Seminar 5 - Exercise1) Many poverty trap arguments depend on increasing returns to scale properties. Does this imply that increasing returns are bad for development?
2) Consider the "dynamic model of investment" in Murphy, Shleifer and Vishny (1989).
a) Interpret the parameters theta and gamma.
b) Derive equation (18) and then (19).
c) Explain how and why we can get two equilibria in this model. What is the role of the interest rate?
3) How can linkages between sectors affect growth, and what role should they play in policies promoting growth?