ECON1157 Economics of International Development

Question number 1 (33.3 points) – 500 words

Think about the neoclassical growth theory as represented by the standard Solow model:

Which are the main drivers of and constraints to the process of economic development and catching-up in developing and emerging economies according to the Thirlwall law? (8.5 points)

Which type of development policies would supporters of the BoP-constrained approach recommend developing and emerging economies to adopt in order to boost their growth process? (8.5 points)

Question number 2 (33.3 points) – 500 words

Take Figure 1 below, which is related to the different evolution of the structural composition of two different economies, Mexico and South Korea, from 1970 to 2000.

(a)Describe the main differences in the development experience of South Korea and Mexico as emerging from Figure 1 (5 points)

(b) Taking inspiration from outline the main reasons why the process of structural change, manufacturing development in particular, has been traditionally so vital for the more general process of economic development (13.3 points)

(c)Outline and provide a brief description of the possible obstacles to the process of structural change and industrialization in developing countries (15 points)

Question number 3 (33.3 points) – 500 words

(a) Taking inspiration from what does the term “natural resource curse” stand for in the economic literature? (5 points)

(b) Outline the various ways through which, according to the economic literature, it can materialise (13.3 points)

(c) It is often claimed that good institutions may represent a solution to the natural resource curse and may transform natural resource abundance from being a curse into a blessing.

Which institutions, as discussed during lectures, may impede the natural resource curse to take place? (10 points)

(d) Can institutions be effectively taken as exogenous factors that may favour a properexploitation of natural resources or are they endogenous to the process of economic development? (5 points)

Question number 4 (33.3 points) – 500 words

Take Table 1 below, which described Chile’s development pattern at the end of the 1970s/beginning of the 1980s as related to the process of financial liberalization undertaken by that country.

(a)Describe, by commenting the data reported in Table 1, the main phases of a prototype Balance of Payments cycle taking place in a developing country (15 points)(b) What does the term “twin deficits” generally refer to in the economic literature? Do the data reported in Table 1 provide evidence of a standard “twin deficits” story as frequently asserted by neoliberal economists? (5 points)

(c) Describe which are the similarities and differences between the alternative policy packages aimed at dealing with finance-led macroeconomic instability as proposed by (critical) mainstream economists on the one side and heterodox ones on the other (8.3 points)