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Berkeley A,RESEC C253 - Review Questions for Final Examination

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PP 253/ARE 253, Fall 2008 Alain de Janvry and Elisabeth SadouletReview Questions for Final ExaminationFinal examination: Friday December 12, 9-12am1. Policy issues in development1. Explain the concepts of market failure, government failure, and community failure, and give examples. Why are they important concepts for public policy?2. Give seven categories of indicators that can be used to characterize “development”.3. How did the UNDP define a “Human Development Index”? What are the advantages and limitations of this indicator?4. Define the concept of z-scores for health achievements. How are they used as development indicators?2. Poverty assessment1. How to define an extreme and a normal poverty line? 2. Give definitions and interpretations of the poverty index Pa and its specialization to P0, P1, and P2. What do they each mean? What would it mean if P0 falls while P1 rises between two periods?3. How to draw a poverty profile? How do we know that comparison of two poverty profiles measured in two periods is robust to the choice of a poverty line?4. How to calculate the aggregate Pa from the Pa for subgroups in the population?5. How would you define chronic and transitory poverty? Do the policy instruments to reduce each type of poverty differ?6. Does growth have to be “pro-poor” to help reduce poverty? Give an example where poverty has fallen even though growth was not “pro-poor”. 7. In your Mexico poverty assessment in Assignment #3, how did you analyze the changes in poverty and inequality between 1998 and 2004? What were your main findings?8. How do Ravallion and Chen explain the spectacular decline in poverty in China?3. Inequality and vulnerability assessment1. How to draw an inequality profile (Lorenz curve)? 2. Define two indicators of inequality: Gini coefficient and Kuznets ratios.3. What is the Kuznets inverted-U curve and what does it imply for policy toward inequality if it holds?4. Many have argued that lowering inequality will increase growth. What arguments have they used in support of this proposition?5. Define the concept of equity. How does it differ from inequality? Does increasing equity call on different policies than increasing equality?6. Define the concept of vulnerability. How can it be measured? 4. Human development and social assistance programs1. How do social programs to reduce chronic poverty and to reduce vulnerability eventually differ?2. How do social programs to protect consumption from exposure to shocks eventually differ from programs directed at the protection of assets?3. Can programs that reduce vulnerability be good for growth? 4. Why can short run shocks eventually create irreversibilities on child education and health, with long run consequences on future poverty. What could be done to avoid these costs? Give some examples. 5. Targeting of social programs1. In targeting, what are errors of exclusion (Type I) and inclusion (Type II)? Why should we be concerned with each of these errors?2. If we do not know people’s income levels, and want to target program interventions on the poor, what options do we have?3. Explain how a workfare program can be designed to achieve self-targeting.4. Is it true that self-targeting always has a cost on beneficiaries? Why would this be? Give several examples.5. Since the poor often know each others, while the social welfare agency does not know them, how could this be used to target program interventions?6. Could we use the concept of joint liability (as in group lending) to devise a community targeting scheme?7. Based on your Policy Brief #3, how does the WDR 2004 Making Services Work for Poor People suggest that accountability of providers to stakeholders could be achieved?6. Environment and development policy1. When there are negative externalities generated by a private activity, why is there a logic for government intervention?2. In this case, why does the government prefer using a tax on the polluting industry, while industry prefers regulation by a production quota?3. What are the advantages and difficulties of putting into place a system of tradable permits, as under the Kyoto agreement? 4. What is the economic rationale to pay for environmental services, and how to determine what price to pay?5. Coase tells us that government intervention is not always needed to internalize externalities. What are the conditions under which private bargains may achieve the same results as government regulation?1 1/14/197. International migration and development1. How can the extent of migration from Mexico be evidenced from Mexican population censuses? What conclusions are derived from that study?2. How can the extent of migration from Mexico to the US be evidenced from Mexican and US population censuses? What conclusions are derived from that study? What are the weaknesses of the approach?3. What does theory tells about the impact of migration on wages? What is the empirical evidence?4. What is the Todaro hypothesis in migration? How does it explain continued migration in spite of urban unemployment? How does this relate to market failure? Will creating more jobs in the modern sector (e.g, in government employment) help reduce migration? What are the policy implications of the model to reduce rural-urban migration?5. How does the “new economics of migration” analyze the decision to migrate? According to this approach, what are the main reasons for a household to send a migrant? Clearly identify the role of market failures. How do policy implications to reduce migration differ from those of the Todaro model?6. Why are migration networks important in reinforcing migration?7. What are the potential gains and losses from migration at the community level? What are the potential gains and losses from international migration for the emitting country? 8. Development strategies, trade, and the real exchange rate1. Contrast the industrialization strategies following ISI, EOI, and OEI. Explain the policy interventions in each. What are the advantages of EOI over ISI? Why is ISI initially easier to implement than EOI? What is needed to make OEI succeed?2. What are the reasons for protecting industry (ISI) as a strategy to industrialize? What are the conditions for success of an ISI strategy and why did it often fail?3. Give the definitions of the nominal exchange rate and of the real exchange rate. What does appreciation of the real exchange rate


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