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EC205 Essay - 78% First
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Question 1:The three economists’ contribution to the innovative Randomized Controlled Trial (RCT) research
method, which is now prominent in Development Economics and yields practical progress in poverty
alleviation, has awarded them the Nobel Prize (NobelPrize.org, 2019). Instead of granting
considerable development aids advised by the Big Push Theory, RCTs allow economists first test their
assumptions and theories on a smaller scale. The three Laureates divide the broad issue of global
development into more specific questions, such as whether free bednets distribution help prevent
malaria infection and utilize RCTs to answer them (Banerjee and Duflo, 2011). In an RCT,
communities are randomly assigned to various experimental programs called treatments, for instance,
free bednets distribution versus total price. The difference in outcomes of an RCT should reflect the
treatment impact only due to ramdomization (Banerjee et al., 2011).
However, Deaton and Cartwright (2018) noted that RCTs often fail the external validity - the casual
relationship tested by a well-designed RCT could only be valid for that specific population and may
not apply in another context. They claimed that the failure of external validity essentially undermines
RCT results’ value and may lead to simple generalization. Due to this flaw, there is insufficient work
to guide the broader application of their RCTs findings.
, Question 2:
𝑌 α β−1
In the Malthusian model, per capita income can be evaluated by y = 𝐿
= A𝐾 𝐿 (Weil, 2013).
Assuming diminishing returns to scale, the population is negatively correlated to the per capita
income for a given technology and land or capital level. There is a steady-state income level
(subsistence income) sufficient for one adult to raise one offspring until adulthood, suggesting no
population growth at this level (Weil, 2013). If the income per capita is above subsistence due to
technological improvements, the population grows, and income per capita declines to subsistence. If it
is below subsistence, the population shrinks and income per capita rises, which converges to the
subsistence level. The endogenous population size adjusts itself so that the per capita income always
converges to the same subsistence level, and thus, there is no sustained economic growth.
A sustained income per capita rise, i.e., sustained economic growth, can be only achieved when
aggregate income grows without proportionate population growth. It occurs after Industrialization
when technological advancements lead to rapid aggregate income growth that population growth
could not reach. Also, the increasing importance of human capital indicates a shift from a large
number of children to higher child quality which depresses population growth despite per capita
income rises (Weil, 2013).
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