
Estimates suggest over 40% of the global disease bur= den as measured by DALYs occurs in the developed wor= ld.	True &nbs= p; False

7) Trage= dy of the commons. (3 points).

Fisherperson A and fisherperson B can choose to put 1<= span class=3DGramE>,2, or 3 fishing boats in the waters off the coast of = their village. Payoffs are as descr= ibed 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.

	&nbs= p; &nbs= p; &= nbsp; Fisherperson B
Fisherperson A		1	2	3
1	10 &nbs= p; 10	9 &nbs= p; 15	8 18
2	15 &nbs= p; 9	14 &nbs= p; 14	10 16
3	18 &nbs= p; 8	16 &nbs= p; 10	13 13

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

Each puts 3 boats on the water, payoff of (13, 13)

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

Nope. Pa= reto improving result at each playing 2,2 with social welfare at 28 compared to the NE of 26.

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

1= ) Quota, quantity restriction (2 boats each)

2= ) User fee (per boat charge to change payoffs)

3= ) Privatize / allocate rights to users.

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

Left to their own devices and without coordination, ea= ch makes decisions that make them worse off then they could potentially be.

8) Pover= ty traps. (3 points)

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

See article. Basic idea, get people to talk at stages in the path out of poverty = by identifiable steps.

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

No, he finds churning. Almost equal % falling into poverty as come out.

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

It was an important part of the story. Lots of people identified migratio= n and the informal sector as playing a role in their escape from poverty ( in contrast to agriculture for example)

9) Educa= tion (3 points).

Statement	Circle whether the statement is true or false
Evidence indicates that public expenditure per stude= nt in Africa is allocated to the educational level with= the highest social rate of return.	True &nbs= p; False
Evidence suggests the education gender gap has decre= ased worldwide since the 1970s.	True &nbs= p; 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 &nbs= p; False
Evidence suggests that the education component of th= e HDI and the income component of the HDI are positively correlated.	True &nbs= p; False
If education is used as a “signaling device= 221;, this is a good indicator that public investments in education are efficie= ntly allocated across primary, secondary, and tertiary education.	True &nbs= p; False
An education Gini coefficient summarizes information= about the relative distribution of education in a population.	True &nbs= p; False

10) Defi= ne and contrast (3 points).

a. Income poverty and asset poverty.

Outcome in terms of income level is below a poverty li= ne – income poverty.

Assets are not sufficient to generate an expected inco= me level above a given income poverty line – asset poverty.

b. Transitory poverty and chronic poverty.

Transitory means the household is not poor in all periods. It moves in and out = of poverty, usually as measured by income.&nb= sp; Some months above the line, some below.

Chronic poverty – the household is always below = the poverty line, again usually an income line.

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

Ex ante is what you do to prepare – it is what y= ou do in advance of the shock to help lessen the impact. Plant multiple crops, diversify in= come sources…

Ex post is what you do after the shock has hit. Go to the forest and gather nuts f= or sale, chop down trees to sell the wood when your crops fail.

d. Urban giantism with first city bi= as.

Urban giantism is that the= city is huge. First city is large and= much bigger than the next&n= bsp; biggest city.

First city bias is the spending pattern / policy frame= work that allocates resources to the first city in a way that is disproportionat= e in per capita terms.

11) Envi= ronment (1 point)

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

Land sparing –increase value / harvest from conv= erted land to keep people from expanding the zone of cultivation into unconverted land.

Backfires if this also increases t= he value of converting the unconverted land.

Extra Credit: <= /span>(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 presen= ce of weak states can reduce tenure security.