Q3. The Lewis-Fei-Ranis model of economic development with unlimited supplies of labour is a neoclassical model that was used to explain the development process in the LDCs. Discuss its limitations and how relevant it is in explaining their dual structures.
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Q3. The Lewis-Fei-Ranis model of economic development with unlimited supplies
of labour is a neoclassical model that was used to explain the development process
in the LDCs. Discuss its limitations and how relevant it is in explaining their dual
structures.
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Solved in 3 steps
- Modified True or False One of the criticisms of Neoclassical and free-market theory of development is its no insight on how countries initiate and sustain development.The neoclassical growth model predicts absolute convergence for countries with the A. same technology. savings rate, and population growth B. technology and savings rate, but different rates of population growth C. same technology and population growth, but different savings rates D. same population growth and savings rate, but different levels of technologyBased on the Neoclassical Growth Model explain in detail what are the critical determinants of economic growth. Also, specify related assumptions.
- Compare the similarities and the differences between the Economic Growth concept by the Neoclassical School of Thought with Keynesian System for Economic Growth.How can we reconcile these four classical models? In other words, what are some positives that can be taken from each model? Linear stages theory, Structural-change model (Lewis two-sector model), International dependence/dominance model, Neoclassical modelconsider the generalized Romer model where the fishing-out effect and the decreasing returns to research are allowed. suppose the number of researchers grows 5% each year and labor-augmenting technology level grows 1% each year. then, there exists an upper limit for the fishing-out effect in steady state. evaluate whether is true, false or uncertain and why?
- Explain, using the OLG model, how an increase in the growth rate of technology affects welfare - specifically, argue how the intertemporal discount rate may change in response to an increase in technological growth and . Be thorough.Suppose that output is given by the neoclassical production function Y (t) = F (K(t), L(t), A(t)) satisfying Assumptions 1 and 2, and that we observe output, capital, and labor at two dates t and t + T . Suppose that we estimate TFP growth between these two dates using the equation Where g(t, t + T ) denotes output growth between dates t and t + T , and other growth terms are defined similarly, while αK(t) and αL(t) denote the factor shares at the beginning date. Let x(t, t + T ) be the true TFP growth between these two dates. Show that there exist functions F such that x(t, t ˆ + T )/x(t, t + T ) can be arbitrarily large or small. Next show the same result when the TFP estimate is constructed using the end-date factor shares: Explain the importance of differences in factor proportions (capital-labor ratio) between the beginning and end dates in these results.What should we infer when our models make predictions that are not reflected in the world? Obviously there is a level of inaccuracy in every model, but is it better to presume we misunderstand the world or to use such errors to find problems preventing the world from matching our model? Explain your answer. Robert Lucas argues that the main model of efficient investment is remarkably inaccurate. What is the key critique of Lucas and how was this problem addressed in our model? Many developing countries struggle with debt due to high interest rates and often low returns. Given what you learned in this chapter, why does this challenge exist? What might be a policy to alleviate it?
- What are location advantages ? Discuss how they may incentivize MNEs to pursue FDI into: a) developing countrues and b) developed countries.In a neoclassical (Solow) growth model, does a decrease in the savings rate permanently affectsthe growth rate of real output? Why or why not? Explain and show graphically.It is never ending effort to find the critical factors that lead towards continued growth in per capita income. Attempt the question in light with the Neoclassical Theory and Growth Model
