National University of Singapore

EC3371 Development Economics I

Mock Midterm Exam
(Semester II: AY2011-2012)
February, 2012
Time Allowed: 1 hour and 20 minutes
(1) This examination paper comprises three (3) printed pages, including this page.
(2) This examination comprises of three (3) questions all of them compulsory.
(3) This is a OPEN BOOK exam.
(4) The total marks for this exam is 84 marks.
(5) Write your answers in the booklets provided only.
(6) Limit your answers to a maximum of two pages per question.
(7) Write your matriculation number on the answer booklet provided. Do NOT write your
name. If you use more than one answer booklet, write your matriculation number on all
booklets used, and number them.
(8) Write down the order in which the questions were attempted on the front page of your
first answer booklet.
(9) You are not allowed to take away this question booklet from the examination hall.

Question 1

[36 points]

In the lectures we talked about the impact of population growth on economic growth.
(a) In the framework of the Solow model, describe how does an increase in population
growth affect affect economic growth in income per capita in the short run? How does it
affect economic growth in the long run? In the long run, everything else being equal, will
India (with a higher population growth) grow faster or slower than China (with a smaller
population growth)?
[8 points]
(b) What other factors can explicitly explain economic growth in income per capita the
short and long run in this model?
[8 points]
(c) Given these alternative explanations what would you suggest countries in Africa do to
increase economic growth in income per capita in the short run? And in the long run?
[6 points]
(d) According to the readings in this module, what are the main differences in the sources
of economic growth between India and China?
[6 points]
(e) What did the Solow model add to the Harrod-Domar model in explaining economic
growth? What is the force behind economic growth in the Harrod-Domar model? How
does your answer to part (c) change?
[8 points]

Question 2

[20 points]

In the lectures we talked about empirical work in economic growth.

(a) According to the Solow Model, what determines income per capital?

[6 points]

(b) If you where to take the model to the data, what is the main assumption you need so
that estimates from a OLS regression are not biased?
[6 points]
(c) Are these assumptions true? From the readings, what else impacts income per capita?
[8 points]
2

Question 3

[28 points]

In lecture we talked about the importance of geography for economic growth.

(a) Please explain at least two reasons why geography can negatively affect economic
growth
[10 points]
(b) Given these two reasons, what should governments do to increase economic growth?
[10 points]
(c) An alternative explanation is that institutions matter for economic growth. What should
governments do if institutions are more important for economic growth than geography?
Give examples of at least two successful institutional changes (in two different countries)
that lead to higher economic growth.
[8 points]

END OF QUESTION PAPER