Exogenous parameter shifts on the long-run equilibrium

Analyze mathematically (using equations and graphs) and explain intui- tively (i.e., tell the causal story) the effects of each of the following exogenous parameter shifts on the long-run equilibrium (also short-run effects and transitional dynamics, for models where these are relevant) in the indicated growth model.

General directions – Please submit hard copies
• The exam is open book and open notes. You may use all readings, class presentations (by the professor or fellow students), lecture notes, etc.
• For the essay questions, you should demonstrate that you have done and understood the relevant readings! (This means multiple readings, not just one or two main ones, and going beyond the class presentations in depth and breadth). Discussions of readings should be detailed and in-depth, not superficial summaries, although the degree of detail can vary depending on how central an article is to your argument. Also, citing the refer- ences within an integrative framework of analysis that you create is better than just dis- cussing them each separately.
• You must do entirely your own work. You may not give or receive any help (except you may ask the professor clarifying questions).
• You may not copy any text or other material. Write all responses in your own words. Give proper citations to any material that is quoted or cited from your sources. Do your own math, graphs, etc. where required (no copying-and-pasting).
o Any suspected violations of the university’s Academic Integrity Code will be referred to the College of Arts and Sciences Dean’s Office for investigation. See for more information and ask the professor if you have any questions about what constitutes plagiarism, cheating, proper citation, etc.
• Please focus on the specific questions asked and respond to all parts of the questions you choose. There is no credit for extraneous material, but points will be deducted for any required parts that are not answered. Try to answer completely but efficiently/succinctly. Avoid repetition! Where relevant, explain your math or graphs verbally/intuitively.
• For #1, any combination of handwritten and computer-printed material will be accepted, but make sure all writing is legible. When using a computer, please use a normal font size (12 pt. is preferred) and normal (1″) margins.
• Do not say “it can be shown that…” – it is your job to show how the results are obtained (show your work and derivations/solutions, step-by-step)!
• Answers to essay questions (#2 or 3) should word processed (computer printed) and about 7-10 pages in length, assuming double-spacing with a normal 12-point font, or the equivalent single-spaced (double spacing is preferred for ease of commenting). Note that a double-spaced page is about 300 words in Times New Roman 12-point, so this means approximately 2100-3000 words.
• Please staple all pages together – do not submit loose sheets, paper clips, etc.
• Do not re-write the questions. That is a waste of time. Just write your answers and label
them by number (letter).
(Questions are on the next page/reverse side)
Questions – Answer #1 (mandatory) and one of the other two questions (#2 or #3):
1. [Mandatory] Analyze mathematically (using equations and graphs) and explain intui- tively (i.e., tell the causal story) the effects of each of the following exogenous parameter shifts on the long-run equilibrium (also short-run effects and transitional dynamics, for models where these are relevant) in the indicated growth model. (NOTE: “Effects” include the impact not only on the growth rate, but also on the other key endogenous variables in each model.)
1. A rise in the rate of growth of the labor force n in the Solow model (you may use any combination of the original Solow graphs and Hein’s, but Hein’s graphs ).
2. A rise in capital productivity A in the AK “endogenous growth” model.
3. A rise in n in the Kaldor (1956) model.
4. An increase in business confidence or “animal spirits” (??in the investment or
desired accumulation function) in the Robinson post-Keynesian growth model.
5. Same as d. (increase in ?) in the Kalecki-Steindl post-Keynesian growth model.
6. Finally, compare and contrast your results for parts a.-e. What do they have in
common? How do they differ, especially in terms of (i) the adjustment mecha- nisms and (ii) the impact on income distribution (real wage w, profit rate r, and/or profit share h or ??– whichever of these are endogenous)? Don’t just list the simi- larities and differences; you also need to explain and discuss them – how do they follow from the assumptions of each model? What do they tell us about the links between distribution and growth in each theory?
[Choose either one of the following two:]
2. We have studied papers that investigate the causes of growth accelerations and the sus- tainability of prolonged “spells” of rapid growth; there are also readings on the syllabus about what causes (or prevents) growth slowdowns or a “middle-income trap” (e.g., Aiyar et al. 2013) and some of the literature on “fundamentals” and structural change is also relevant to what makes economies grow. Compare and contrast the findings of key studies related to the causes of growth accelerations, sustainability, and slowdowns, and discuss how these causes are similar or different. Are there differences between low- income and middle-income countries in this respect (does initial income level matter)? Do any of these results confirm or refute predictions of theoretical growth models?
3. Why is it often thought that the manufacturing sector plays a crucial role in the process of economic development? What (recent) empirical evidence supports the view that manu- facturing production or exports offer developmental advantages not found in other sec- tors? Do such advantages warrant neglecting agriculture, or is raising agricultural produc- tivity also important in the development process (see, e.g., de Souza 2015)? What new challenges face developing countries that are seeking to promote manufacturing activity or manufactured exports today, which were not faced by countries that used manufactur- ing as an “engine of growth” in the past? How is the nature of structural change changing today?
More writing suggestions:
• Use a correction citation style for economics (this applies to your research papers too!). Do not use footnotes for simple references or citations. All sources should be cited in the text by author’s last name(s) and year of publication. For example, Rodrik (2016). For two authors, give both names: Blecker and Razmi (2010). For three or more authors, use the last name of the first author and “et al.” (Latin for “and others”; note there is a period after al. because it’s an abbreviation) [like Berg et al. (2012)] in the text, but give all names in the reference list at the end. If there are two readings by exactly the same author(s) in the same year, use a, b, etc. (e.g., Rodrik 2013a, Rodrik 2013b). Complete references are then given in a Reference list or Bibliography at the end (see any of the published journal articles for a sample style). And be sure to spell the authors’ names correctly!!
• Footnotes or endnotes are only used for tangential material, discussions, or explanations – they may include references, but should not be used merely to list references.
• Don’t use phrases like “In their paper” or “In this study,” which are almost always redun- dant; just say something like, “Author (date) found that….”
• For an exact quote, you must give the page number if available. For example, Hausmann et al. (2005, p. 23) conclude that “countries that export goods associated with higher productivity levels grow more rapidly….” But don’t do too much quoting.
• Generally you should use and cite the readings as posted on Blackboard, rather than finding them otherwise on the internet (especially, do not rely on earlier drafts – but if you find a later published version, that’s OK). The date of a published article is the offi- cial date of publication of the journal or book (for example, Rodrik’s article on “Prema- ture Deindustrialization” should be cited as 2016, even though some earlier drafts may be circulating around the internet).
• Since the topics for the essays (#2 and 3) are quite broad, you may choose a focus in your answer, but don’t make it too narrow (you can consult with the professor).