GS 29282 Fall 2021

Economics of Professor Bae

International Development

Assignment 2
Solution

1.

a. Gender Inequality Index (GII) - The GII measures gender inequal-

ities, using three important aspects of human development: repro-
ductive health, empowerment, and economic status.
b. Multidimensional Poverty Index (M P I) - The M P I complements
monetary measures of poverty by considering overlapping depriva-
tions suffered at the same time. The index identifies deprivations
across the same three dimensions as the HDI and shows the num-
ber of people who are multi-dimensionally poor and the number of
deprivations with which poor households typically contend with.

2. Rostow’s stages of growth theory can provide important insights into

the development process, such as the important role played by savings,
investment, and capital accumulation. His identification of which stages
countries were in at the time his theory was developed are interesting
in comparison to where some of those countries are today. His model
postulates that economic growth occurs in five basic stages, of varying
length:

(1) Traditional society

(2) Preconditions for take-off
(3) Take-off
(4) Drive to maturity
(5) Age of high mass consumption

The stages are only necessary and not sufficient conditions. The theory
does not take into account the constraints of the international economic
order and there are counter-examples such as Argentina.

1
 1 1
3. Consider the production function Y = K 2 L 2 .

√ √
a. Y = 36 64 = 6 × 8 = 48.

√ √
b. Y = 2 × 36 2 × 64 = 2 × 6 × 8 = 96. Output doubles.

√ √ √ √ 1
Y ( K L) √K
c. L
= L
= L
= (K
L
); i.e., y = k 2 .

K
√ Y
√
d. L
= 1 gives L
= 1 = 1.

4.
1 1 1
Y K 2 L2 K2 K 1 1
a. y = = = 1 = ( )2 = k 2 .
L L L2 L
b. Steady state is reached when k is constant, therefore when (in per
capita terms) new investment = depreciation. New investment =
saving = sy; depreciation = δk. So must have sy = δk.
1
c. Using (a) and (b), steady state requires sk 2 = 0.1k and therefore

1 s
k2 =
0.1

So the steady state values are given by

s 2 s s
k=( ) ,y = , and c = y − sy = (1 − s)y = (1 − s)
0.1 0.1 0.1

For s = 0.2: k = 4, y = 2, c = 1.6

For s = 0.3: k = 9, y = 3, c = 2.1
For s = 0.4: k = 16, y = 4, c = 2.4