I. Institutions and growth
Michalopoulos and Papaioannou (2013) study the role of pre-colonial ethnic institutions in shaping regional development using a within-country specification and a contiguous ethnic homeland analysis.
- Explain each of these methods and compare them.
- What is their main result?
- Discuss the internal and external validity of their finding. Is a causal interpretation warranted in this case?
II. Rural-urban migration and urbanisation (From the exam 2014)
- Explain why the allocation of labour in an economy between a formal, urban sector and an agriculture-based rural sector may not necessarily be efficient. Use the Harris-Todaro model (from Ray (1998), section 10.3) in your answer. (10p)
- Based on the paper by Ravallion et al (2007), what can you say about the levels and trends in absolute poverty in urban versus rural areas across the developing world? (10p)
The Hukou system in China restricts citizens with a rural ID card from taking employment in the formal sector in urban areas. Use the Harris-Todaro model to answer the following questions:
- Does the Hukou system lead to an efficient allocation of labour? Motivate your answer. (7p)
- How would removing the Hukou system affect rural-urban migration, the size of the informal urban sector and rural wages? (7p)
Consider the paper by Ravallion et al. (2007) again.
- Is the urban sector’s share of the poor different in China than in other parts of the developing world? Does the Harris-Todaro model predict that this should be different in China? (6p)