Microeconomic Theory of Fertility - Assignment Example

nоmiсs оf Dеvеlорmеnt How incentives/disincentive can change family size in a developing country under the microeconomic theory of fertility The microeconomic theory of fertility involves an application of the “microeconomic theory of consumer behaviour” to the decisions made by couples regarding the size of their family. The theory compares the benefits and costs of children. Benefits of children are things such as extra hand work and the provision of security in old age. On the other hand, costs of children are the expenses involved in raising the children, educating them, and providing other things that children require. If the costs involved in raising children are higher compared to benefits, the tendency to have more children will reduce. On the other hand, if the benefits of having children are higher than the costs involved, then the propensity to have more children will increase. In many developing countries, which are characterized by high populations, many governments impose disincentives to ensure that couples have smaller family sizes. Such disincentives emphasize that having many children is associated with high costs and thus seek to reduce the number of children that couples or individuals can have. The disincentives include negative sanctions by government on couples or individuals that have a certain number of children and promotion of family planning. The effect of such disincentive campaigns is that they lead to families or individuals having a certain number of children that is deemed desirable, which reduces the family size. Using the Harris-Todaro model to explain the origin of urban unemployment The Harris-Todaro model attributes migration from rural areas to urban areas to the occurrence of considerably more favourable economic conditions in urban areas. And this is what ultimately leads to unemployment in urban areas. According to the model, migrants make comparisons of wages in the urban area relative to what is earned in the rural area. If the wages in the urban area are higher, people will be motivated to move from rural areas to the urban areas. If people expect to earn much higher income in urban areas than in rural areas, they will migrate to the urban area even if the prospect of getting employment in the urban area is low and the actual income is low. The result is that many people move to urban areas in search of employment opportunities that are scarce. Because of this, the probability of getting employment in the urban area is directly related to the rate of employment in the urban area and inversely related to the unemployment rate in the urban area. Consequently, because of the high rate of unemployment in urban areas as a result of high rural-urban migration, the probability of getting a job is low and thus urban unemployment is exacerbated. Costs and benefits of a free tertiary education system and should it be rolled out in a developing country? Benefits: If implemented well, a free tertiary education system in a developing country can ensure that many people have access to higher education. The developing country stands to benefit since it will have well educated people who are not saddled with debt and are therefore capable of making a contribution to the economy as soon as they complete their studies. By offering free higher education, there would be no need for need-based grants or scholarships, which would ensure that everyone is treated equally. Costs: Having free tertiary education would impose a big burden on the economy, and may end up only benefiting those students who can pay. Free tertiary education is likely to result in far fewer people going to institutions of higher learning. It can also result in provision of very low quality education or both low quality and low uptake by the targeted students. Free tertiary education can also create a regressive tax condition in developing countries since both the middle and upper classes of people become over-represented in tertiary learning institutions in comparison to the lower classes. Makes access to tertiary education institutions highly stratified, with elite universities becoming more popular; access to highly sought courses becomes skewed towards those who can afford the high costs involved. This leaves the poor with no option but to take undesired courses that may not have much economic benefit in future. What are pros and cons of sharecropping and how to convince subsistence farmers to switch their farming practices Pros of sharecropping: Sharecropping can be considered relatively efficient in that it makes both the landowner and the tenant to benefit from a piece of land and helps in spreading risk. If the landowner were to pay the tenant a straight wage instead of sharing the produce from a piece of land, the tenant would not have the motivation to work hard on the farm and this would be costly to the landowner. This scenario is avoided through sharecropping. Similarly, if the tenant were to pay a straight rent to the landowner as opposed to sharing the produce, the tenant would be put at risk in case of crop failure due to instances such as drought or floods or low crop prices. Thus, sharecropping protects the interests of both the landowner and the tenant. Cons of sharecropping: Incentives of sharecropping are weaker than the scenario would be for a fixed rental contract of ownership. In sharecropping, the tenant is only a residual owner of a portion of the crop, not the entire crop. This is bad for incentives given that the tenant equates the marginal benefits of harvest earned to the marginal cost of the labour that they employed. The reality is that what is spent on labour may be more than what is earned from the share of crop that the tenant gets upon harvesting. Subsistence farmers can be convinced to switch their farming practices by introducing them to alternative farming practices that produce more yields and are more reliable. What is “tragedy of the commons” and how might the solution to that problem differ between developed and developing countries The “tragedy of the commons” is an economic theory describing a condition within a shared resource system whereby individual users who act independently in accordance with their own self-interests behave in a manner that goes against the common benefit of all users of a given resource by exhausting the resource through their egoistic actions. For instance, fishermen can catch a certain species of fish from a lake to the extent that the species becomes depleted. This is because the fishermen are motivated by the need to catch more fish so as to increase their income. But the fishermen’s actions may go against the interests of other users of the lake and fish in particular, such as researchers. To solve the problems of “tragedy of the commons”, the respective government may ban fishing at certain periods or impose a limit on the amount of fish that fishermen can catch. The response to the problem may be different between developed and developing countries. For instance, developed countries with adequate resources may provide other incentives to produce more fish through aquaculture to avoid reliance on fishing in the lake. On the other hand, developing countries may impose measures such as arresting those who violate the set requirements or implementing bans on fishing without providing alternatives to getting fish. PART B Why are cities good for growth Cities are destinations for large numbers of domestic and international migrants, who spur growth. Cities attract domestic and international capital, which is essential for growth. Cities play an ideological role as sites for generation and dissemination of knowledge, which stimulates growth. Cities promote the growth of formal and informal economies by being centres of employment. Identify the causes of urban giantism Industrialization that involves import substitution: This results in less trade and is an incentive to focus on one large city to reduce transportation costs. Where “bread and circuses” (where some incentives are provided to cover up for failed policies) strategies are used to avoid unrest. Creation of hub and spoke transportation as opposed to web transport that makes transport cost high in smaller cities. The compounding effect of having a country’s capital in the country’s largest city. What explains the rise of urban informal sector in developing countries High cost of formal business sites and regulatory requirements. The service and retail economies in the formal sectors in the urban areas in developing countries are not adequately developed to absorb all the activities that are found in the informal sector. There is usually an increased need for low-priced and low-quality work, products or services by some segments of the population in urban areas. The informal sector grows to fill this gap. Discuss policy recommendations for curtailing the growth of the informal sector Promoting formalization by establishing an enabling regulatory environment. Educating government officials about the significance of the informal sector and what they can do to promote formalization by offering better services. Support dialogue between players in the informal sector and the government to reveal barriers to formalization and build trust between the two sides. Explain the view of education and health as joint investments for development Education and health are intertwined with regard to economic development. On one hand, greater investment in health may improve the return on what is invested in education since good health is a prerequisite for school attendance and learning. On the other hand, greater investment in education may increase the return on what is invested in health given that many health programmes depend on basic skills that are taught at school, such as personal cleanliness and sanitation. Education is also required for the formal training of health personnel. How to solve the child labour problem Eliminating poverty so as to reduce the motivation to employ children. Coming up with strategies to ensure that more children go to school. This includes having more schools in areas where child labour is rife and offering parents “conditional cash transfer incentives” to encourage them to send their children to school. Regulating child labour by providing support services for children in cases where child labour is inevitable. Banning child labour in its “most abusive forms” such as slavery, child trafficking, and work that is likely to harm the child. Why is free tertiary education benefiting the rich at the expense of the poor Free tertiary education ends up benefiting the rich at the expense of the poor because it is mostly the rich people who are able to afford the fees required for a child to go through secondary school. In the end, many children of the poor do not join secondary school and will therefore not qualify to join tertiary education institutions. Hence, when free tertiary education is offered, it ends up mostly benefiting the rich at the expense of the poor. Do conditional transfer programmes work Yes, there is evidence that conditional cash transfer programmes work. For instance, the Progresa/Opportunidades programme in Mexico, which involves giving parents cash incentives on the condition that the parents send their children to school, has seen many children going to school. The scheme works better than making basic education compulsory, since the cash incentives give parents a more valid reason to have their children in school. What make subsistence farmers so different from extensive cultivation in Africa Subsistence farming involves the production of crops, rearing of livestock and conducting other farm-related activities on small plots of land. On the other hand, extensive cultivation involves tilling a piece land until it has been exhausted of fertility then turning to another piece land, leaving the previous one to become fertile again. The difference between two practices is that subsistence farming comprises many activities such as livestock rearing and growing of crops while extensive cultivation is mainly centred on tilling land and growing crops. Why sharecropping may be a way to overcome market failure for subsistence farmers Sharecropping may be a way to overcome market failure for subsistence farmers because it helps both the landowner and sharecropper to benefit from the crop that is produced on a piece of land. The landowner does not have to pay a straight wage to the tenant, and neither does the tenant (sharecropper) have to pay a straight rent to the landowner. What is the role of the government in reforming the agricultural sector in developing countries Governments in developing countries have a role in reforming the agriculture sector by providing agricultural research and extension services, helping in creating markets where they do not exist, removing monopolistic tendencies in the market, ensuring that farmers are protected in case of environmental externalities, and reducing informational asymmetries in regard to product quality. Discuss the rationale behind the environmental Kuznet’s curve Environmental Kuznet’s curve is a graph that reflects the notion that pollution and other forms of environmental degradation first rise and then fall as income per capita increases. That is, at first there is an increase in environmental damage as economic development increases, but environmental damage decreases as more people become more conscious about the need to protect the environment. However, the theory does not hold for all forms of environmental degradation. How to solve under-provision of public good Public policymaking has to be adjusted to fit the changing realities and address the gaps that are associated with the under-provision of public goods. The mechanisms that can be applied are those that formally put together the views of different stakeholders supported with negotiation as well as research and analysis of pertinent information. What is internalization Internalization is the process in which producers or end users who generate external environmental costs or other costs are made to bear those costs, usually via the imposition of consumption or pollution taxes. For instance, in some countries, manufacturers who burn fossil fuels are made to pay for the carbon that they produce through carbon taxes. Read More