International Trade and Economic Growth

Does international trade increase economic growth? In this context, what are the trade policies that have been followed by developing countries?

Standard textbook economic theory tells us that international trade benefits both parties in the trade, based on the gains from comparative advantage as laid out by David Ricardo. However, recent research into New Trade Theory suggests that trade may not always be beneficial, and there are examples when it could inhibit growth. This essay will examine when this could be the case and then relate this to the example of developing countries.

The Ricardian story goes that countries have comparative advantages in producing certain goods. [...]

What is economic development?

‘What is economic development and how would you measure it? Does an increase in per capita national income always constitute an increase in the standard of living?’

Economic development is hard to define, but is an improvement in the living conditions of the population as a whole. Whilst closely linked with economic growth – high growth could result in high development – they are not the same thing and economic growth, as we shall discover, does not necessarily equate to economic development. It can be measured in a variety of different ways and Streeten believes it is necessary for its own sake, to improve the condition of people, because it results in higher productivity and lower fertility (which is generally seen as a good thing), can lead to a better environment and a healthier civil society, democracy and social stability. [...]

Unemployment during the Inter-War period

The 1919-20 reduction in working hours accompanied by the maintenance of the weekly wage has been argued to underlie the rapid rise in unemployment in Britain in the early 1920s and some of the persistence of unemployment through to 1939. To what extent can these aspects of interwar unemployment be attributed to this supply-side change?

Unemployment was persistently high during the inter-war years at 10.9% (Feinstein) compared to an average of 5% pre-WWI. Even within the inter-war period there were large differences in this rate – jumping from 17% in 1921 to 9.7% in 1927 and reaching a peak of 22.1% [...]

Europe 2020

Within the overall Europe 2020 strategy, there will be difficult tensions to resolve between social and economic aims, as well as between qualitative progress and quantitative targets.

The impact of Europe 2020 on employment and the labour market will be pivotal, because it is the policy domain that straddles the boundary between the EU as an economic union and its wider social ambitions. Discuss.

The 2020 strategy is designed to promote “smart, sustainable and inclusive growth” with 7 key targets to; increase total investment in R+D to 3% of GDP; reduce greenhouse gas emissions by at least 20% compared to 1990 levels; increase the share of renewable energy to 20%; and move towards a 20% increase in energy efficiency; reduce school drop-out rates to less than 10% and increase the share of the population having completed tertiary education to at least 40%; lift 20 million people out of the risk of poverty and social exclusion; and raise the employment rate to 75% amongst 20-64 year olds. [...]

Technological Revolution

Explain the debate between Allen and Mokyr on the role of institutions and resources in explaining the Industrial Revolution in Britain

Mokyr believed that the Industrial Revolution was greatly aided by the technological changes which came about through an increase in scientific knowledge from what he termed the Industrial Enlightenment. This enlightenment came about through increased scientific knowledge, skilled craftsmen and experimentation. Scientific knowledge improved through a number of factors; firstly overall education improved as higher real wages meant that it made more sense for couples to have fewer children but to invest more in their education. This was further enhanced by increased urbanisation which increased the incentive to learn as urban citizens would need to read, write and count to conduct business and trade. [...]

The Lewis Model

Describe carefully the Lewis dualistic labour surplus model. Does the Lewis model describe accurately the process of economic development in poor countries?

The Model

The Lewis model proposes a dualistic economy consisting of a formal, industrial and urban sector, and an informal, agricultural and rural sector. The formal sector is characterised as capital intensive and being run by profit-maximising capitalists who hire labour until the wage rate equals the marginal product of labour. This is because it makes economic sense for a firm to continue to hire labour until the costs (wage) equal the benefits (the marginal product of the additional unit of labour). [...]

Minimum Wages

Why have statutory minimum wages become more prominent in recent decades? Why have they generally had little adverse effect on employment?

Prior to the introduction of the national minimum wage (NMW) in 1999 there had been no statutory wage floors since the abolishment of the Wages Councils in 1993 by the Conservative government. Growing wage inequality in both the D50:D10 and D90:D50 measure (which looks at the differing wage rates in the respective percentiles) was one of the leading reasons in the demand for some form of minimum wage to counter this growing inequality. Metcalf finds that the NMW reduced the D50:D10 ratio by 9 points if we include the effects of immigration. [...]

Life at Cambridge Part II

This is a long overdue follow on from my previous post Life at Cambridge, and details my experience of the Cambridge Economics Tripos for 1st year Lent and Easter terms.
The Course

Lent

Microeconomics

This term we began by looking at Game Theory, where we cover the basics such as Nash Equilibrium, before moving on to more sophisticated games, looking at 3×3 matrices as well as 2×2. Simultaneous games are considered, along with Cournot and Bertrand games and models of business strategy and the notion of game theory is applied to matters such as externalities and public goods. There are also references to evaluation, such as how game theory isn’t the best model of real-life situations; for example in a finite game, theory tells us that if it pays to cheat in the last round (i.e. [...]

New Labour v.s. Old Labour

New Labour was forced by political circumstances to adopt neo-liberalism and the Conservative European, Foreign and Defence policies, and so abandoned traditional Labour party ideology. Discuss.

New Labour began government with a promise not to increase spending above Conservative plans for the first two years of their government along with no increases in basic or high income tax. The government was strongly pro-Europe and wanted Britain to play an active role in the policy making decisions of the EU along with a future promise to join the monetary union. Foreign policy took on an ethical role with the government promoting human rights and intervening to stop abuses. [...]

Demography and the Industrial Revolution

What were the causes of the distinctive characteristics of English fertility behaviour during the Industrial Revolution? (b) How did the fertility rate interact with economic growth during this period?

demographyBefore the causes of fertility behaviour are explored, we need to first look at what these characteristics were in the first place. From the graph to the left1 we can see that the crude birth rate (which is defined as the number of live births per 1000 people) starts off at about 30 births per 1000 people in 1680 but increases to about 44 births per 1000 by 1820. This is a significant increase, especially as Malthus believed that the maximum biological rate of fertility can only be about 50 per 1000 people – so the fertility rate was approaching the maximum in 1820. [...]