Problem Set 2 ECON 450  Development Economic

Question
Problem Set 2
ECON 450  Development Economics
Due Date: 10/01/15

1 During the past decade, India has invested about 22% of its GDP while Chinas investment rate
has been double that of Indias. Indias annual growth rate has been about 6% while that of China
has been about 9%. Based on the Harrod-Domar model, what conclusions can you draw?

2 What are the main dierences between the linear stages and international dependency models
of development?

3 Explain the meaning of the "Lewis turning point" in the Lewis Two-Sector Structural Change
Model.

4 Explain what is meant by the term coordination failure and provide an example.
5 Explain in what sense coordination failure can lead to multiple equilibria in a given economy.
6 How can the O-ring theory help explain the existence of a low-level equilibrium that an economy
may
nd itself in?

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

8 One of the characteristics of some developing economies is the relatively low level of trust of
people outside one's extended family. How might the models explored in this chapter shed light on
this problem?