Exam Flashcards
(140 cards)
1
Q
What is GDP per capita formula
A
GDP/Population
2
Q
What is the effect of using a logarithmic scale?
A
turns an exponential variable into a linear trend variable
3
Q
How can you work out growth
A
change in yt/yt
4
Q
What are current world growth rates?
A
3%
5
Q
How has income inequality changed?
A
It has increased
6
Q
Draw three Production function diagrams showing differences in factors of production and productivity
A
see notes lecture 1 use new revision notes
7
Q
What econometric points must you remember?
A
Correlation doesn’t imply causality
There can be reverse causation
There could be an omitted variable causing the other effects
8
Q
How many people survive on less than $1 a day?
A
1.1 billion worldwide
9
Q
Why is PPP used?
A
because once you control for exchange rates, you can compare growth rates more easily.
10
Q
What is a residual?
A
It is the part of growth which cannot be explained.
11
Q
Proximate Cause
A
an event which is immediately responsible for causing an observed response.
12
Q
What is an ultimate cause
A
Something which effects an observed result through different channels
13
Q
Explain the use of randomized control trials
A
If a treatment happens to be observed in one setting, it may not work in another setting.
RCT looks at both a treated and a control group.
But unfortunately it doesn’t consider the deeper economic factors present.
14
Q
What is the formula for compounding growth rates?
A
yt+1=yt(1+g)^h
15
Q
Write out the normal solow equation
A
L2 notes
16
Q
What is the empirical evidence on GDP per cap and per cap capital?
A
Strong correlation between the two heston et al(2010)
17
Q
give the marginal product of capital
is it or isn’t it diminshing.
A
derive y w/r to k
MPK>0 increasing capital increases output
second derive and show MPK 2<0
Shows diminishing marginal product of capital.
Show the diagram.
18
Q
Give the change in capital stock equation
A
changek=i-sigmak
19
Q
derive the savings rate equation and the diagram for the model economy in the solow growth going to a steady state level.
A
l2 notes
20
Q
Dervie steady state capital, output and consumption
A
see math note
21
Q
What is the correlation of predicted GDP solow and actual
A
not very strong.
22
Q
Explain the solow model in transition
A
If the savings rate increases, physical capital will reach a new steady state.
income will increase from this increase.
Consumption will drop from this income increase.
It is not clear where the level of consumption ends up.
SHOW DIAGRAM L2
23
Q
When is and isn’t there convergence.
A
same savings but differing inital capital,
convergence will occur
Same initial capital but different savings
Convergence will not occur
24
Q
Draw the diagram and explain the concept for when savings depend on income level
A
See l2 notes 1
25
What are the five characteristic of capital?
- Productive; the produce something
- Capital is produced through investment
- Capital is rival only a certain amount of people can use it at one time.
- it earns a return
- it depreciates over time
26
What is the average capital share of income?
prove the results
0.35
MPK*K/Y
27
What is the evidence on land ownership in the UK
Moved from 64% of wealth in 1888
to 2% in 1958
28
Draw the capital per worker diagram
L2 notes
29
What are the effects of changes in population?
More mouths to feed in the economy
More hands to do work in the economy.
30
How has world population changes
10000bc-1st cen: 0.04%
1900-1950: 0.9%
1950-2000: 1.8%
31
What does the Malthus model look at?
It analyses population growth vs the standard of living in the economy.
32
What are the assumptions of the Malthus model?
- Fixed land
- All population are workers
- human capital is constant for each worker
- All production is consumed
-Children number depends on consumption
33
When is the economy more well off in the Malthus model?
The smaller the population relative to the available land, the more well off they are.
So the more you reproduce, the less land you have. Therefore, you must consider the economic benefits of having children.
34
Derive the mathematical part of the malthus model
see L3 notes
35
Derive the steady state of the malthus model, see notes
See L3 notes
36
What is the transmission mechanism of the Malthus model?
When you have a low population; the land per worker and consequently output per worker is high.
Higher income will lead to more reproduction
The population will then grow
as a result the land per worker will decrease, output per worker will fall.
37
What is the impact of human capital growth on pop grwoth>
Increases income
Which gives more population
so income doesn't change
38
What are the Malthusian Checks?
Positive Check: Diseases, Starvation or War
Preventative Check: Moral restraints. i.e: Restricting your marriage until you finances are balanced.
39
What does the malthus model say is the only way to improve your standard of living?
Moral restraints. Show using maths with a country with more constraints.
Also show it graphically.
40
What are the citisisms to the Mathus model?q
It does not apply to the world very well after 1820.
Galor and Weil (2000) show that as we move closer to the present day, populaiton growth has less of an impact on output growth
41
Give evidence on pop growth
Heston et al. (2001) shows that there is a negative relationship between population growth and GDP per capita
42
What is it called when there is population growth in the solow model?
Capital Dillution
43
Show this Mathematically
You add an n term into capital depreciation.
Show it on a diagram with two levels of population growth (n).
You will also want to derive the steady state which must be learnt.
predictions: Countries with higher pop growth have lower steady state income.
44
what are the two ways that population can changes
Mortality transition:
- Higher standard of living
- better public health
- Clean water and better food
Fertility Transition
- lower mortaility; if less adults are dying familys dont need to reproduce
- income and substitution; If you get a higher wage you can afford more kids but you will have a sub for working more to earn more
- Parents who invest more will get more out of their kids but this means the more they have the less they can invest per child.
45
What is a good paper to reference when talking about pop growth?
Young 2005;
aids was humanitarian disaster but an economic benefit.
See Sem 1 for more ideas
46
what are the two causality directions for health?
health improves output through a bigger and more productive labour force.
Higher output generates the resources for better health.
47
What is the heston evidence on health?
Heston et al. (2011): Found positive correlation between daily calorie supply and real GDP per capita.
48
Draw the two diagrams of health and output relationship
See L4 notes
49
What is Fogel's findings on health?
Improved nutrition helped UK GDP grow by 0.33%
56% more calories available allowed more 56% more people to go to work
50
What is the ration of doctors to people in many countries;
poor 0.2 per 1000
| rich 2.3 per 1000
51
What developed worldwide in 1975-2010
Education
Avg years increased
- developing: 3.2 - 6.7
- advanced: 8-11
- US: 11.4-12.4
52
What is the return to education?
The wage paid is a combination of hours worked and human capital.
So returns to EDU is extra wage from each extra year of edu.
53
What % of world had no edc in 2010?
20. 8%
0. 4% in the US
2. 5% in advanced economies
54
What is Barro and Lee's(2010) estimation of the wage premia from schooling?
4. 11 from completing higher
| 3. 61 from incomplete higher
55
Draw the wage premia curve
See l3 notes
56
Derive the solow model with human capital
L3 notes
57
What are the problems with comparing the education levels
Education will be of different quality.
Doesn't consider externalises.
58
What is the Lucas model (1988_
see notes but basically says extra training leads to future growth.
59
What are the limits to human capital?
health: life expectancy and public health budget.
Educational: Yrs of education
60
What is BArro (2001) saying?
human capital may say why poor countries don't grow as fast as the rich.
Higher science score = higher GDP
need strong legal system
Male attainment to more edu 0.044
Female EDU has little explanatory power
Education quality is most important.
61
What letter denotes productivity growth?
A
62
Draw a diagram to show the differences in productivity growth
Draw one with same factors of production but different growth rates
63
Show the solow growth break down
see notes
64
What is development accounting?
Income LEVEL differences between countries broken down into differences between productivity and factor accumulation levels
65
What is the prediction of develpment accounting?
predicts large productivity differences among countries .
Japan has high factors of production but low productivity
UK has high productivity but low factors of production.
66
What does Barro and Lee (2010) say?
UK and norway more productivtive than US
Japan 0.70 less much poorer same fop
67
What sort of countries is productivity more important
For poor countries; productivity is the most important in in determining the income gap to the US
68
What is growth accounting?
This decomposes income growth into factor accumulation and productivity growth.
yhat=Ahat+alphKhat+(1-alpha)hhat
69
What are the differences in productivity and FOP for Growth Accounting and Development Accounting?
Development:
47% Factor Accumulation
53% productivity
Growth Accounting:
32% Factor Accumulation
68% Productivity
70
What are the problems with measuring productivity?
You can overstate physical capital in some countries due to not considering the corruption levels there.
The can also overstate human capital because they do not consider differences in the quality of the education.
71
What paper looks at productivity and what are the predictions?
YOUNG (1995):
Essentially the Asian Tigers between 1960 and 1990 had impressive growth rates (5.7-6.8)
but not so impressive productive (0.2% -2.3%)
Most of the growth comes from higher labour particiipation. This can come from women in the labour market due to lower fertility rates.
Method:
- tran-log function
- Weights the growth of each subinput by it's average marginal product.
- Sums all the census to get a six dimensional variable of interest.
72
Define Technology
Technology is knowledge about factors of production combination that produces output
73
Define Efficiency
How effectively given technology and factors of production are used.
74
How is technology created and what is the evidence on it?
What is the OECD average
Technology is created through investment into research and development.
Japan has the most researchers and researchers spending as a percentage of GDP.
OECD: 2.4%
75
How can technology be considered a public good?
it is non-rival: it can be shared with other people
It is non-excludable: Once the technology has been invented you cannot exclude people from using it
this can be a problem which means that it may distroy the incentive for people to innovate things.
76
What does a firm consider when deciding to invent?
They consider;
- Size of the market
- size of the advantage
- lenght of time the advantage would last
- amount of uncertaity in the research process
77
Discuss the use of patents
The are granted by the government to give monopolistic rights to a certain invention.
two systems;
- first to file - underdeveloped products
- first to invent - how can you prove it
Taiwan: highest patents per person; 418.5 per million
Patents must be filed in each conutry where they are wanted to work .
Problems:
-Monopoilies will cause market inefficiencies
-Patent trolls may buy up the patents causing infrigement issues
Alternatives:
You could use a secret recipie like mcdonalds
or dying seeds ideas
78
Explain Romer's 1990 model
Labour force consists of workers ly and researchers la
L=La+Ly.
gamma a= La/L
Y=A(1-gammaa)L
Less people doing research doing research today
=higher growth today.
Higher population = higher growth - remember we know from population that this is not true.
see notes for diagram its the one where y drops down.
79
What determines the impact of new technology?
The level of human capital would help.
Also technology into a bigger sector will have a bigger effect.
80
Derive the two country model for technology
See notes
Cost of copying programme
Remember that tacit knowledge is important for innovation impact
81
What is the paper to look at for technology
PARENTE AND PRESCOTT (1994)
They look at the impact of the impact of barriers to technology.
Barriers:
- Regulatory and legal constraints
- Bribes
- Violence
- Sabotage
- Worker's strike
France and west germany increased their barriers to tech adoption and saw that they saw growth reduced.
South Korea and Taiwan:
Decreased their barriers and their growth increased.
82
How can you meausre the technology gap
T2009Indea/T2009US=
(1/(1+g)^G
G=years indian tech lags behind US
g=average growth rate of technology
T2009 india=t2009-Gus=t2009US/(1+g)^G
83
What is likely to be the case about efficiency?
Unless there are large technology gaps, the efficiency gap is the most dominant force in the productivity gap.
84
What is the Soviet Union Example of Efficieincy?
Krugman (1995) looked at the soviet union.
They had high investment rate and a well educated workforce.
-They focused mainly on defence related technology.
The problem was that the economy was centrally planned. What this means is that the were production targets.
Such as a weight target for nails
Because their were no market mechanisms explaining what needed to be produced or competition to incentives high quality production.
85
What are the types of inefficiency?
- Resources could be used incorrectly.
- Technology could be blocked.
Some company may use a resource to rent seek which means they use it without creating wealth (economic gain) for others
-there can be idle resources:
Labour hoarding is when unions keep people in a job when they are needed in a recession.
Capital Hoarding is shutting down a factory during a recesssion when it is not needed.
-MISSALLOCATION AMONG SECTORS:
.This is when the marginal products of the inputs are not equal across sectors. SEE DIAGRAM.
86
What are the efficieincy gains from sectoral reallocation
Taiwan: 0.7-5.4%
Korea: 0.7-5.7%
87
What is Hsieh and Klenow (2009)'s thoughts on
In manufacturing misallocation is larger in India and China than the US.
Luddities wouldn;t adopt weaving loom
Technology blocking occurs in more rich countries
88
Give a definition for autarky
Where the country does not interact economically with the rest of the world.
89
What is openess
Where the exchnage of final goods and services occurs.
90
What is the pattern of globalisation
1800 mid to 1914 saw the beggining of globalisation
1914-1950-Departure from globalization
1950 to present day: globalisation has increased sensationally.
1914: Peak of labour market integration
1990-Present: Emerging market investment Boom.
91
What is world exports as a percentage of GDP?
5% - 24% 1950 - 2010
92
What can flow across bornder?
- Human and Physical capital
- International Aid
- Foreign Donimination
- Ideas of political and democratic processes.
93
What is the law of one price
The same good must trade for the same price in two countries.
94
How can you tell the level of openess of economies?
The closer the price of a good in two different markets, the more integrated the markets.
Savings Retention Coefficient: This is the degree of capital market openess.
it is calculated as the slope of the saving vs investment graph.
Savings retention coeffcient measures thew fraction of each saved dollar that is used for addtional investment.
0: Perfect Openess
1: Completey Closed Markets.
Shown by Solow growth ande Open economies.
95
What factors helped globalisation?
-Lower transport costs
-Better information transmission
use NY and London example.
Better trade policy.
Tariffs and Quotas.
VERs
Talk about anti-duimping duties and the WTO.
96
give examples of non-tariff barriers
Bureaucratic creativity:
| France and Japan trade dispute.
97
Give an example of trade liberalisation leading to growth
1985 Japan
1990 Uganda and Vietnam
1965 South Korea
98
Show the open economy in the solow growth model
set rw=MPK rental rate of borrowing in world capital markets
Show that gamma is not in the equation (saving/investment rate)
When the economy is open, the level of capital should not depend on the savings rate.
When the economy is autarkic it will depend on the savings rates.
99
What is Feldsten and Horioka's puzzle?
They found that there were strong saving/investment correlations. But they should be uncorrelated in the open economy which we see.
100
What is the Lucas Paradox?
Surely capital should flow from the rich to the poor countries?
But we see it flowing from China to the US.
101
What are Train Gains
better resource allocation from comparative advantage.
Specialisation will lead to gains from increasing returns to scale.
It weakens monopolies who cause misallocated resources.
e.g: As trade with Japan has become more open, the faults per 100 cars in the US has rapidly fallen.
102
Show the technology transfer model.
c1 invention
c2 imitation
see notes to derive through showing the bigger the technology gap, the lower the cost of copying.
Draw the diagram and explain. As the gap closes the follower gets less benefit from copying.
103
Give examples of Geographical Barriers to trade.
Larger the country the bigger the barriers
If the country is landlocked
Distance between the two countries in trading question.
104
What is the cost to poor countries of rich protectionism each year?
$100bn each year.
105
Show the growth of technology diagram
See not but it's gamma a / mewi with A2 rising.
If country increase their number of workers, they can increase the technology gap. Show in diagram.
106
What is the evidence of Kose, Prasad and Terrones (2009)?
It looks at financial openess and total factor productivity.
Uses a dynamic panel of 67 countries at their 10 year average.
Controlling for;
-terms of trade
-trade openess
-institutional quality
financial sector developments
FINDINGS:
Debt inflows have a negative TFP effect
FDI and Equity inflows have a positive TFP growth effect.
107
Why do people Oppose globalisation?
Workers can be exploited overseas
Poor countries struggle to compete
Lose the national sovereignty
There can be environmental exploitation
108
Define the distribution of income
This is how income is divided among the residence of a country.
109
How can income be put into catagories
You can divide income into equal amounts and then find what fraction of the population is in each group.
Or you can divide the population into groups (e.g quintiles) and you can see what population of income goes into each of there groups.
For example in the US 3.4% of income goes to the lowest 20% and 50.8% of income goes to the highest 20%.
110
What are the measures of inequality?
You can measure using a lorenz curve. y axis is cumulative % of HH income x axis is cumulative % of pop.
then have a 45 deg line which is the line of perfect equality
Then have a curve bending away from this which is the lorenz
You can also have the gini coefficient. This measures the area between perf eqaul and lozern relative to below lorenz.
Then lower the gini coefficient, the less the inequality.
111
Who plots the lorenz curve for the US?
De Neavas-Walt, Proctor and Smith (2010).
112
What is shown by the kuznets curve?
SHows that as a country develops the inequality will first rise and then fall. Draw one from notes
113
What is shown by Heston et al. (2011).
What is shown by Weinberg (1996)
No real income per capita and inequality correlation.
Shows that recently in the US gini coeffficient has risen between 1969 and 2010.
114
What are the sources of income inequality?
- Ownership of physical capital
- Occupation specifics
- Human capital level
- Geography
- Matching working characteristics with environemnt.
Not point being a financial whiz if you live in the saharan desert.
115
What is the relationship between education and income inequality?
If there is a lower return to education then there is lower inequality.
If the distribution of years of schooling is narrower then there is lower inequality.
Technological progress will increase the returns to education, so higher inequality.
116
What will occur in inequality?
unskilled workers will increasingly put more value on education given the widended wage gap.
These workers flow into a fast growing region. Reducing inequality.
117
How will trade lower inequality?
It lowers the cost of items that the country is scarce in.
it also returns on education
118
What is the impact of a superstar dynamic
Higher pay will be given to super sports stars increasing the wage premia for these skills so more inequality.
119
What is the impact of income inequality
Keynes: 'Giving money to the rich is bad but good because it helps to increase growth because the rich are more likely to invest in physical capital.
120
What are the meadian savings rates as given by Dynan, SKinner and Zeldes (2004)?
lowest 20% = 9%
Highest 20% = 24%
121
What is the effect of income inequality on human capital accumulation?
More inequality of income will lower human capital accumulation.
Poor people cannot afford higher education
More inequality leads to lower GDP through less human capital
Because poor just invest only in human capital.
122
What is the idea betwen redistribuive taxes
Progressive tax earn higher earners more and then gives the lower earners money back in lump sum payments.
Lump sum tax = tax rate x mean disposible income
123
How do economies decide to redistribute?
Income>Mean:
-You will have less disposible and lower pre-tax income
Mean=Income:
Lump-sum redistribute cancel out tax effects.
-Redistibution will lower the pre-tax income
Income
124
What is the extra problem of inequality
It causes social political unrest
125
What is the paper for inequality?
Dollar and Kray 2002;
-The share of the income quintiles does not vary with the average income of the whole group.
Policy effects examined:
- Openess to international trade
- Macroeconomic stability
- Moderate Stability
- moderate government size.
- Strong rule of law.
137 countries were used.
Macroeconomic raise income with little effect on distribution.
126
What two factors cause demographic transition?
Mortatliy Transtion: More people dying
| Fertility Transition: More people being born.
127
Livi-Barri (1997)
Life expectancy has gone from 35 to 75 for england (1750-2000)
128
Katemi-Ozecan (2002)
Had similar data set for developing countries and found a similar pattern.
129
What causes Mortaility transition?
Improved:
- Standard of living
- Public Health Measure
- Medical Treatment
130
What causes Fertility Transition?
Changes in TFR (Total Fertility Rate).
This is the number of daughters
This is decreasing for countries (Coale and Zehik (1963) show this).
Because women are living longer and wages increases.
income and sub effects around having kids.
131
What is the Net Rate of Reproduction
No of daughters each girl born is predicted to have.
NRR=1
132
What is replacement fertiliity
Fertillity rate consistent with with the same population level.
133
What is Demographic momentum
#of newborns = TFR x #of women at reproductive age.
134
What does Yashiro (1998) show?
That actual TFR is very different from forecast in Japan.
135
What are future population trends?
Median age of the global population will rise
26.5 to 2000 to 36.2 in 2050.
UN Development Programme 2007: All developing countries have seen falling TFR since 1975.
136
What is the problem with aging population
y * # of wokers/total population.
137
What is the empirical evidence on aging population?
```
Malaysia
Mexicso
Thailand
Turkey
Bangledesh
```
All saw an increase in the % of total population of people in working age
They all saw increases in GDP per capita
138
What is the Tempo Effect
When TFR falls in one year women may just be putting off having children to the following year.
139
What is demographic momentum measured by>
Number of girls under 15.
Because it shows how pop will rise for time.
Africa = 40% and Japan =13%
140
What is the paper to study?
Beck, Levine and Loayza (2000):
Look at the level of financial development on economic growth.
TFP growth
PHYS cap accum
Private Savings Rate
Use a panel method which controls for simultaneous bias and unobserved specific effcts
FINDINGS:
Financial intermdiaires have a large positive effect ion TFP growth causing economic growth
Weak leak to development and private savings rate
They provide more accurater info about production tech and corporate control.
