Questions and Answers of Development Economics

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
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
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
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
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
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).
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
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?
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
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
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
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
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
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
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
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
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
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
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
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
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
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
Read "The Informal Sector in Developing Countries: Output, Assets and Employment" by Sangeeta Pratap and Erwan Quintin, 2006 (http://www.wider.unu.edu/publications/
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
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
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
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 =
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
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
Read the following article by Deepthi Kolady, Sujana Krishnamoorthy, and Sudha Narayanan: "India-Marketing Cooperatives in a New Retail Context: A Case Study of
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
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
Download the following article by Elizabeth Roebling on trade at the border between Haiti and the Dominican Republic:
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
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%
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
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,
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-
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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.
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
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
Download the following article by the United Nations Office on Drugs and Crime that references corruption in the Afghan government:
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
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
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.
What is the difference between the interpretation given by Fearon and Laitin, on one hand, and by Collier and Hoeffler, on the other, of the important correlation between income per capita and

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