Question 1

In contrast to the earlier neoclassical models of economic growth, in endogenous growth models, there is more emphasis on
A) human capital.
B) externalities.
C) increasing returns to scale.
D) all of the above.

Accepted Answer

Endogenous growth models emphasize the importance of human capital, externalities, and increasing returns to scale for economic growth, unlike earlier neoclassical models which focused mainly on physical capital and technology. Therefore, all of the above choices are correct.

Question 2

Explain what is meant by the term coordination failure and provide an example.

Accepted Answer

This is a state of affairs in which agents are unable to coordinate their efforts, and hence end up in an equilibrium that leaves them worse off than they would be if they were able to coordinate.There are several examples offered in the text, or the students may come up with their own.

Question 3

Is it possible for a super-entrepreneur to solve all of the coordination failure problems within
a developing economy? Discuss.

Accepted Answer

It is highly unlikely for a super-entrepreneur to solve all coordination failure problems within a developing economy. While a super-entrepreneur may possess exceptional skills and resources, the challenges within a developing economy are complex and multifaceted.

Coordination failure problems within a developing economy stem from a variety of factors such as inadequate infrastructure, lack of access to capital, weak institutional frameworks, and limited human capital. These issues are deeply entrenched and cannot be easily resolved by the actions of a single individual, even one with exceptional entrepreneurial abilities.

Furthermore, addressing coordination failure problems requires collaboration and cooperation among various stakeholders including government agencies, businesses, non-governmental organizations, and local communities. A super-entrepreneur, no matter how skilled, cannot single-handedly overcome these challenges without the collective efforts of these diverse actors.

Additionally, the scale and scope of coordination failure problems within a developing economy are often beyond the capacity of any individual, no matter how successful or influential. These problems require systemic and structural changes that go beyond the capabilities of even the most skilled entrepreneur.

While super-entrepreneurs can certainly make significant contributions to addressing coordination failure problems within developing economies, it is unrealistic to expect them to solve these challenges entirely on their own. Sustainable and lasting solutions require a collaborative and comprehensive approach that involves a wide range of actors working together towards common goals.

Question 4

In endogenous growth models, it is assumed that
A) there are external economies from public or private investments.
B) there are diminishing marginal returns to capital.
C) growth is explained by forces outside the model.
D) the capital-labor ratio is constant.

Accepted Answer

Endogenous growth models assume that growth is driven by factors within the model, such as human capital and knowledge spillovers, rather than external factors. A key assumption in these models is the presence of external economies from public or private investments, which can lead to increasing returns to scale and sustained long-term growth. The other options listed are not consistent with the assumptions of endogenous growth models.

Question 5

Suppose that a developing country devotes extensive resources towards improving the education and skill level of the labor force.How might this help the country avoid a coordination failure? Is this strategy likely to be successful? Why or why not?

Accepted Answer

The answer of Suppose that a developing country devotes extensive...

Question 6

The Solow residual helps explain growth that derives from
A) increasing the size of the labor force.
B) increasing the size of the capital stock.
C) increasing the capital-labor ratio.
D) anything except increases in the size of the labor force or the capital stock.

Accepted Answer

The Solow residual represents the portion of economic growth that cannot be attributed to the increase in the labor force or the capital stock. Therefore, it explains growth that comes from any other sources such as technological progress, advances in management practices, education and training, and improvements in infrastructure.

Question 7

What is meant by the term technological spillover?

Accepted Answer

The answer of What is meant by the term technological...

Question 8

Explain how relatively high wages in the modern sector, as compared to the traditional sector, can lead to a coordination failure.

Accepted Answer

The answer of Explain how relatively high wages in the...

Question 9

Explain the basic idea behind the Big Push model?

Accepted Answer

The answer of Explain the basic idea behind the Big...

Question 10

Is a coordination failure a type of market failure? Explain.

Accepted Answer

The answer of Is a coordination failure a type of...

Question 11

According to the HRV growth diagnostic framework why is there no "one size fits all" development policy?

Accepted Answer

The answer of According to the HRV growth diagnostic framework...

Question 12

Explain how the S-curve reflects the typical nature of complementarities?

Accepted Answer

The answer of Explain how the S-curve reflects the typical...

Question 13

The big-push theory argues that coordination failures may arise because of
A) pecuniary externalities.
B) technological externalities.
C) lack of human capital.
D) all of the above.

Accepted Answer

The answer of The big-push theory argues that coordination failures...

Question 14

Explain how the government can help the economy avoid a coordination failure.

Accepted Answer

The answer of Explain how the government can help the...

Question 15

What three factors distinguish models of endogenous growth from their neoclassical counterparts?

Accepted Answer

The answer of What three factors distinguish models of endogenous...

Question 16

Show in a diagram an S-curve and a 45-degree line.Are all three points of intersection stable equilibrium points? Explain.

Accepted Answer

The answer of Show in a diagram an S-curve and...

Question 17

Based on the HRV growth diagnostic framework and the case study in Box 4.2, what are the binding constraints faced by Brazil, El Salvador and the Dominican Republic and how can these constraints be overcome?

Accepted Answer

The answer of Based on the HRV growth diagnostic framework...

Question 18

How can the O-ring theory help explain the existence of a low-level equilibrium that an economy may find itself in?

Accepted Answer

The answer of How can the O-ring theory help explain...

Question 19

The new growth theory attempts to explain
A) the rate of population growth within a country.
B) the rate of capital accumulation within a country.
C) the factors that determine the size of the Solow residual.
D) why there are diminishing returns to capital.

Accepted Answer

The new growth theory focuses on explaining the factors that determine the size of the Solow residual, which represents productivity improvements not accounted for by labor or capital increases, emphasizing the role of technology, innovation, and knowledge in driving economic growth.

Question 20

The S-curve is used to illustrate
A) the typical path taken by the current account over time.
B) economic fluctuations in the economy.
C) the typical growth path of a developing economy.
D) the existence of multiple equilibria.

Accepted Answer

The answer of The S-curve is used to illustrate
A) the...

Quiz 4: Contemporary Models of Development and Underdevelopment

In contrast to the earlier neoclassical models of economic growth, in endogenous growth models, there is more emphasis on

Explain what is meant by the term coordination failure and provide an example.

Is it possible for a super-entrepreneur to solve all of the coordination failure problems within a developing economy? Discuss.

In endogenous growth models, it is assumed that