Ch 2 - Overview of development and basic facts

Question 1

What is economic developement?

Answer 1

Process of gradual improvement in the material well-being of individuals

Question 2

What are some ways of measuring development?

Answer 2

1. Real GDP/GDP per heads (+adjusted for avg exchange rates/ PPP)
2. HCR
3. Inequality
4. Subjective well being
5. Objective well being (eg: HDI)

Question 3

What does HCR measure?

Answer 3

Ratio of the no of individuals living below a level of income relative to the total population

Question 4

What are randomized controlled trials?

Answer 4

Researchers and policy makers work together to see which policies work and why

Question 5

What are some difficulties when running RCTs?

Answer 5

1. expensive
2. Ethical considerations
3. Implementation not straightforward
4. Hawthorne and John Henry effects
5. Might be difficult to generalize to populations outside the study area
6. Short run responses might differ from long run effects
7. unbalances sample characteristics
8. some participants may drop out

Question 6

Describe the exchange rate method of facilitating comparisons

Answer 6

Using the rates of exchange between local and common currencies to express incomes in a common unit

Question 7

What is the purchasing power parity (PPP)?

Answer 7

International prices are constructed for a basket of goods and services by averaging the prices for each such good and service over all different countries.

Question 8

What are some disadvantages of the real GDP/ GDP per head measure of development?

Answer 8

Does not account for home production/consumption
Does not account for the informal economy/ black mkt
Underreporting of income in developing countries due to inefficient tax collection systems

Question 9

What is per capita GPD?

Answer 9

Per head value of final goods and services produced by the people of a country over a given period

Question 10

When are RCTs useful?

Answer 10

Large sample size, clear measurable impacts, sufficient time available