APEC 460 Spring 2006 Prof Kilkenny

Study Questions -- To be covered on Exam I

Note: REQUIRED on EXAMS (and useful in any context, before attempting to answer any question) DEFINE the italicized terms.

Chapters 1-2-12:

Study Q #1: Be able to predict which countries will specialize in the production of what goods & services; and what each country will export and import, from knowledge only of i. relative factor endowments, ii. relative factor intensities OR iii. the age of the products.

Study Q #2: Is globalization bad for the poor? (Be sure you can define globalization.)

B. The Economist (May 10th 2001) “Not by their bootstraps alone”

C. Bhagwati, Jagdish, in The Economist (Jun 20th 2002 ) “The poor's best hope”

D. The Economist (May 27th 2004) “Nothing to sell”

E. The Economist (Nov 3rd 2005) “Tired of globalization”

Study Q #3: In what areas of the world is hunger most acute? A: Food insecurity

Chapter 5: Be sure you can do all the problems in “Study Question Set #2”, plus:

4. a. Provide the formulas for these six measures of poverty and/or inequality;

b. define each variable in each formula,

c. identify the data one would need to calculate each measure:

i. GNI/cap

ii. Gini coefficient

iii. coefficient of variation (“CV”)

iv. headcount index

v. total poverty gap and the normalized poverty gap

vi. Foster-Greer-Thorbecke measure

d. What is the relevance of the desirable characteristics (below) of these measures? Briefly explain each characteristic.

anonymity principle

scale independence

population independence

transfer independence

monotonicity

distributional sensitivity

e. Which of the above measures (c. i-vi) are better with respect to the characteristics in (d)?

f. Identify at least two ways that we can measure each poverty and inequality using only our class’ data. Then, using our class’ data and the best of each, measure

1. the level of absolute poverty in each country. Which two countries have the most absolute poverty? Which two have the least?

2. the degree of income inequality in each country. Which two countries are the most unequal? The least?

5. According to Todaro and Smith, a. Why might a redistribution of income through progressive taxation, for example, potentially undermine growth?

b. What are the five reasons why anti-poverty policies need not lead to a slower rate of growth?

6. According to Todaro and Smith, a. what’s so bad about high inequality within a country?

b. What are at least three reasons why relative inequality among the non-poor within a country is also a concern?

7. How do “the 3 foundation stones” (Prof. Kilkenny) explain why some places/segments of society are rich and others are poor? Discuss the relevance of the ‘3 Fndtn Stones’ to Todaro & Smith’s four suggested policy options to mitigate inequality and poverty (outline each option, then discuss).

Chapter 6:

8. What are the relationships between the GNI/capita, the birthrate, the population pyramid and the dependency burden within a country? Discuss the implications for income security in old-age in poor countries.

9. Re-draw the figure in Ch 6 illustrating “the Microeconomic Household Theory of Fertility,” to reflect the assumption that children are necessities; and use your own diagram to investigate how fertility rates in poor countries would compare, under that assumption, with fertility rates rich countries. Do the statements made by Todaro & Smith in Chapter 6 make more sense, or less sense, under the assumption that children are necessities?

Chapter 9:

10. Draw your own diagram illustrating the Becker “Household Theory of the Allocation of Time” such that at the prevailing wages for market work, no time would be allocated to market work. Then, use your diagram to:

a. investigate Todaro & Smith’s explanation of the effects of cheap food policies in poor countries,

b. predict the effect of increases in wages paid for market work on the proportion of labor devoted to subsistence farming, and

c. the effect of improved productivity on small household plots on the proportion of labor devoted to subsistence farming in poor countries.