Questions and answers of relevance for the exam June 15, 2012
Course: Economic Growth

Question set 1:

a) LN 14, p. 12, below eq. (12):              should it not be            = - alpha_3?

b) Are we expected to remember the general formulas for solutions to linear differential equations, cf. Appendix A to Exercise Problems, Part 1, p. 22?

c) Are we expected to be able to do the math behind, e.g., the Mincer equation or the final form of the Barro regression equation?

Answer:

a) Yes, sorry.

b) No, if you need one of the general formulas, it will be given in a hint. But you should know the formulas for the simple special cases. In Part 1 of Exercise Problems, Appendix A, p. 22, the "simple special cases" are the cases where b = 0 and b(t) = 0.

c) No, not in detail. It is enough if you are familiar with and able to apply the basic concepts, methods and models as analytical tools at a level corresponding to solving the exercise problems considered in class. Exam problems are formulated in the same style as the exercise problems.

Question set 2:

a) Should g not be deleted in Acemoglu p. 52, Fig. 2.9?

b) At p. 382 in the last 14 lines of Section 10.8 Acemoglu expresses some reservations concerning the Nelson-Phelps hypothesis. What is his argument really?

c) See LN 5, p. 4, the equation two lines above eq. (4). Where does this equation come from?

d) See LN 5, p. 6, Warning 1, last three lines. Why does Harrod neutrality together with rejection of the Cobb-Douglas specification imply rejection of Hicks neutrality?

e) See LN 11, § 5.1. I do not understand that in what sense static comparative advantage may "lead to a conflict" (p. 26) with economic growth.

f) See LN 13, p. 5, the equation between eq. (12) and eq. (13). Why is at*L = V*Nt?

Answer:

a) Given the title of the figure and given Acemoglu's identification of the "basic Solow model" with the Solow model without technical progress, the answer is: yes.

b) The Nelson-Phelps hypothesis is that growth for countries not on the technology frontier will tend to be positively related to the level of human capital rather than the growth in human capital because technology adoption and technological catching-up is facilitated by a high level of human capital.

Acemoglu's comments try to link this hypothesis to the many empirical controversies about the links from level of human capital and growth in human capital to level of per capita income and growth of per capita income. In the course we have not dealt in detail with these controversies. As for the questioner also for me, Acemoglu's point is not overly clear.

c) Let x denote TFP and let gx denote the growth rate of x. Then gx = (dx/dt)/x. It follows that dx/dt = gx*x.

d) Because the Cobb-Douglas production function is the only production function where technical progress can be both Harrod neutral and Hicks neutral at the same time.

e) The conflict arises in Case 2, p. 27-28. In this case the static comparative advantage locks the country to specialize in the sector with low growth potential.

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