I. Natural resources and development
- Consider the theoretical model considered by Mehlum et al. (2006). Explain the role of their parameter λ, and discuss whether this captures “good institutions” in a good way.
- Explain how they model the productive sector and why the productive sector becomes more profitable the more entrepreneurs are in the productive sector.
- Explain how good development depends on the interplay between the amount of resources R and institutional quality λ.
- Explain first how Mehlum et al. test their theory empirically. Discuss:
- Whether it is a proper test of the predictions of their model
- The empirical validity of their approach more generally.
- Explain the empirical approach followed by Berman et al. (2016)
- What are the assumptions necessary for their approach to provide valid results?
- How does this improve on the empirical approach of Mehlum et al.?
- Berman et al. estimate the presence of a local resource curse, i.e. negative effects in a relatively small area. When is this warranted? When are the effects on the whole county more relevant?
II. Prices and Engel curves
- Explain why we need to adjust for different price levels across countries when computing global inequality and poverty figures. What would be the effect of ignoring this?
- Explain briefly how purchasing power parities (PPPs) are computed according to the Geary-Khamis approach. Discuss why this may be a problematic approach to computing true PPPs.
- Explain how Alm?s (2012) suggest to estimate price levels using Engel curves for food.
- What is the AIDS demand system that Alm?s uses, and to what extent do her results depend on this specification being correct?
- Discuss her assumption that Engel curves are identical across countries. Mention some reasons why this may not be the case and what the effects of these deviations would be.