Development economics Flashcards
Functionings and Capabilities (Sen)
What are “functionings” and “capabilities” according to Amartya Sen?
Functionings are the various things a person may value doing or being, and capabilities are the opportunities to achieve these functionings.
Amartya Sen’s concept focuses on what individuals are able to do (functionings) and their abilities to achieve these functionings (capabilities). It shifts the focus from traditional economic measures to what people value and are able to be and do.
Causality versus Correlation
Q: What is the difference between causality and correlation?
A: Causality is a cause-and-effect relationship, whereas correlation is a mutual connection without direct cause.
Explanation: Causality indicates a cause-and-effect relationship, while correlation indicates a mutual relationship or connection between two variables without implying direct cause.
Omitted Variable Bias, Selection Problem, Reverse Causality
Q: What is omitted variable bias and reverse causality?
A: Omitted variable bias occurs when a model leaves out one or more relevant variables, leading to biased estimates.
A: Reverse causality is when it is unclear which variable is the cause and which is the effect.
Explanation: These are common issues in regression analysis where omitted variables can bias results, the selection problem occurs when non-random samples lead to biased estimates, and reverse causality happens when it is unclear which variable is the cause and which is the effect.
Randomization and Randomized Control Trials (RCTs)
Q: What is a randomized control trial (RCT) and what is its purpose?
An experiment that uses randomization to measure the effect of interventions by comparing treated groups with control groups. The purpose is to ensure each participant has an equal change of being assigned to any group, reducing bias.
Explanation: Randomization ensures each participant has an equal chance of being assigned to any group in a study, reducing bias. RCTs use randomization to measure the effect of interventions by comparing treated groups with control groups.
Happiness, Life Satisfaction, Well-being
Q: What do happiness, life satisfaction, and well-being measure and why are they important in development economics?
They measure subjective perceptions of quality of life beyond income and provide insights that economic measures like GDP cannot capture.
Explanation: These terms refer to subjective measures of how individuals perceive their lives and well-being, often used in development economics to assess quality of life beyond income measures.
Easterlin Paradox
Q: What is the Easterlin Paradox?
The observation that higher income does not necessarily lead to higher levels of happiness.
Explanation: This paradox suggests that higher income does not necessarily lead to higher levels of happiness, challenging the assumption that wealth equates to well-being.
Easterlin Paradox
Q: What does the Easterlin Paradox imply about the relationship between income and happiness?
A: It implies that beyond a certain point, increased income has little effect on happiness.
Explanation: This paradox suggests that higher income does not necessarily lead to higher levels of happiness, challenging the assumption that wealth equates to well-being.
Different Definitions of Development
Q: What are some (at least three) different definitions of development?
A: Economic (GDP growth), social (education and health improvements), and sustainable development.
Explanation: Development can be defined economically (e.g., GDP growth), socially (e.g., improved education and health), and sustainably (e.g., meeting present needs without compromising future generations).
Development Goals (MDGs, SDGs)
Q: What are the SDGs and how do they differ from MDGs?
A: 17 goals set by the UN for 2030 to end poverty, protect the planet, and ensure prosperity.
SDGs are more comprehensive and inclusive, addressing a broader range of issues and involving more stakeholders.
Explanation: The Sustainable Development Goals (SDGs) are a universal call to action to end poverty, protect the planet, and ensure prosperity for all, aiming to be achieved by 2030. They build upon the achievements and lessons learned from the Millennium Development Goals (MDGs), which were eight international development goals established in 2000, focusing on poverty reduction and basic human needs.
Different Measures of Development, Indicators, Indices
What is HDI and why is indecies like it important in development economics?
Human Development Index is a composite index measuring average achievement in health, education, and standard of living.
Explanation: The Human Development Index (HDI) is a composite index that measures average achievements in three basic dimensions of human development: health, education, and standard of living. It provides a holistic measure of human development, helping policymakers assess and compare the development levels of different countries.
Neoclassical Growth Model
Q: What is a steady state in the Neoclassical Growth Model?
A condition where key economic variables grow at constant rates and the economy is in long-term equilibrium.
Explanation: This model explains economic growth through factors like labor, capital, and technology, emphasizing returns to scale and steady-state growth.
Steady State (general)
Q: What is a steady state in economic growth models?
A: A condition where output, capital stock, and population grow at constant rates, maintaining stable economic ratios.
Explanation: In growth models, a steady state is when the economy’s output, capital stock, and population grow at the same constant rate, and key economic ratios remain unchanged.
Comparative Statics
Q: What is comparative statics and why is it useful?
A: The analysis of how changes in external conditions affect economic equilibria. It helps understand the impact of changes in external factors on economic outcomes without focusing on the transition process.
Explanation: Comparative statics analyze how changes in external conditions affect economic equilibria, comparing different equilibrium states without considering the path taken to move between them.
Convergence
What is convergence and differentiate between absolute- and conditional convergence
A: The theory that poorer economies will grow faster than richer ones, reducing income disparities.
Absolute convergence assumes identical conditions; conditional convergence accounts for differing characteristics.
Explanation: Convergence theory suggests that poorer economies will tend to grow faster than richer ones, leading to a reduction in income disparities over time. Absolute convergence assumes identical conditions, while conditional convergence accounts for differing characteristics.
Externalities/Spillovers in Growth Models
Q: What are externalities in growth models?
A: Unintended side effects of economic activities that can be positive (benefits) or negative (costs).
Explanation: Externalities are the unintended side effects of economic activities. Positive externalities (spillovers) can lead to benefits like technological advances, while negative externalities can cause issues like pollution.
