Big Push Model

The key to development lies in a big push. (a) Explain the role of coordination problems and externalities in producing development traps where some countries are unable to move from subsistence agriculture to an industrialised economy, (b) Evaluate the proposition that if the economy were open to trade such coordination problems might be resolved, (c) Read more about Big Push Model[…]

Political Commitment Theory of Trade Agreements

Tang and Wei (JIE, 2009) found that countries which undertook more stringent tariff reductions as part of their accession to the WTO subsequently had higher growth. Explain how these results support or refute the political- commitment theory of trade agreements. The political commitment theory of trade agreements argues that trade agreements arise due to the Read more about Political Commitment Theory of Trade Agreements[…]

Changes in Consumption Should be Unpredictable. Discuss

The classical consumption models (Modigliani’s Life-Cycle hypothesis and Friedman’s Permanent Income hypothesis) tell us that consumption is dependent on life-time income. This is based on the assumptions of credit market access (so we don’t have liquidity constrained individuals) and certainty. In short this means that consumption will only change if income changes, and a temporary Read more about Changes in Consumption Should be Unpredictable. Discuss[…]

Labour Matching Models

Labour matching models stem from the fact that when a worker becomes unemployed, he needs to look for a job and such a process is not instantaneous. He cannot simply occupy any vacancy, but has to search for a job in a certain area, in a certain profession and which matches a list of criteria Read more about Labour Matching Models[…]

Neoclassical Business Cycles

Aggregate data do not lend support to neoclassical business cycle models. Discuss this statement paying particular attention to inter-temporal decisions about consumption, labour/leisure and investment. According to Prescott the reason for business cycles is due to technology shocks which manifest itself as changes in the TFP productivity term (or Solow residual) A. Summers criticises this Read more about Neoclassical Business Cycles[…]

Search Markets

In the context of the search model of the labour market, Peter Diamond (1971) raised the following critique: Firms have no incentive to offer a wage higher than the reservation wage. Discuss. Economic theory may initially have us believe that firms shouldn’t offer a higher wage than the reservation wage of workers. If they did Read more about Search Markets[…]

The Credit Channel

The credit channel is an enhancement mechanism for traditional monetary policy transmission, not a truly independent or parallel channel. Discuss The traditional monetary policy transmission works through a number of conventional channels: interest rate effect, exchange rate effect, asset price effect and through expectations. The stance of monetary policy acts as a signal to firms Read more about The Credit Channel[…]

What is Social Ontology and why should Economists care?

Literally, social ontology is the study of social nature and it concerns itself with “how existents exist”1. It is the study of the social realm which includes the “domain of all phenomena, existents, properties”2 whose existence depends upon humans and their interactions. To paraphrase Little “almost all human action is social: socially oriented, socially embedded or socially Read more about What is Social Ontology and why should Economists care?[…]