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IO Field Prelim June 2004 6. In Lower Slobobia all electricity is provided by a publicly-owned enterprise. The manager of the firm is concerned only about the present discounted value of his income. In particular, the manager is not the residual claimant for the firm’s profit. The manager in each period is paid a base salary Y large enough to put food on his table for his 16 children, and an incentive component A t . Y is constant but A t changes according to the compensation formula A t = ( π t − π t − 1 ) + x t − 1 ( p t − p t − 1 ) where π is profit and the second component is the quantity-weighted output price change. Y is taken to be part of production cost, but A t is paid “off the books” as a subsidy. a) Discuss the incentives this gives the manager. What will output and prices be after one period? In the limit? b) How does the manager’s discount rate affect the outcome? c) Is this mechanism related to any others you are familiar with in the literature? d) Modify the incentive component to B t = x t − 1 ( p t − p t − 1 ) – D · 1 ( π t < 0) where D is a very large number and 1 (·) is the indicator function. On an output and price graph, show the manager’s incentive payments over a sequence of declining prices. Using the graph, explain the incentives B t gives the manager. e) What is the outcome over time for prices under this incentive pay scheme? f) What informational requirements do the above mechanisms place on the regulator (i.e., the governmental authority that pays the manager’s salary)? Page 5 of 5

ECN | 121A | Industrial Organization | exam | IO Field Prelim June 2004 6. I

ECN | 203A | Advanced Economic Theory | exam | 

University of California - Davis Date: July 10, 2007 Department of Economics Time: 3 hours Economic History Reading Time: 20 min PRELIMINARY EXAM Please answer FOUR of the following eight questions, including at least one from each of the three Parts . Part A (answer at least one) 1. The Malthusian world is also a Darwinian world. Explain why this should be true in theory. Is the empirical evidence consistent with this? 2. Institutions are just the sets of rules that govern interactions. In this case explain the circumstances in which societies can get stuck with inefficient institutions. Are there examples of such failures? 3. Economists and historians have often asserted that trade promotes growth in national product, or that growth in national product promotes trade. (3A) For a national setting before 1800, can you identify a period in which trade promoted growth? Explain what change(s) in trade caused growth, and how you know this. (3B) For a national setting before 1800, can you identify a period in which growth promoted trade? Explain what sources of growth caused trade to expand, and how you know this. 4. We usually think of textiles as a labor-intensive sector. Yet somehow India became a net importer of textiles from labor-scarce Britain in the nineteenth century. When and how did that happen? Why didn’t India out-compete Britain in world markets? Part B (answer at least one) 5. In 1850 many key economic, institutional, and demographic characteristics found in sections of the United States (and Canada) were far more conducive to modern economic growth than what existed in other parts of the United States and in most of the rest of the Americas. What were the differences and why did they exist? 6. Advocates of the induced innovation hypothesis have claimed the model does an excellent job in explaining the general pattern of American agricultural development. In light of what you know about relative factor price movements and the course of technological change, describe and evaluate the basic features of the model and the major claims of success? Part C (answer at least one) 7. Capital does not flow very plentifully to poor countries today. Does this reflect (a) the poor countries' low productivity? (b) their distortions? (c) their weak institutions (country risk)? (d) other forces? Discuss. Contrast with conditions in the 1870-1914 era. 8. "Fixed exchange rates (and the gold standard) have promoted trade." Discuss.

ECN | 111B | Economics History | exam | University of California - Dav

University of California, Davis Date: September 14, 2005 Department of Economics Time: 3 hours Economic Growth Reading Time: 20 minutes PRELIMINARY EXAMINATION FOR THE Ph.D. DEGREE Answer one question from each section SECTION I 1. Identify across the theoretical models we studied what are the common features of the “idea-driven” model of growth, namely those models in which growth is sustained by innovation (or knowledge capital). Why are these models so prominent in the recent literature? Consider also the empirical evidence on “idea-driven” growth and their contribution to understanding growth (time series) and development (cross section) of income per worker. 2. Present the basic features of a one-sector model of endogenous growth and of a two- sector model of endogenous growth. Analyze the commonalities in the two types of models. What conditions determine the existence of endogenous growth either model? What kind of empirical analysis has each model stimulated? What kind of externalities are at the core of each model? 3. Present the key equations and assumptions of a model with expanding varieties of products. Describe what is the so called “scale effect” and discuss in detail what kind of empirical work has been undertaken to prove or disprove their existence. 4. Present and discuss the main common features of the early “endogenous growth” models such as Romer (86) or Lucas (88). Explain and discuss the role of externalities and increasing returns in them. Analyze what are their main insights and their main limits. SECTION II 5. What implications does the theory of the second best have for the conduct of economic policy? How are the findings of several multi-country studies on the economic effects of industrial policies (as measured by the effective rate of protection) relevant to the assessment of the applicability of the theory of the second best? 6. Discuss how geography, culture, and institutions affect the economic growth of a country. Be sure to include in your discussion, the conclusions by David Landes that the key variable is culture, and by Dani Rodrik that "institutions trump every other variable". 7. Some China scholars have identified “lessons from China” that ought to have guided the transition strategies implemented in Poland and Russia. Evaluate these “lessons from China” University of California, Davis Date: July, 2005 Department of Economics Time: 3 hours Economic Growth Reading Time: 20 minutes 2 e.g. dual-tack pricing is the mechanism that allowed China to escape the transformational recession. 8. Economic management in the 1980s was advised to focus on "getting prices right", the slogan in the 1990s was "getting institutions right." Explain the basis of the broader approach to economic development, especially the importance of this broader approach to increasing the rate of technical innovation. How does the Washington Consensus fit into this analysis? SECTION III 9. What is the Great Divergence? What are its main quantitative features? Discuss some of the main controversies surround the Great Divergence: When did it begin? Where did it begin? Why did it happen? Has it been exacerbated by globalization? 10. Several authors have tried to lay out a unified growth model that can describe the evolution of an economy from a “Malthusian trap” through to “modern economic growth” (whether exogenous or endogenous). Describe in detail three such models and then compare and contrast their approaches. According to Clark, which features of these models look problematic? 11. What is the “A versus k” debate all about? Cite authors from both sides. What do the data say? Is this a false dichotomy? 12. Capital does not flow very plentifully to poor countries today. Does this reflect (a) the poor countries’ low productivity? (b) their distortions? (c) their weak institutions (country risk)? (d) other forces? Discuss. Contrast with conditions in the 1870–1914 era.

ECN | 270A | Economic Growth | exam | University of California  Davi

ECN | 001B | Macroeconomics | exam | 

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