Department of Economics Spring 2004University of California Economics 113Berkeley Professor OlneyECONOMICS 113 — FINAL EXAMINATION QuestionsPART I. QUESTIONS FROM LAST THIRD OF COURSE (60 points possible; 60 minutes)A. Paired Identification (12 points total; 12 minutes total)Choose one of the following two pairs of items. Define or identify each term in the pair (8 points). Then,briefly discuss the connection between the two terms (4 points). Your answer is worth 12 points total. Youshould spend no more than 12 minutes on the question.(1) (12 points; 12 minutes) (a) Changes in women’s labor force participation rates, 1970-2000(b) Changes in marriage patterns, 1970-2000(2) (12 points, 12 minutes)(a) Productivity growth slowdown, 1973-1995(b) Rise of the service sector, post-World War II periodB. Using Economic Models and Concepts to Explain Historical Events (36 points total; 36minutes total) Answer three of the following four questions. Allocate no more than 12 minutes to each question.(1) (12 points; 12 minutes) Use the concept of comparative advantage to discuss the pattern and causes ofoutsourcing in recent years.(2) (12 points; 12 mintes) Use the productionfunctionand() ()()YAK K LITvNvvKITKNL=× × ×the table at right to explain the post-1995 risein the growth rate of labor productivity.(3) (12 points; 12 mintes) Use the Phillips Curveto discuss the Reagan Administration’seconomic policies and their effectiveness insimultaneously lowering unemployment andinflation.(4) (12 points; 12 mintes) Use Thurow’s idea of “brainpower industries” and the concept of competition todiscuss the impact of the current pattern of educational attainment by gender and by race/ethnicity onthe distribution of income by gender and by race/ethnicity.Explaining the Revival in U.S. Productivity GrowthShare of Change in Productivity Growth Rate Due To . . . . . .Capital Deepening . . .TFPIT-Related Other IT-Related Other43 % -15 % 26 % 42 %Source: Stiroh, “Information Technology & the U.S. ProductivityRevival,” Business Economics (January 2002): Table 1, last column.C. Graph and Table Interpretation (12 points total; 12 minutes total) Answer both questions.(1) (6 points; 6 minutes) What is the graph saying? What is an implication of the graph for the future ofSocial Security?(2) (6 points; 6 minutes) What is the figure saying? What is the connection between the figure and theSavings and Loan Crisis?PART II. QUESTIONS FROM ENTIRE COURSE (50 points possible; 50 minutes total)A. Paired Identification (20 points total; 20 minutes total)Choose two of the following three pairs of items. Very briefly – one sentence – define or identify each term inthe pair (2 points). Then, discuss the connection between the two terms (8 points). Note the pointallocation! Each answer is worth 10 points. You should spend no more than 10 minutes on each question.(1) (10 points; 10 minutes) (a) Pattern of fertility in the antebellum years(b) Pattern of fertility after 1964(Connection: focus on role of labor market opportunities)(2) (10 points; 10 minutes) (a) 19th century immigrants’ wages relative to wages of native-born, according to Hannon(b) 20th century Mexican immigrants’ wages relative to wages of native-born, according to Feliciano(Connection: focus on explanations)(3) (10 points; 10 minutes) (a) Insider lending in antebellum New England(b) Development of a national currency in postbellum United States(Connection: focus on role of asymmetric information)B. Using Economic Models and Concepts to Explain Historical Events (30 points total; 30 minutestotal) Answer two of the following three questions. Allocate no more than 15 minutes to eachquestion.(1) (15 points; 15 minutes) Use Goldin and Katz’sresults shown at the right to speculate as to theexplanation of the 2002 pattern of high schoolgraduation rates by state. Give specific examples ofat least two states that currently have relatively highand at least two states that currently have relativelylow graduation rates.Determinants of High SchoolGraduation Rates, 1928(standard errors in parentheses)1928log per capita wealth 0.852(0.37)% population $65 yrs old 1.423(0.79)% labor force inmanufacturing-0.144(0.097)% population Catholic -0.377(0.09)Auto registrations per capita 0.0568(0.02)South (0/1 dummy variable) -0.0935(0.03)New England (0/1 dummyvariable)0.100(0.03)Constant -0.468(0.27)R20.874n48Source: Goldin & Katz, “Human Capital andSocial Capital,” Table 1.(2) (15 points; 15 minutes) Use Rowthorn &Ramaswamy’s results shown at the right tospeculate as to the cause of the United States’late 19th and early 20th century“deagriculturalization.”Internal vs External Causes ofDeindustrialization(t-stats in parentheses)Indep.VariablesManufacturing/ Real GDPManufacturing/EmploymentLog Y 6.55(7.02)11.65(10.92)(Log Y)2-0.363(7.09)-0.643(11.01)Log RelativePrice-0.611(9.82)Exports -Imports0.020(6.39)0.015(4.16)Imports fromLDCs-0.003(0.14)-0.041(1.57)Investment /GDP0.018(6.16)0.014(4.26)R20.84 0.91Turning Point $8,276 $8,673Source: Rowthorn & Ramaswamy (1999), Table 3 (8AVG)and Table 4 (9AVG).(3) (15 points; 15 minutes) Illustrate Professor Olney’s parting message – PROFIT MAXIMIZATION IS NOT A“VALUE.” – with any historical example that was discussed in class. Explain the connection between theexample you chose and her statement. Then, provide a contemporary example – one that has been inthe news in the last few years or one that you make up but which is plausible – that illustrates her partingmessage.Sources of Growth in Real GDP Share attributable to . . . Labor capital land productivity1840-1860 49 26 10 151870-1930 43 27 4 271940-1990 41 14 0 45Source: Walton & Rockoff, Table 1-10.Part III. Essay Question from Whole Course (50 points; 50 minutes)The Essay: Growth in the 21st Century: Lessons from HistoryWe have told one story in Economics 113: the story of U.S.economic growth. It has been a complex story. We havelooked at both types of growth: extensive growth (increases inthe quantities of inputs) and intensive growth (increases inproductivity). The table at the right indicates the relative rolesof extensive and intensive growth in U.S. economic history. The complexity of the story comes in part from our recognitionthat the costs of economic growth are not borne evenly. Thereare inequities in the distributions of gains and losses fromeconomic growth. Some inequities are based on race or gender–