Deck 2: Trade and Growth: the Empirical Evidence

Question 1

Statistical studies that have looked at the sources of economic growth have found:

A) evidence of a positive relationship between international trade and economic growth.
B) evidence of a negative relationship between international trade and economic growth.
C) no evidence of a significant relationship between international trade and economic growth.
D) widely varying evidence that permits no conclusions whatsoever about the relationship between international trade and economic growth.

Answer 1

A

Question 2

After classifying countries as either strongly outward-oriented, moderately outward-oriented, moderately inward-oriented, or strongly inward-oriented, an influential 1987 World Bank study found that the average growth rates of the:

A) moderately outward-oriented economies were by far the highest of the four groups.
B) strongly inward-oriented economies were by far the highest of the four groups.
C) moderately inward-oriented economies were by far the highest of the four groups.
D) strongly outward-oriented economies were by far the highest of the four groups.

Answer 2

D

Question 3

In their popular study, Jeffrey Sachs and Andrew Warner classified countries as being either open or closed to trade, and they found:

A) a strong association between openness and growth within the group of developing countries.
B) a strong association between openness and growth within the group of developed countries.
C) no association between openness and growth within the group of developing economies.
D) a and b only.
E) None of the above.

Answer 3

D

Question 4

While the empirical studies clearly tell us that economic growth tends to be higher when a country opens its economy to international trade and international investment, these same studies:

A) have been able to help us determine exactly why this relationship occurs so persistently.
B) have not been able to help us determine why this relationship holds so persistently.
C) have also been able to prove, once and for all, that trade causes economic growth.
D) have clearly contradicted everything that trade theory and growth theory predict.

Question 5

The sources of growth equation decomposes the rate of growth of real output into:

A) the rate of growth of technology, capital's share of income times the rate of growth of the capital stock, and labor's share of national income times the growth of labor.
B) the sum of (1) the growth rates of the reproducible factors plus (2) the rate of growth of total factor productivity.
C) the product of the average growth rate of the productive factors and the rate of growth of total factor productivity.
D) ratio of the average growth rate of the productive factors and the rate of growth of total factor productivity.

Question 6

All of the following types of empirical techniques have found asignificantly positive relationship between trade and growth except:

A) cross-section analysis.
B) time-series analysis.
C) simultaneous equation model analysis.
D) causality analysis.

Question 7

As of date, the most significant challenge to the positive empirical results linking trade and growth is the issue brought up by Rodriguez and Rodrik, namely that:

A) there is significant correlation between the variables used in past empirical models.
B) statistical non-stationarity issues have cast a doubt on the validity of past empirical findings.
C) international trade variables capture the influences of other omitted variables, such as institutions.
D) past studies only used fast-growing economies that guaranteed a significant trade-growth relationship.

Question 8

Empirical studies of the relationship between foreign trade and economic growth most often specified the linear econometric models based on:

A) the Cobb-Douglass production function.
B) the Penn World function.
C) the Kremer production function.
D) the Granger causality function.

Question 9

According to cross-section, time-series, and per-capita income regression summaries, a one-percentage increase in exports is significantly associated with roughly a _ increase in economic growth:

A) one-fifth of one percent.
B) one-half of one percent.
C) one percent.
D) two percent.

Question 10

The Feder's (1982) model and findings suggest all of the following reasons for why trade has a positive impact on growth except:

A) the export sector of the economy is more productive than the non-export sector.
B) trade generates externalities that increase growth in other parts of the economy.
C) the import sector provides a significant source of technology transfers to the rest of the economy.

Question 11

Which of the following is not a way to deal with simultaneity bias in economic models?

A) apply causality modeling.
B) apply non-stationarity modeling.
C) apply simultaneous equations modeling.
D) apply instrumental variables.

Question 12

The average coefficient estimates for qualitative studies find a ___ relationship between openness and economic growth.

A) positive and insignificant.
B) positive and significant.
C) negative and insignificant.
D) negative and significant.

Question 13

In distinguishing exactly how trade impacts growth, Wacziag (2001) employs a simultaneous equations model and finds three significant channels through which trade impact growth. Which of the following is not one of those channels?

A) trade reduces black market premiums.
B) trade causes investment to incease.
C) trade increases foreign direct investment (FDI).
D) trade improves macroeconomic policy quality.

Question 14

Augmenting the regression equation derived from the production function, g_Y = a
+ b₁ g_K + b₂ g_L, by adding other possible explanatory variables in order to create the regression equation g_Y = a + b₁ g_K + b₂ g_L + b₃Z₁ + ... + b_n+2Z_n, the coefficients of the Z variables tell us the effect of the Z variables on:

A) the growth of the factors of production.
B) the levels of the Z variables.
C) the level of technology.
D) the rate of total factor productivity growth.

Question 15

Statistical analysis:

A) can determine the direction of causality between variables very well.
B) can easily distinguish between the effects of explanatory variables that vary in similar fashion.
C) may be able to reliably estimate the effects of a large number of variables on another variable if there are enough degrees of freedom.
D) has been of no help in distinguishing the sources of growth.

Question 16

Levine and Renelt run repeated regressions to examine the effect on economic growth of a large number of potential explanatory variables, and they find:

A) that there are many variables that robustly explain economic growth.
B) a strong relationship between international trade and investment.
C) a strong relationship between climate and economic growth.
D) absolutely no relationship between any of the explanatory variables and economic growth.

Question 17

In using Leamer's sensitivity analysis, Levine and Renelt are trying to deal with what weakness(es) in statistical analysis?

A) Omitted variables bias and multicollinearity.
B) Excessive degrees of freedom.
C) Insignificant coefficients.
D) Poor data.

Question 18

One of the most robust explanatory variables in growth regressions is:

A) education.
B) population growth.
C) crime.
D) international trade.

Question 19

In a statistical study where he tests 62 variables that potentially affect the rate of economic growth, Xavier Sala-i-Martin finds that:

A) the fraction of the population that is Buddhist, Catholic, Confucian, Muslim, and Protestant is significantly correlated with economic growth.
B) countries with predominantly Buddhist, Confucian, and Muslim populations grow faster, ceteris paribus, than countries whose people are predominantly Catholic or Protestant.
C) the number of revolutions and coups, war, the rule of law, lack of political rights, and an index of civil liberties matter for economic growth.
D) international trade and finance also seem to matter.
E) All of the above matter for economic growth.

Question 20

Sala-i-Martin's famous (1997) robust study entitled I Just Ran Two Million Regressions indicated that:

A) The fraction of the population that is Buddhist, Catholic, Confucian, Muslim, and Protestant is significantly correlated with economic growth.
B) The number of revolution and coups, war, the rule of law, and political rights matter for economic growth.
C) International trade and openness matter for economic growth.
D) Regional variables like absolute latitude, sub-Saharan Africa, and Latin America matter for economic growth.
E) All of the above are correct.

Question 21

Hall and Jones estimates of the levels of technology across countries show that the levels of technology:

A) differ across countries, just as the varying estimates of total factor productivity growth suggest.
B) are quite similar across countries.
C) vary directly with the amount of capital per unit of output.
D) do not matter much for determining output per worker.

Question 22

From a broad economic perspective, technology is best described as:

A) the economy's ability to convert productive resources into welfare-enhancing final goods and services.
B) the design and quality of the capital equipment.
C) the efficiency with which an economy allocates its resources.
D) the level of scientific knowledge.

Question 23

Regression analysis is:

A) a statistical method that seeks to find the relationship between observed variables.
B) a statistical method that calculates the coefficients of explanatory or independent variables that influence the dependent variable.
C) a formal statistical procedure that seeks to fit a line to a scatter of points in two or more dimensions.
D) All of the above.
E) None of the above.

Question 24

The formal statistical procedure of regression analysis has several advantages over the simple visual observation method, including:

A) providing a specific measure of a relationship between variables.
B) providing a measure for judging how confident we can be that the relationship
Indeed holds in the real world.
C) enabling us to find the relationships between more than just two variables.
D) All of the above.
E) None of the above.

Question 25

Regression analysis is useful in pointing out relationships among variables, but it:

A) cannot handle more than two variables at a time.
B) requires numerical data.
C) is of limited use in examining potential economic relationships.
D) is rarely used in economics.

Question 26

The following is an example of a linear regression equation:

A) g_y = a + b₁X₁ + b₂X₂ + b₃X₃ + ... + b_nX_n
B) g_y = f(X₁, X₂, X₃)
C) Y = Ak^α L^1-α
D) g_y = g_Y - g_L

Question 27

The estimated value of a coefficient in a linear regression equation is statistically significant if it is:

A) positive.
B) at least twice as large as the standard error.
C) greater than two.
D) greater than the value of the constant coefficient.

Question 28

According to Barro's simple linear regression relating data on the levels of 1973 real per capita GDP and post-1973 rates of growth,

A) per capita real output in the world has converged since 1973.
B) per capita real output in the world has diverged since 1973.
C) there is no statistically significant relationship between initial income and subsequent growth.
D) our impression from eye-balling the data was completely wrong.

Question 29

The Cobb-Douglas production function Y = AK^αL^1-α can be converted into the regression equation:

A) Y = AK^αL^1-α
B) g_Y = a · b₁ g_K · b₂ g_L
C) Y = A + b₁ K + b₂ L
D) g_Y = a + b₁ g_K + b₂ g_L