Final. Spring 2006

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) True or False (5 points)

Statement	Circle whether the statement is true or false
The rate of population growth worldwide over the past 10 years is the highest ever recorded in history.	True False
The Lorenz curve is the inverted “U” shaped relationship between income per capita and the Gini coefficient.	True False
In a cross section of countries, there is evidence of a positive correlation between income per capita and the share of the population living in urban areas.	True False
For developing countries taken as a whole, the ratio of the share of the total labor force in agriculture divided by the share of this sector’s contribution to GNP is greater than one.	True False
For developing countries taken as a whole, food production per capita has been increasing since the 1980s.	True False
For developing countries taken as a whole, the female literacy rate is now equal to the male literacy rate.	True False
Net National Product = GNP – depreciation of manufactured capital assets – depreciation of environmental capital.	True False
The Gini coefficient satisfies the principle of “scale independence”.	True False
The Average Poverty Gap is the Total Poverty Gap divided by the total population size, N.	True False
Height for age is a measure of past undernutrition.	True False
The Total Poverty Gap measure is sensitive to redistribution of income amongst those below the poverty line.	True False
The Gini coefficients for land ownership in Latin American countries tend to be lower than those found in other parts of the world.	True False

2) Poverty measures. (4 points)

Person number	Income per day
1	$0.45
2	$0.80
3	$0.90
4	$0.91
5	$1.05
6	$4.24
7	$5.80
8	$7.00
9	$9.85
10	$12.00

TOTAL INCOME $43.00

a) What is the headcount (H) and the headcount index (HI) of absolute poverty if the absolute poverty line is defined as $1 per person per day?

b) If we take ten cents from person 1 and give it to person 4, describe how this impacts your answer to (a) and discuss the issue this raises about the use of H and HI as poverty measures.

c) What is the headcount and the headcount index of absolute poverty if the absolute poverty line is defined as $0.50 per person per day?

d) What is the Normalized Average Poverty Gap if the absolute poverty line is defined as $0.50 per person per day?

3) More about Measures. (3 points).

a) Define the Human Development Index (HDI).

b) Define the Human Poverty Index (HPI-1).

c) What is the difference between the average income shortfall and the average poverty gap?
4) Population issues. (3 points)

a) Draw a figure illustrating the demographic transition noting the different stages.

b) What could cause a country get caught in stage II of the demographic transition?

c) How can lowering child mortality rates lead to a decrease in the rate of population growth?

5) More population issues. (2 points)

Hidden momentum of population growth.

The ten women in the post reproductive cohort had a total fertility rate of 4 during their reproductive years.

50% of their children were female and are in the current reproductive cohort (20 of them) which has a total fertility rate of 3, 50% of which will be females (30 of them).

If we achieve a fertility rate of 2 for the youth and ensuing generations, what will the size of the total population be in Generation 4?

	Gen 1	Gen 2	Gen 3	Gen 4
youth	30
reproductive	20
post reproductive	10
Female population
Total population	120

6) Inequality. (2 points)

Draw a Lorenz curve and illustrate how to calculate a measure of inequality from this Lorenz curve.

7) Kuznets curves. (3 points)

a) Draw the original Kuznets curve.

b) Explain the logic behind the shape of this curve.

c) Draw an environmental Kuznets curve.

d) Explain the logic behind the shape of this curve.

8) Match the number to the concept (3 points)

Number	Concept	Which number matches the concept
41%	1) Replacement level for the total fertility rate
75%	2) Current world population Estimate
2.1	3) Share of world’s population in developing countries
6.1 billion	4) Sub-Saharan Africa’s private rate of return to primary education
58%	5) Share of developing country labor force involved in agriculture
16 billion	6) Estimated impact in dollars of a 2.5 degree C increase in average temperature on annual returns to cropland in Sub Saharan Africa
1.3	7) Current rate of world population growth in percent

9) Poverty. (3 points)

a) Contrast chronic poverty to transitory poverty by defining each.

b) Contrast income poverty to asset poverty by defining each.

c) Summarize Krishna’s main findings with regard to the causes of falling into poverty in his World Development article.

10) Income distribution (2 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	$4.00
9	$5.00
10	$6.20
11	$6.50
12	$7.00
13	$9.00
14	$12.00
15	$14.23
16	$16.57
17	$17.30
18	$24.00
19	$47.00
20	$90.00

Total: $269.80

a)What share of income is held by the highest decile and what share is held by the lowest decile?

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

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

Extra Credit (1 point, no partial credit)

=

When alpha =2. Prove.