Alternative Assumptions

Alternative Assumptions - and mines The unskilled are given...

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1. Alternative Assumptions a. Know which assumptions in the above models don’t make sense for the developing world. Be able to discuss the issues below. i. labor and capital move between countries ii. not all goods are the same (some are better than others for economic growth) Difficult to change- infrastructure, political structure, labor markets, infant industry iii. transitions made as a reaction to changing economic conditions are not always easy (infrastructure, political structure, labor market, infant industry issues Transitions are stubborn than what models suggest (structuralist argument). When there is infrastructure, labor adds political structure around an industry, it is difficult to change. iv. just because the country gains from trade doesn’t mean the individuals in the country gain from trade) Gains arent spread equally. Maybe foreign firms are benefitting but not domestic firms. Example- enclave economy where foreign owned firms own plantations
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Unformatted text preview: and mines. The unskilled are given subsistence wages, capital and skill labor is foreign owned, and the land receives low rents b. Know the various disadvantages of specializing in agricultural goods (commodities, consumption goods) and how this form of specialization can lead to very slow or stagnant economic growth. They have low income elasticity of demand, low price elasticity of demand, and provides a fragile export base when primary products were main export. They are also sensitive to synthetic substitutes found in developed countries. c. Be prepared to discuss the advantage of trade in the form of shared ideas and technology. Trade can lead to transfers of ideas from developed to developing countries through tech transfers, research finds that can increase trade and investments, trade can be a stepping stone to developing own technology....
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This note was uploaded on 09/30/2011 for the course ECN 115B 115B taught by Professor Wilson during the Spring '09 term at UC Davis.

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