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    Final Exam: Development Economics at ICEF May 26, 2018 Part II: Problems

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    sasha
    1. The document contains the final exam questions for a Development Economics course. It includes mathematical problems involving Harrod-Domar and Solow growth models and questions about income distribution, taxation, and Lorenz curves. 2. It also asks students to comment on statements about the validity of instruments in growth studies, the measurability of leadership effects, and the interchangeability of culture and institutions. 3. Students must also answer two essay questions, choosing from topics about the relationship between social security, fertility decline, and other factors; the tax rate that maximizes growth in the Persson-Tabellini inequality model; and the main elements of the "Regulation and Distrust" paper model.

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    Final Exam: Development Economics at ICEF May 26, 2018 Part II: Problems

    Uploaded by

    sasha
    37 views1 page
    1. The document contains the final exam questions for a Development Economics course. It includes mathematical problems involving Harrod-Domar and Solow growth models and questions about income distribution, taxation, and Lorenz curves. 2. It also asks students to comment on statements about the validity of instruments in growth studies, the measurability of leadership effects, and the interchangeability of culture and institutions. 3. Students must also answer two essay questions, choosing from topics about the relationship between social security, fertility decline, and other factors; the tax rate that maximizes growth in the Persson-Tabellini inequality model; and the main elements of the "Regulation and Distrust" paper model.

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    1. The document contains the final exam questions for a Development Economics course. It includes mathematical problems involving Harrod-Domar and Solow growth models and questions about income distribution, taxation, and Lorenz curves. 2. It also asks students to comment on statements about the validity of instruments in growth studies, the measurability of leadership effects, and the interchangeability of culture and institutions. 3. Students must also answer two essay questions, choosing from topics about the relationship between social security, fertility decline, and other factors; the tax rate that maximizes growth in the Persson-Tabellini inequality model; and the main elements of the "Regulation and Distrust" paper model.

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    © All Rights Reserved
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    Download as docx, pdf, or txt
    37 views1 page

    Final Exam: Development Economics at ICEF May 26, 2018 Part II: Problems

    Uploaded by

    sasha
    1. The document contains the final exam questions for a Development Economics course. It includes mathematical problems involving Harrod-Domar and Solow growth models and questions about income distribution, taxation, and Lorenz curves. 2. It also asks students to comment on statements about the validity of instruments in growth studies, the measurability of leadership effects, and the interchangeability of culture and institutions. 3. Students must also answer two essay questions, choosing from topics about the relationship between social security, fertility decline, and other factors; the tax rate that maximizes growth in the Persson-Tabellini inequality model; and the main elements of the "Regulation and Distrust" paper model.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 1

    Development Economics at ICEF

    Final exam
    May 26, 2018
    Part II: Problems.

    Mathematical problems. Solve both.

    1. Early growth theories. Consider Harrod-Domar and Solow growth models with following
    production functions. Harrod-Domar model: Y=K/5; Solow growth model Y =5 K 0.3 L0.7.
    Depreciation rate = 5%. Population growth is zero. L=100.
    a. (10pts) If K=2000, which savings rate maximizes the long run growth rate in Harrod-
    Domar model?
    b. (10 pts) Which savings rate maximizes per capita consumption in Solow model in long run?
    You can refer to a theorem without proving it.

    2. Suppose the distribution of incomes in an economy of 1000 individuals is given by the Lorenz
    curve of the following form: L(x) = x4, where 0≤x≤1 denotes a fraction of population. The GDP
    (aggregate income) is 10 million USD.
    a. (15 pts) Find the income y(x) of each person in the economy, as function of x.
    b. (15 pts) Suppose the government imposes a tax of 20% on all income, and distributes the
    tax revenue to all people equally. Find everyone’s income after redistribution.
    c. (15 pts) Find the Lorenz curve after redistribution.
    d. (20 pts) Calculate the Gini coefficient before and after redistribution.
    e. (15 pts) Identify which individuals will support the redistribution

    True, false, uncertain? Provide comments on any 2 out of the following statements. (40 pts. each)

    3. Past settlers mortality is a valid instrument for institutions. 

    4. The effect of leadership on country development is impossible to measure because the change
    of leadership is itself affected by country growth.

    5. In the context of economic development, culture and institutions are completely interchangeable
    and their effects cannot be separated.

    Essays – provide a detailed answer to any 2 out of the following questions. (60 pts. each)

    6. . Explain the mechanism through which better social security for old people is believed to have
    reduced fertility. Which other factors are believed to have influenced fertility decline?

    7. In the Persson-Tabellini model of inequality and growth, which tax rate maximizes the
    economic growth rate? Explain the intuition of the model. Why does inequality lead to
    suboptimal tax rate?

    8. In the model of the “Regulation and Distrust” paper, outline the main building blocks without
    providing the details. In that model, social welfare under government regulation is a quadratic
    function of the share of civic individuals. Why?

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