Problems for group 1: Institutions and development
Exercise 3 from the 2010 Exam
Problems for group 2: Aid and devlopment
- Explain what a poverty trap is and what may cause a poverty trap. Why are there better justifications for international development aid in the presence of poverty traps than when growth may be described by a standard Solow type model?
- How would a poverty trap change the empirical relationship between level of development and growth? Is this pattern seen empirically?
- Discuss potential negative effects of aid and which other strategies may be attempted to fight global poverty