Development Economics 1st Edition Gérard Roland - Solutions

Search the Internet and find those countries in which financial markets are governed by Islamic law. Which countries have the strictest interpretation of the Qur'an, and which countries have a more open interpretation? What common patterns do you find in countries governed by Islamic law as
Why do developing countries collect fewer taxes as a percentage of national income than do developed countries?
Assume that labor supply follows the following equation Ls = 2 + w1.8. Assume that the wage is equal to 3 without taxes and that the after-tax wage is 2.4. What is labor supply with and without taxes? Calculate the elasticity of labor supply to wages.
Using the Internet, find the latest data on government revenues and expenditures in India and in the United Kingdom. What differences do you find in terms of the composition of revenues and expenditures in the two countries?
Research the tax reforms implemented in Tanzania around the turn of the 21st century.What was the situation before these reforms were put in place? What were the principal changes resulting from the reforms and what were the economic effects of those changes? Choose another country that implemented
On the World Bank's Doing Business in the World" site, go to the page devoted to taxation: http://www.doingbusiness.org/ Explore Topics/Paying Taxes/. The information on countries concerns not only their tax rates but also the time it takes a business to prepare and pay taxes. How do the tax rates
Research and explain the difference between the views of Karl Marx and Max Weber on the role of culture in economic development. What is your view?
What has Putnam's research shown in terms of the interaction between culture and democracy? Explain.
Culture affects political institutions, but political institutions could affect culture. Licht, Goldschmidt, and Schwartz have proposed instrumental variable regression as an efficient way to measure culture's effect on political institutions. Explain how this regression helps to measure such a
Download the data from the Hofstede website on scores of individualism (http://www.geerthofstede.com/dimension-data-matrix). Compare these scores with the Schwartz cultural map (see Figure 11.4). Which of the dimensions on the map seem the closest to the Hofstede individualism scores?Figure 11.4
Greif has compared contract enforcement methods among Genovese merchants and Maghribi traders during the late Middle Ages. What was the main difference in their contract enforcement systems? How does that difference relate to culture? Explain the implications of these different contract enforcement
Choose a continent in the developing world. Research the dominant (or one of the dominant) culture(s) on that continent. When and how did it emerge? What are its main components? How did it spread? Which components of this culture do you think favor economic development? Which favor economic
Choose one developing country from Asia and one from Latin America. Go to the World Values Survey website and download its data (http://www.worldvaluessurvey.org/). Compare the survey answers for those two countries. Which answers are the most similar? Which answers differ the most between these
Download the article "Culture and Economics" from Raquel Fernandez's website (http:// sites.google.com/site/raquelfernandezsite/ research). What does she mean by the epidemiological approach to culture? What are the main insights from her research?
Data from the United States are often used to understand culture in developing countries. Why? In what ways are the data interesting to understand culture and why can they lead to econometrically convincing results? Do an online search for relevant examples of studies using data from the United
Download a conversation with Amy Chua, Yale professor of law and author of World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability (http://globetrotter.berkeley.edu/people4/ Chua/chua-con0.html). How do Chua's ideas relate to the ideas in this chapter?
What is the main determinant of land size for individual farm ownership? Why?
Does communal ownership become more inefficient when population density is higher? Explain.
What empirical evidence do we have about the different effects of sharecropping and individual farm ownership? What are the empirical problems in trying to measure such a difference and how did Shaban (1987) overcome those problems?
What evidence is available about the relationship between land size and productivity? What is the relation between risk and those two variables?
Read the following article about land tenure issues in South East Asia: http://www.fao.org/docrep/009/a0306t/A0306T04.htm#ch3. What connections can you draw between the discussion in this chapter on land contracts and property rights, and the issues in this article? What issues related to property
Pick a developing country of your choice that has undergone land reform. Find information regarding land reform in that country. When did it happen, what form did it take, and what results did it have? Describe any possible flaws in the reforms in that country and provide an explanation for what
Compare the situation of two farmers, one who owns his land and the other who rents it from a landlord. In good times (which happen with probability 1/2), the owner-farmer earns an income of 125. In bad times (also with probability 1/2), he earns an income of 75. The tenant works on a farm that is
Consider a sharecropping arrangement where farmers earn a shares of output F(L), where L denotes their hours of labor. Consider two farmers, where one is more productive than the other. The more productive farmer has costs aL (a < 1). The less productive farmer has costs L. This reflects the fact
A private farmer hesitates in considering buying new machines to work on his land. The cost of the new machines is K. Without new machines, the output on his land is Ta, where T stands for land. With new machines, output will be bTa, where b > 1. Calculate the amount T above which it is profitable
Download the following article: Land Institutions and Land Markets," by Klaus Deininger and Gershon Feder, http://papers.ssrn.com/ sol3/papers.cfm?abstract_id=636211. What connections do these authors make between land rights and the development of markets for the sale of land?
Explain the transaction costs incurred by informal business.
In terms of its objectives, explain why privatization through auction sales is better than privatization by direct sales.
Discuss the possible links between the size of the informal sector in developing economies and rural-urban migration trends.
Go to the website of the World Bank Governance Indicators (http://info.worldbank.org/governance/wgi/index.asp) and examine the indicators for Asian countries. From the information you find there, in which country would you be most willing to invest, and in which would you be least willing to
Download the article by J. David Brown and John S. Earle, "Does Privatization Raise Productivity? Evidence from Comprehensive Panel Data on Manufacturing Firms in Hungary, Romania, Russia, and the Ukraine" at (http://papers .ssrn.com/sol3/papers.cfm?abstract_id=694401). Compare this article's
Go on the "Doing Business" website of the World Bank (http://www.doingbusiness.org/). Download the data on rankings for starting a business and resolving insolvency. Are these rankings correlated? If so, why might this be?
Read "The Informal Sector in Developing Countries: Output, Assets and Employment" by Sangeeta Pratap and Erwan Quintin, 2006 (http://www.wider.unu.edu/publications/ working-papers/research-papers/2006/en_GB/rp2006-130/). What methods do the authors discuss for measuring the size of the informal
Relational contracting develops between firms when institutions are weak. Compare the efficiency of these informal institutions with formal institutions using the material discussed in this chapter and in Chapter 8.
Do an online search to find out about privatization policies in Argentina. What methods were used, which sectors were most involved, and what did you learn about the effects?
Read the following article on the informal urban sector in Nigeria: "The Urban Informal Sector in Nigeria: Towards Economic Development, Environmental Health, and Social Harmony" by Geoffrey I. Nwaka (http://www.globalurban.org/Issue1 PIMag05/NWAKA%20article.htm). What topics from this article are
In this exercise and the next, we formalize the discussion of monopsony. Assume that a farmer can produce QL of output at a per unit cost cL under a traditional technology. Assume that using a modern technology with investment I, the farmer can produce QH of output at a per unit cost CH. Calculate
In this exercise, we analyze the dual-track system of price liberalization that was implemented in China. Assume a market in which supply and demand follow, respectively, the following equations: P = 2 + 4Q, P = 14 - 2Q. What are the equilibrium price and quantity? Assume that a quantity of 1 must
In this exercise, we examine the conditions under which monopsony is inevitable. Call PM the market price that a trader can realize on the market and call T the transportation cost for moving goods from the village to the market. If there are two traders, assume that the probability one of them
Read the following article by Marcus Noland: "Famine and Reform in North Korea," Asian Economic Papers 3(2) 2004: 1-40. Was the famine in North Korea associated with an aggregate fall in agricultural output? What are the main economic causes of the famine? On the basis of the information in the
Read the following article by Deepthi Kolady, Sujana Krishnamoorthy, and Sudha Narayanan: "India-Marketing Cooperatives in a New Retail Context: A Case Study of HOPCOMS"(http://www.regoverningmarkets.org/en/filemanager/active?fid=1024). According to this article, what benefits did farmers receive
Why do formal institutions provide little assistance to market development in poor countries?
Why do increases in oil prices lead to increases in food prices? Describe the various factors affected by rising oil prices that, in turn, contribute to rising food prices.
Do some online research to find what the spontaneous reactions of governments were to the food crisis of 2008. What effect did government reactions have on food markets? What institutional failure is the source of these reactions? What solution would you suggest to avoid similar problems in the
Why was the output fall in Central and Eastern Europe a surprise to economists? Use a standard supply and demand framework, assuming that the planned price is below the market equilibrium price. What does the supply and demand framework predict in terms of variation in output after price
Download the following article by Elizabeth Roebling on trade at the border between Haiti and the Dominican Republic: http://www.ipsnews.net/2009/04/dominican-republichaiti-border-market-embodies-inequalities/. Which facts in this article illustrate the themes that we have been analyzing in this
In this exercise, we examine the adverse selection issue discussed in the chapter. Call as the share of safe projects and (1- as) the share of risky projects. Assume that a safe project yields a return of R, with 100% probability. Assume that a risky project yields a return of R, with probability
This is an exercise on moral hazard in credit markets. Assume that a borrower must borrow 100 for an investment. The borrower can choose between a safe project yielding a return of R, with 100% probability and a risky project yielding a return of R, with probability pr and a return of 0 with
Take the same assumptions as in the previous exercise on the returns and probabilities associated with the safe and risky projects. Assume that there are monitoring costs C to make sure the borrower chooses the safe over the risky project. If L is the size of the loan, what is the minimum interest
This is an exercise on microcredit as a substitute for collateral. Take the same assumptions as in the previous two exercises on the safe and risky projects. Now assume that there are two borrowers, A and B. Assume that the size of the loan is 1 and that the interest rate is r. Also assume that A
Download and read "Bank Credit and Business Networks," an article by Asim Ijaz Khwaja, Atif Mian, and Abid Qamar (http://dash.harvard.edu/bitstream/handle/1/4876870/RWP11- 017_Khwaja_Mian_Qamar.pdf?sequence=1). What is the research innovation in this article? How would you explain the researchers'
Read "Banking for the Poor: Evidence from India," an article by Robin Burgess, Rohini Pande, and Grace Wong, Journal of the European Economic Association 3 (2-3): 268-278. Compare and describe the similarities and differences between the approach in this article to the Banerjee-Duflo article on
Will the problems of credit markets disappear when developing countries become more affluent? Explain your answer.
How does monitoring alleviate informational asymmetries and what effect does it have on loans of different sizes?
Explain the different methods economists usually employ to measure credit constraints. What are the potential problems with these approaches?
What is progressive lending? How is it related to group lending? When is progressive lending less successful?
What are the best methods to prevent and to treat diarrheal diseases in developing countries? Find other documentation than that in the chapter on the costs and benefits of different methods.
Better infrastructure to improve water quality in developing countries has often had disappointing results in terms of reducing diarrheal diseases. Why?
Malaria was eradicated in many countries after World War II. How did this happen and what were the methods used? Find other documentation than that in the chapter on controversies surrounding different methods.
A malaria vaccine would be a safe method to eradicate the disease. What are the possible reasons for the absence of a malaria vaccine?
Read the article by Hoyt Bleakley, "Disease and Development: Evidence from Hookworm Eradication in the American South," The Quarterly Journal of Economics 122, no. 1 (2007): 73-117. Compare the method he uses to evaluate the effect of hookworm eradication with that used by Edward Miguel and Michael
Download and read Paul Gertler and Orville Solon, "Who Benefits from Social Health Insurance in Developing Countries?" (Berkeley: University of California at Berkeley/ NBER and University of the Philippines, 1998) http://faculty.haas.berkeley.edu/gertler/working_papers/philippines-6.pdf. the
According to Alwyn Young, HIV will lead to lower fertility choices, whereas Sebnem Kalemli-Ozcan argues that HIV will lead to higher fertility choices. Use the economics of fertility choices analyzed in Chapter 3 to evaluate both arguments. Draw a two-dimensional diagram with the number of children
Go to the World Health Organization's website (http://apps.who.int/ghodata/); on the left side of the page, select "World Health Statistics", select "Cause-specific mortality and morbidity" and download "Distribution of life years lost by broader causes" Find which diseases cause the largest
Some researchers argue that free bed nets will lead to lower rates of malaria, while others argue that the free nets will be used inefficiently. Use supply and demand arguments to make the case for the first argument. Then make the case for the second argument using what you have learned about
We found in this chapter that better health did not lead to higher income per capita. We saw that higher life expectancy amounts to an increase in population. Use the Solow model in Chapter 4 to show the effect of a variation of an exogenous increase in the size of population on income per capita.
How can we measure the gross enrollment rate in education? Why can it sometimes be higher than 100%? How can we correct it and calculate a net enrollment rate?
What are the usual estimates of returns to education in developing countries? How can we measure these returns? What is the potential problem with simple OLS (ordinary least squares) regression of wages on education? How does Esther Duflo's research in Indonesia avoid this problem?
Teacher incentives can be enhanced by giving them bonuses if their students do well in test scores. Discuss. What was the experience with teacher incentives in Kenya? Do some research on the same topic for other countries.
What is the experience in developing countries with parent involvement and bottom-up monitoring of schools?
Private net returns to education could be negative. Use the data in Figure 17.3 on human capital investment discussed in this chapter to show how this can be the case. Why might this be the case?Figure 17.3 Earnings S Private costs - Externalities h₂ Foregone earnings h₁ Private
Programs to reduce the costs of schooling lead to higher participation rates for girls than for boys. How do you explain this? How does it relate to the education gender gap? How does it relate to gender preferences of parents discussed in Chapter 3?
Download and read the article, "The Impact of Children's Work on Schooling: Multi-Country Evidence based on SIMPOC Data by Ranjan Ray and Geoffrey Lancaster. You can find this article on the website http://repec.org/ esAUSM04/up.15362.1076562558.pdf.To understand the effect of child labor on school
Read the article by Joshua D. Angrist and Victor Lavy, "Using Maimonides' Rule to Estimate the Effect of Class Size on Scholastic Achievement," in The Quarterly Journal of Economics 114, no. 2 (1999): 533-575. Explain why Maimonides' rule is a good instrumental variable for class size. Without such
Go to the World Development Indicator website (http://data.worldbank.org). Scroll down the page and under "The World at a Glance," select the database on "Education" and download the data on the ratio of girls to boys in primary and secondary education for 2005. Find the 10 developing countries
Download the following article by Hongbin Li, Pak Wai Liu, Ning Ma, and Junsen Zhang: "Does Education Pay in Urban China? Estimating Returns to Education Using Twins." You can find the article at this website: http://www.econ.cuhk.edu.hk/~discusspaper/00013.pdf.Why is it interesting to use data on
Why is infrastructure investment important for development? Explain by giving some examples of infrastructure investment that help development.
What effect does income inequality have on access to infrastructure in development?
Define the weighted average cost of capital. How important is it for private investment in infrastructure in development?
A telecom company is considering investing in South Africa. Here are the data necessary to calculate the rate of return. The debt is 71% of equity. The risk-free rate of interest is 8%, the country premium is 12%, the return on equity is 18%, the return on debt is 11%, and the tax rate is equal to
Take the same numbers as shown in the previous exercise, but assume that debt is 42% of equity. What is the necessary rate of return to make the investment worthwhile? Explain why this rate of return differs from the answer to the previous exercise. Based on the variation of WACC as a function of
Esfahani and Ramrez found that ethno-linguistic fragmentation and a large informal economic sector had a negative effect on infrastructure investment. Look at other chapters in the book and find what other effects these two variables have.
One problem with infrastructure concession contracts given to private firms in Latin America was the tendency for those firms to renegotiate the contracts in their favor. Explain this phenomenon in terms of the hold-up problem analyzed in Chapter 7.
Find the Download the latest version of the World Competitiveness Report: http://www.weforum.org/reports?filter[type]=Annual%20Reports. country ranking in terms of infrastructure quality. Find the countries that are better ranked than the United States. Among those, select the subset of developing
Read the article "Does Decentralization Increase Spending on Public Infrastructure?" by Antonio Estache (policy research working paper 1457, The World Bank, 1995). Summarize the main findings. Can you make sense of these findings given the discussion on decentralization in this chapter? Explain. Do
Go on the World Bank website (http://databank.worldbank.org/) and find data per country on Internet users per 100 inhabitants between 2005 and 2009. Find the countries in Latin America, Asia, and Africa that have the lowest and the highest number of Internet users for each continent. Find the
Explain why discussions about corruption can become politicized. Give some examples to show the possible policy consequences of different ideological views on corruption in developing countries. What is your view?
The extent of corruption in a country is an indicator of the quality of its institutions. Explain. How do you see the link between corruption and institutions?
Does corruption always lead to inefficiency? Why could corruption lead to improved efficiency? What is your view?
Why is corruption more distortionary than taxation? Do we have some evidence to support this view? Explain.
Give examples of two acts that are identical in terms of corruption, but one is morally reprehensible and the other is not.
Call x the proportion of people in a country who decide to behave in a corrupt and dishonest way. Assume that when people are honest, their payoff is L. Assume that when they behave in a corrupt way and are caught, their payoff is 0, but if they are not caught, their payoff is C > L. Assume that p
Using the previous exercise, assume that the same competitive game can be played twice. Assume that in the beginning of the second period people can observe how people behaved in the first period. Does the analysis of the second period game change relative to what it was in the previous exercise?
Go to the following website that ranks the 10 most corrupt world leaders: http://www.infoplease.com/ipa/A0921295.html. Do you detect any empirical patterns from this list's data? Find and identify commonalities and differences between these leaders and describe any possible correlation between
Read the following article by Benjamin Olken and Patrick Barron: "The Simple Economics of Extortion: Evidence from Trucking in Aceh," Journal of Political Economy 117, no. 3 (2009): 417-452. The researchers examined the effect of market structure on the level of bribes paid by truckers to pass
Download the following article by the United Nations Office on Drugs and Crime that references corruption in the Afghan government: http://www.unodc.org/documents/data-and-analysis/Afghanistan/Afghanistan-corruptionsurvey2010-Eng.pdf. The report lists in detail different forms of bribery. Using
Given the same assumptions as in the previous exercise, assume now that country A thinks that the probability of either party winning is 50%, but country B thinks that its probability of winning is 75% and country A does not have this information. Will the proposed agreement made by country A work?
Under the same assumptions as in question 1 (however, assume for simplicity that CA = CB = C), suppose that there are 2 periods and that the probability that country A wins in period 1 is 70%, while it is 30% in period 2 (the probability that country B wins is then 30% in period 1, but 70% in
Do some research and find an example of a conflict in a developing country due primarily to greed. Explain the circumstances of the war.
Do some research and find an example of a conflict in a developing country due primarily to grievance. Explain the circumstances of the war.

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Development Economics 1st Edition Gérard Roland - Solutions

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