Beruflich Dokumente
Kultur Dokumente
BSc IV Section C
Instructions: Answer all questions in the spaces provided. For full marks, make sure you write
all relevant points and formulate coherent and concrete answers. Pencils, pens, rulers, etc.
cannot be shared and cell phones cannot be used during the session.
Question 1
Describe the rationale behind Kuznetss Inverted-U hypothesis. Why do you think its
relevant (or not relevant) to a country like Pakistan? (10 points)
place. Hence, at least till this point in time, the Inverted-U hypothesis is not relevant to a
country like Pakistan, although the upward sloping portion of the curve seems applicable. And if
economic development and trickle-down economics happen or pro-poor policies are
implemented over time, we may miraculously see higher economic growth and lower inequality
(the downward sloping portion of the curve). But this seems difficult because inclination of
policymakers towards pro-poor policies and well implemented inequality-reducing policies is
hardly seen.
Question 2
Briefly describe the policy options that can address poverty directly. (10 points)
Question 3
If Pc and PX both increase, then people would purchase less of both goods. The budget line
will change accordingly:
than before. If PX increases, that is, if price of all other goods rise relative to the price of
children, demand for children would increase. We dont know the final effect this combination
of events would bring. Students can draw the new indifference curve on any of the red or green
lines. Both ways, households are worse off (lower indifference curve) and most likely, demand
for children will fall.
Question 4
How can child labor issue be represented as multiple equilibria problem? State the
options/policies that can address child labor. (10 points)
A stringent policy measure could be a ban on child labor but it may prove to be more costly for
the family (there will be obvious reduction in income/poverty). Hence following policies could
be helpful:
Activist approach: trade sanctions. Concerns: could backfire when children shift to informal
sector; and if modern sector growth slows
Question 5
The rate of return on womens education is higher than that of men in developing countries
(education of mother has inverse relationship with child mortality)
It increases productivity, social status and role of woman in a household unit and thus
lowers fertility
Educated mothers have a multiplier impact on many generations
It can break the vicious cycle of poverty and inadequate schooling for women