经济学｜Module Code ECO00031I BA, BSc Degree Examinations 2024-5

联系我们： 手动添加方式: 微信>添加朋友>企业微信联系人>13262280223 或者 QQ: 1483266981

Module Code
ECO00031I
BA, BSc Degree Examinations 2024-5
Department:
Economics
Title of Exam:
Development Economics
Time Allowed:
3 hours
Allocation of Marks:
All questions are worth 50 marks.
Instructions for Candidates:
Answer any two questions.
The use of calculators is prohibited in this exam.
Materials Supplied:
Green Answer Booklet
Do not write on this booklet before the exam begins
Do not turn over this page until instructed to do so by an invigilator
Page 1 of 7
Page 2 of 7
Answer any two questions
Question 1
a) Describe what economists refer to when they discuss institutions. [5 marks]
b) Discuss with examples the role that poor institutions can play in limiting economic
development. [25 marks]
c) Using examples of papers that we have covered in lectures or seminars, explain how
and why economists have used historical experiences of European colonialism to
study the importance of institutions. [20 marks]
Question 2
a) Use a graphical representation to show and explain convergence to the steady state
in the neoclassical (Solow-Swan) model. How does this model relate to the concepts
of conditional and unconditional growth convergence [25 marks]
b) With reference to your model, explain how foreign aid might influence long-run income
per-capita. [5 marks]
c) According to your model, explain how (all else equal) a reduction in fertility will increase
a country’s long run income per capita. Summarize some of the factors that might lead
to such a fertility reduction. [20 marks]
Question 3
a) The process of structural transformation is used to describe the reallocation of
economic activity across agriculture, manufacturing and services during economic
development. What are the commonly observed patterns in structural transformation
[5 marks]
b) Consider an economy with a modern capitalist sector and a traditional agricultural
sector. Describe and illustrate in detail the process by which the modern sector may
pull resources away from agriculture during structural transformation. [40 marks]
c) Using your answer in part b), explain what is meant by the ‘Lewis turning point’.
[5 marks]
Question 4
a) Although a very valuable commodity, the discovery of natural resources has
sometimes been described as a curse. Using examples where applicable, describe in
detail the possible channels through which a discovery of natural resources can limit
economic development. [40 marks]
b) With reference to your previous answer, what types of policies might governments
enact to try to ensure natural resource are beneficial for economic growth
[10 marks]
End of Exam
Page 3 of 7
Rough suggestions on how to answer
Question 1
a) Describe what economists refer to when they discuss institutions. [5 marks]
In lecture I used the following: “Institutions are the humanly devised constraints
that structure political, economic and social interaction.” Anything similar is fine.
Good answers will mention formal institutions (property rights, contract
enforcement etc.), informal institutions (e.g., social norms) and meta
institutions, such as government.
b) Discuss with examples the role that poor institutions can play in limiting economic
development. [25 marks]
Students could mention poor controls on government authority and examples
from the lectures, such as the Petrobras scandal and kleptocracy in Brazil, and
corruption in Angola/Zimbabwe. Perhaps, also the difference in economic
development between North/South Korea.
Students should mention the strong correlation between index measures such
as rule of law or government effectiveness and GDP per capita. I would expect
students to recognize the potential for reverse causality in these relationships,
and good answers will elaborate on this by giving examples where growth
good institutions (e.g. higher government wages reducing corruption).
Good students could also mention poor incentives to save and invest where
there is little protection of property rights and perhaps even a lack of FDI where
this is a risk of expropriation.
c) Using examples of papers that we have covered in lectures or seminars, explain how
and why economists have used historical experiences of European colonialism to
study the importance of institutions. [20 marks]
We looked in detail at Acemoglu et al. “The colonial origins of development”
and the use of settler mortality as an IV for institutions. Students should
understand that this approach was necessary to avoid bias due to endogeneity
or reverse causality between GDP and institutions.
While the students have not studied IV methods, they should be able to
describe the thinking behind the Acemoglu et al paper (e.g., settler mortality
settlement past institutions current institutions impacts growth)
and the bottom line result that institutions have large effects on growth and
much of the cross-country income differences could be eliminated if low income countries had similar institutions to high-income countries.
Better students will go further than the Acemoglu et al paper and note some of
the other evidence we covered: This includes the Iyer, 2010 paper using direct
versus indirect colonial rule in India, showing that ex-British India states are
poorer today. Also, the links between past exposure to the slave trade in Africa
and current levels of trust (Nunn and Wantchekon, 2011).
I would expect them to name the Acemoglu et al study, but they don’t need to
remember the specific authors/years of the other two, provided they
understand the key points in both papers well.
Page 4 of 7
Question 2
a) Use a graphical representation to show and explain convergence to the steady state
in the neoclassical (Solow-Swan) model. How does this model relate to the concepts
of conditional and unconditional growth convergence [25 marks]
This question requires the student to explain (graphically) convergence to the
steady state in the Solow-Swan neoclassical growth model. They should use
an illustration similar to that shown below, and be able to clearly explain the
dynamics of the model, i.e., while saving/investment is more than is required to
offset depreciation and population growth, next period’s capital per worker will
be higher, leading to higher income… etc.
A really good answer may mention some limitations of the model (e.g., no long
run growth).
They should explain that the steady state in the model represents long run
outcomes for a given level of population growth and depreciation of capital.
Conditional on countries having the same levels of these, all countries will
converge to the same steady state.
b) With reference to your model, explain how foreign aid might influence long-run income
per-capita. [5 marks]
Students should show on the model or explain how foreign aid can act to boost
limited domestic saving, raising the sf(k) schedule and allowing long run
convergence to a higher steady state.
c) According to your model, explain how (all else equal) a reduction in fertility will increase
a country’s long run income per capita. Summarize some of the factors that might lead
to such a fertility reduction. [20 marks]
Students should show or explain that a reduction in population growth will shift
the (n+d)k schedule downwards, again allowing convergence to a higher
steady state.
Reasons discussed for a reduction in fertility included:
improvements in female labour market opportunities, raising the
opportunity cost of children.
Page 5 of 7
less reliance on unskilled labour (structural transformation)
better social protection (e.g., pension provision)
reducing male-preference (smaller family sizes)
contraception and family planning.
Good students might also mention the Malthusian population trap and positive
or preventative checks on population growth.
Question 3
a) The process of structural transformation is used to describe the reallocation of
economic activity across agriculture, manufacturing and services during economic
development. What are the commonly observed patterns in structural transformation
[5 marks]
Students should note that we tend to see a decline in agriculture, an increase
in services and a ‘hump-shaped’ pattern in manufacturing that holds for both
employment share and contribution of sectors to GDP.
Good students might also mention that development tends to prompt a
reallocation from traditional to modern services within the service sector.
b) Consider an economy with a modern capitalist sector and a traditional agricultural
sector. Describe and illustrate in detail the process by which the modern sector may
pull resources away from agriculture during structural transformation. [40 marks]
This question refers directly to the Lewis two-sector model.
Students should explain the assumptions in both the A=agricultural sector
(fixed capital, wage = AP, perfectly elastic supply of labour) and the M=modern
sector (diminishing returns, a fixed wage, short run fixed capital)
They should be able to graph total product against labour in both sectors,
marginal product against labour in the modern sector, and marginal and
average product in the agricultural sector.
Agriculture
Page 6 of 7
Modern
They should show graphically or at least explain how a higher modern wage
draws in surplus labour from agriculture and capitalist profits are re-invested in
expanding capital in the modern sector.
c) Using your answer in part b), explain what is meant by the ‘Lewis turning point’.
[5 marks]
They should be able to describe or show that this point implies all surplus
agricultural labour has been exhausted.
Better answers might indicate that this will lead to increasing agricultural wages
and a slow down in modern sector growth. Good students may also mention
the suggestion that China may be at or have passed the Lewis turning point.
Question 4
a) Although a very valuable commodity, the discovery of natural resources has
sometimes been described as a curse. Using examples where applicable, describe in
detail the possible channels through which a discovery of natural resources can limit
economic development. [40 marks]
There are lots of ways students could answer this question. In lectures we
focused on four specific areas:
o Sectoral composition – Here I used the ‘Dutch Disease’ example where
exchange rate appreciation driven by natural resource exports kills off
other export sectors.
o Macro instability – a lack of economic diversity and international
resource price fluctuations. I gave the example of Venezuela and the
fall in oil prices in the early 2010s and 2014.
o Institutions – A lack of scrutiny on government spending and possible
corruption/rent seeking. I used an example from Equatorial Guinea of
the miss-appropriation of natural resource revenues. There were
numerous other examples in the lectures though, including Angola
(missing GDP) and Brazil (Petrobras).
o Conflict – An increased risk of conflict. I used one example from
Columbia (Dube and Vargas, 2013) where guerilla attacks are more
likely in oil regions when oil prices rise (rapacity), but more likely in
coffee growing regions when oil prices fell (opportunity cost).
b) With reference to your previous answer, what types of policies might governments
enact to try to ensure natural resource are beneficial for economic growth
[10 marks]
Students should note the links between natural resources and slow GDP
growth is strongest among countries with poor institutions.
Students could mention policies where resource revenues are reinvested in
other industries or sectors (e.g., sovereign wealth fund in Norway), or when
revenues are used to eliminate existing debt or invest in public goods. Possibly
even some share of oil revenues paid directly to citizens in Alaska.
Page 7 of 7

经济学｜Module Code
ECO00031I BA, BSc Degree Examinations 2024-5最先出现在KJESSAY历史案例。