Short Questions

Make sure you answer all questions using your own words. Answers that are simply copies the notes will not be considered for credit.

1. Give an example of a mechanism that might cause multiple equilibria to exist. Using your example, explain how the existence of multiple equi- libria might explain di↵erences in per capita income across countries. [3 points]

2. Explain how an abundance of natural resources might cause an econ- omy to grow more slowly. [3 points]

3. Read section 4.4 in the paper by Algan and Cahuc (a reference and link to the paper can be found on the last page of this assignment). Summarize the empirical exercise they are describing (i.e. tell me what was actually done) and explain why the exercise was designed the way it was. That is, what problems were the authors worried about and how does their design help mitigate these problems. Finally, summarize the findings. [3 points]

4. Suppose that factor accumulation, as highlighted by the neoclassical growth model, is important in the determination of national income. Give an example of a cultural trait that might a↵ect the extent to which a country accumulates either physical or human capital. Explain. [3 points]

5. As discussed in the notes, the world values survey collects data on attitudes towards work in a variety of countries. The data suggests that people in poorer countries view work as more important than do people in richer countries. This can be interpreted to mean that a strong work ethic is not an important determinant of national income. Criticise this interpretation. Give an example of an empirical exercise that could address this question and would be free from your criticism. [3 points]

6. Give an example of a case where culture and institutions interact (i.e. either an example of a cultural trait that influences the form of an institution, or an example of an institutional structure that results in some trait becoming part of the culture). [3 points]

7. Read the paper by Crafts (a reference and link to the paper can be found on the last page of this assignment). Explain how he reconciles Allen and Mokyr’s theories of the Industrial Revolution. [3 points]

8. Explain the theory of the Industrial Revolution proposed by unified growth theory. What are the strengths and weaknesses of this ap- proach?. [3 points]

References and links

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