Elaisa Mae V.

Sebastian
BSACC-1 (BLK 1)

ASSIGNMENT FOR MODULE 4

1.What role do you think international trade and foreign investment can play in solving some
of the problems identified in the big push model? In the O-ring model?
ANSWER:
The big push model highlights that a company's decision to industrialize or not depends on
what it expects other companies to do. According to the O-ring principle, all production
jobs must be completed proficiently in order for any of them to be of high value.

2. The word trap suggests that there may be a way to escape. Do you think developing
countries can escape all of the traps described in this chapter? Which ones would be most
difficult to escape?
ANSWER:
It is up to my government to govern and fix, avert, or overcome the problem. When
emerging countries have low investment ratios, slow manufacturing rates, limited industry
diversity, and bad labor market circumstances, they fall into the middle trap. These
countries are unable to match the quality criteria of the world market in such
circumstances, and thus are unable to compete

3. One of the characteristics of some developing economies is the relatively low level of trust
of people outside one’s extended family. How might the models explored in this chapter shed
light on this problem?

ANSWER:
Because the models discussed in this chapter aren't available, all I can do is look at the
probabilities of the various options. There would be mistrust among some family members,
and even when trust exists, it might be broken. There is a chance that some people outside
the family may be trusted on occasion, and that trust will be exploited on occasion. The
likelihood that families that were trustworthy would locate other families who were as
trustworthy, easing the need to marry outside the family.
4.Why might high levels of inequality lead to lower rates of growth and development? Why
might it be difficult to get out of this kind of trap?

ANSWER:
If all else is equal, the fundamental argument against inequality (in terms of growth)
revolves around making poor people poorer - less consumer spending/market size, less
education/human capital formation, and so on. If you keep pushing this to the limit, you'll
eventually have to move from a consumption/service economy to a resource extraction
economy, as numerous African countries and oil-rich Gulf states have done. It might be
difficult to break free since poor productivity stifles growth, making it difficult to enhance
productivity. However, there is a significant flaw in this form of analysis: inequality is
measured in terms of a fixed quantity of money. There is a significant gap between this type
of inequality and that seen in first-world countries. In that context, "growing inequality"
usually refers to "the rich gaining wealth faster than everyone else."