Problem Set 2

ARE/ECON 115A

Economics of Development

Problem Set 2

You must limit your answer to all 3 questions (combined) to no more than 1 page, single spaced, 12 font size!  That is, one page total maximum per group! This means you need to be very concise. You can attach supporting graphs and/or equations on a separate page.  As with problem set 1 you can form a group of maximum two people.

This assignment will require you to think about the economic growth and development issues we have covered in class, in the context of individual countries that you are interested in.  To do the assignment, you will have to visit the World Bank’s website, where you will find data on selected variables by country.  The link is:

http://data.worldbank.org/

(You are free to use any other independent research you want to do.)

Your assignment is this:  Choose two countries, one from the World Bank’s list of “low income” countries, the other from the World Bank’s list of “middle income” countries. Then please answer the following three questions:

1.                  Based on your understanding of sources of growth and development, what are the key characteristics of these two countries that you think explain why they find themselves at their current rankings/income levels?  Please refer to key terms from the lectures thus far, especially the three main growth theories we have explored (Solow, Endogenous, Credit).  You don’t have to agree completely with any of them but you must show your understanding and application of at least one of them to each country’s context. Don’t forget to use data as well.

2.                  If you were economic minister of the poorer of these two countries, what kinds of policies might you suggest to help bring your country up to the ranking of the richer country? Again relate this to one of the growth theories and use data as well to back up your policy claims.

(Note: Homework will be graded on clarity of thought, knowledge of the growth theory used, including proper application, and use of data as well to justify your answers).