ECON 355
First Exam
Feb. 11, 1991
Instructor: Prof. D. DeVoretz
Dept. of Economics
Simon Fraser University
Instructions: Do any two questions. No
aids and place all materials and coats in back or front of room. You have one
hour. Raise your hand for questions or to leave room. Remember that academic
dishonesty will be dealt with severely.
- Briefly explain the
demographic transition theory and place your country in this model with
all your available data. Next, explain what forces operate to move a country
through all four stages.
- Compare and contrast the
labor surplus model to the Neo-Classical growth model. Which model
explains the performance of your country to date? Support your selection
with facts. Finally explain (with facts) why the model you did not choose
does not work for your country.
- Pick at least three major
economic and two no-economic indicators of development that apply to your
country. Given this information assess the level of development of your
chosen country vis a vis other countries or stages of development i.e.
low. low-middle, upper-middle etc. now criticize the usefulness of the
measures chosen and argue why a composite index should be used.
Outline
for Answers: points below each section of answer. It must be a complete answer
for marks. Give every one 1 point for their name.
- Demography transition theory
- A diagram with axis labels
with GDP per head at the bottom and CBR and CDR on the y-axis. As
follows: (10 pts.)
- Identify second stage: i.e.
CBR high at 35 and CDR at 20 or less. This increase family size variable;
Average family size to rise to 8 with 6 or more dependents. Now refer to
both consumption data and savings data on family size and dependents. A
complete answer must provide information from the lecture notes on
rural-urban family size effect on food and non-food consumption. For
savings the dependent variable must by S/Y and both dependent variables
for rural and urban areas must be present with the elasticities. In
addition, an analysis of a 1% change in family size must be made
especially for savings to note impact on APS (13 pts.)
- Models to choose from:
- Capital one sector Solow
type model: no one should pick this one. It should be used in the last
part of the question. It only contains one sector and relies so much on
capital accumulation with no understanding of relative prices for labor
or final goods namely agriculture or industrial goods.
Must have diagram: this diagram must explain production
function, savings rate and role of population. (8 pts.)
- Two sector surplus model.
Must have all three diagrams from their book and explain movement of
productivity curves; total, marginal and average in agricultural sector
as labor is transferred to industrial sector. An analysis of the
subsidence wage, average and marginal product relationship must appear in
the intermediate diagram. Finally, the subsistence wage and size of
surplus must be noted an analyzed in industrial sector. Shifts in the
industrial demand for labor must also appear. Criticisms of the model must
also appear. 1. Small size of the surplus due to small savings and fact
that skilled leave rural area and reduce and not hold app constant in
agriculture sector. This of course raises subsistence wage in industrial
sector and further reduces surplus for re-investment (25 pts.) 2.
Migration in 19th century Europe reduced population pressure
on the rural sector and raised industrial output just like the two-sector
model above. They should use the two-sector model to explain how this
worked. Also, if there was surplus labor then millions could travel to
land rich North and South American or Australia. This meant that
unskilled people left Europe and not skilled and where given
complementary capital i.e. land in the west and both stayers in Europe
and movers gained with no externalities. (13 pts.)
Now re-do this same argument for their country and show how
too many people are moving to the cities relative to job opportunities. They
must have fact on rate of urbanization, urban unemployment. They should also have
facts on types of movers outside of their country especially to Canada if that
is relevant to talk about the brain or skill drain. (10 pts.)
- Must name their country and
produce a table with GDP/head savings rate, growth rate in GDP or GDP/head
and income distribution. Non-economic indicator could be demographic, i.e.
CBR, CDR, population growth, calories/person, etc. Now once they have
defined their terms they should have reference point for each indicator or
stage of development such as upper middle or lower middle etc. (13 pts.)
Criticism should recognize that all money values are biased
downwards due to subsistence economy and requirement to translate into a common
i.e. dollar currency. Many non-economic measure do not illustrate distribution
problems i.e. calories per person of physicians per person etc. Also, some
non-economic indicators such as nurses or TVs per person are a consequence of
development and not an indicator of future potential as savings would be. (10
pts.)