Tutorial 1 5

TUNKU ABDUL RAHMAN UNIVERSITY COLLEGEBACHELOR OF ECONOMICS (HONS)

BBBE 2043 KNOWLEDGE ECONOMICS

TUTORIAL 1 (Chapter 1: Introduction to knowledge economics)

Section (A) - Case Study of Human Capital Flight

The recent report by the National Economic Advisory Council (NEAC) on the New Economic Model (NEM) stated that “we are not developing talent and what we do have are leaving”. This report is to focus on the brain-drain (human capital flight) trends and treated it as a stumbling block for Malaysia to develop as an advanced and high income nation.

The report says that currently more than 350,000 Malaysians are working abroad with over half of them having tertiary education. According to figures compiled in year 2007, 40% of Malaysian emigrants headed for Singapore. For the other emigrants, 30% go to OECD countries (Australia, New Zealand, the United States, Canada and Britain) 20% to Asian countries (Brunei, Philippines, and Indonesia) and 10% for the rest of the world.

According to World Bank, Malaysians residing overseas numbered only 9,576 in 1960 while the world’s total registered migration was 382,912 per nation. By 2005, the world’s registered migration increased to an average of 919,302 per nation, an increase of 2.4 times. However, the emigration numbers rose to 1,489,168, an almost 100-fold increase over the 45-year period.

It’s generally believed that, the culprits of this phenomenon are better career opportunities abroad, serious corruption, social inequality, lack of religious freedom and educational opportunities, and the government's affirmative action policies.

1. What is brain drain (human capital flight)?

2. Briefly elaborate the culprits of this phenomenon that stated in the article.

3. Analyse the advantages and shortcomings of brain drain.

3. Develop the policy implication to tackle this economic problem.

Section (B) – Introduction to Knowledge Economics

1. Define knowledge economics.

2. List and briefly explain the possible ways to create new knowledge.

3. Explain the diffusion of new innovations by using the curve of adoption process.

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TUTORIAL 2 (Chapter 2: Macro-Microeconomic references to continuity and breaks)

Section (A) - Case Study of the Correlation of Education & Economic Development.

Education is a significant key perspective to making economic development sustainable in the 21st century. The overall state of education in the world has been increasing at rapid rate. More and more countries are reaching very high rate of education that only a few highly developed nations were able to achieve in the past.

For example, Taiwan has raised its average number of years of education from less than 3 years in the early 1950s to over 10 years in 1995. However, many countries still remain with low levels of education. Especially in Africa, southern Asia and the Middle East, the overall levels of education remain extremely low.

High income economies provide their residents with much more education than developing economies do. The average years of education in developed countries is 11.1 years but the average years of education in developing countries is only 3.9 years.

There are also very large differences in education attainment among the developing countries. For examples countries in Africa such as Chad, Burundi and Mali have the average years of education of only 0.4 year but compared with countries such as South Africa (3.9 years) and Swaziland (3.8 years).

The performance in Latin America is better. For examples, high education attainment is found in Argentina (9.2 years), Uruguay (8.1 years) and Chile (7.8 years). But country such as Haiti can manage only 1.7 years of average education. In Asia the achievement is more unequal. High performing countries include South Korea (9.3 years), Taiwan (8.4 years) and the Philippines (7.6 years). Low performing countries with low education attainment usually do not perform better than the others. For example, Afghanistan is 0.9 years and Bangladesh is 2.0 years.

1. From this article, evaluate the estimated correlation of education on economic development.

2. In your personal opinion, how education making economic development sustainable in the 21st century?

Section B - Macro-Microeconomic references to continuity and breaks

1. What is intangible capital? Explain the differences between tangible and intangible capital with the aid of relevant examples.

2. Analyse the main reasons to the growth in the share of intangible capital.

3. Clearly define ICT and explain how it can play a role as knowledge instrument.

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4. Explain why the technological change and innovation are costly apart from direct investment spending in intangible capital (R&D).



TUTORIAL 3 (Chapter 3: Production of knowledge)

Section (A) - Case Study of the Effects of Technological Change on Labor Market;

Employment and Wage Differentials.

The fear of a jobless future has persisted for decades, going back to debates concerning automation in the early 1960s. More recently, the displacement of workers has regained attention owing to the upsurge in information technology. Indeed, along with a large-scale technological transformation and a boom in productivity, the U.S. economy in the 1990s was characterized by a restless labour market.

There was almost 22 million new jobs were created during the decade, and unemployment dropped as low as 4%, the lowest rate since World War II. However, the decade witnessed massive layoffs and the disappearance of many well-paid, permanent jobs. Some studies examined the overall job loss in the United States between 1981 and 1999 increased despite economic expansion.

Technological change is often painted as one of the culprits for the growing wage inequality and increasing educational wage differentials in the U.S. labour market. Researchers generally agree that technological change has increased the demand for highly skilled labour relative to the demand for low-skilled labour. Some studies attribute this trend to computer-labour substitution, suggesting that technology can substitute for low-skilled labour and thus reduce demand for less-educated workers.

1. Differentiate the skilled and unskilled labour with the aid of relevant examples.

2. From this article, analyse the distributional consequences of knowledge-based

economy with respect to growing inequality in wage and employment.

Section B – Knowledge Production

1. What is dual dichotomy in knowledge production? Discuss it with an aid of the

relevant diagram.

2. Explain the key roles that science system plays in a knowledge-based economy.

3. Analyze why the efforts to measure the contribution of scientific knowledge to the

economy are difficult?

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TUTORIAL 4 (Chapter 4: Reproduction of knowledge)

1) Discuss the THREE forms of knowledge reproduction:

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2) What are the “Visible” and “Invisible” functions of knowledge reproduction?

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TUTORIAL 5 (Chapter 5: Knowledge as Economic Good)

1) What is knowledge spillover?

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2) Discuss the following THREE properties of knowledge as an economic good.

a. A good that is difficult to control -

b. A good that is non-rival -

c. A good that is cumulative -

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