Part I Question 1: [Economic Growth] According to the growth accounting equation discussed in Box 3.1, gx=gA+agk+(1- a)g

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Part I Question 1 Economic Growth According To The Growth Accounting Equation Discussed In Box 3 1 Gx Ga Agk 1 A G 1 (56.61 KiB) Viewed 41 times

Part I Question 1: [Economic Growth] According to the growth accounting equation discussed in Box 3.1, gx=gA+agk+(1- a)gh where gx, g, and gh, are growth rates of GDP per capita, capital per worker, and human capital per worker, and a is the share of capital income in total GDP. The first four columns of the following table give values for g 8 gb and a. a. Fill in the fifth and sixth columns of the table with the growth attributed to physical and human capital accumulation. These may be calculated as a gand (1-a ), respectively. b. Fill in the seventh column of the table, plugging the values of gx, gh, and a into the growth accounting equation and backing out ga c. Fill in the final column of the table by calculating the fraction of overall growth (g) that is attributed to TFP by the growth accounting framework. (That is, divide gaby gx and multiply by 100.) By 5.2 5.2 5.2 gk 4.0 4.0 4.0 gh 2.0 3.0 oo 2.0 .3 .3 4 a Growth attributable to Physical to Human capital capital Growth TFP attributable growth 1 TFP share in growth d. Discuss the potential for inaccurate estimates of g and a to render misleading estimates of the importance of TFP growth.

Question 3: [Consumption, Time Allocation, and Production Choices] Elasticities are useful measures, because we can roughly assess their size without reference to the units in which we measure goods consumption or price levels, simply by comparing their values to benchmarks of 1,0, or -1. a. If the income elasticity of rice consumption equals 1, what happens to the ratio of rice consumption expenditure to total income when income rises (holding prices constant)? If the elasticity is greater (less) than 1? b. If the own price elasticity of rice consumption (R) is less than (greater than) -1, rice demand is said to be "price elastic"("price inelastic"). When rice demand is price elastic (inelastic), does total expenditure on rice (PR) rise or fall when the price of rice (P) rises? Question 4: [Domestic Markets for Goods and Services] Using diagrams like those in Figure 8.2, discuss the potential impacts on the local price and local quantities of corn produced, consumed, imported, and exported of each of the following changes: a. An inflow into Small Village of refugees who bring wealth with them but do not have access to farm land b. A reduction in the price of fertilizer c. The construction of better paths connecting outlying homesteads to the Small Village center d. The construction of a better road connecting Small Village to Big City.

Question 5: [Agricultural Market Interventions and Reforms] Consider a country that exports corn, and assume that: • Corn is cultivated using highly labor-intensive methods. • The primary way in which com production can be expanded here is by expanding cultivation onto previously fallow land. • There is no migration or commuting between rural and urban areas. • Markets for the output of the rural non-farm sector are in autarky. a. Describe the likely effects of an increase in the price of corn on the well-being of each of the following groups, being careful to describe all relevant channels through which the price increase might affect the group's well-being, and the likely direction of the effect. • Small commercial corn farmers who sell corn, but do not buy or sell labor • Rural poor households who run small nonfarm businesses using only family labor • Rural poor wage laborers • Urban poor wage laborers b. The table below shows some statistics describing the corn-exporting country's population. If this country reduced its import tariff on corn, would you expect the number of the poor who benefit from the change to be greater or smaller than the number of the poor who are hurt by the change? Explain. Please assume that this country is a small importer in world corn markets. Among All Households: Percent Urban Percent Rural Among All Urban Households: Percent Poor Percent Non-poor Among All Rural Households: Percent Poor Percent Non-Poor Among Poor Rural Households: Percent Small Commercial Corn Farmers Percent Non-Farm Self Employed Percent Wage Laborers 20 80 20 80 60 40 70 15 15