Econ 3853: Emerging Economies Fall 2014: University of Arkansas Homework 2

Econ 3853: Emerging Economies Fall 2014: University of Arkansas Homework 2

1) Consider the following data on two countries.

Higher values of the expropriation and contract repudiation indices above imply greater risk.
(a) Is it more important for a country to have better contract enforcement or stronger property rights? 
Why? (10 Points)
(b) Would you prefer to be an entrepreneur in Egypt or India? Why? (5 Points)
2) Why do Italian companies rarely go public? (5 Points)
3) Why does Germany have such a small stock market, but very large powerful banks? (5 Points)
4) What is the difference between the public interest and public choice view of government 
regulation? (10 Points)
5) The authors of the article “The Great Wall of Institutions” suggest that there is a “Great Wall of 
Institutions” barrier to income growth at around US $12,000. Is there some evidence for this in 
the diagram they provided? Explain. (5 Points)
6) Can you briefly explain the economic intuition behind the “Great Wall of Institutions?” (10 
Points)