2.6.5 Economic growth and development Flashcards
economic growth
refers to increases in national income over time, measured in either actual or potential terms.
development definition
- believed to depend on:
- income - which will come from economic growth
- availability of basic goods and services for survival - food, shelter, warmth and so on
- freedom of individuals to make choices on a social and an economic
level.
main characteristics of less-developed countries
- low levels of real GDP per capita
- dependence on primary products for export revenue
- fast pop growth + low median age for the population.
- a high proportion of the population based in rural areas.
- higher than average size for the informal economy
- poor levels of infrastructure
- poorly developed financial markets.
Main indicators of development
- Humn development index
- Human poverty index
- Gender-related Development Index + Gender empowerment measure
- social indicators
Human Development Index (HDI)
assigns each country a score based on:
* real national income per capita - based on PPP exchange rates
* health of the population - based on life expectancy at birth
* education of the population - based on mean years of schooling and expected years of schooling.
= combinded give HDI score
Human poverty index
measures a range of indicators including life expectancy, poverty rates and literacy rates
Gender-related Development Index (GDI) and Gender Empowerment
Measure (GEM)
similar to the HDI but also considers gender gaps in
development
social indicators
individual statistics looking at levels of social development (e.g. education levels, access to health and education, literacy rates and so on)
factors effecting growth in development
Investment
- adds to both short-run and long-run growth within an economy.
- Investment in infrastructure - transport links, sewerage systems, public services, etc. - is more useful for development than, say, increased military investment.
factors effecting growth in development
education and training
- add to SR growth and should also move the economy closer to development.
- Education adds to the economy’s
intellectual capacity - e.g. boosting literacy rates helps development.
Training increases workers’ employability, either boosting productivity or increasing the range of jobs they can perform.
barriers to economic growth and development
- poor infacstructure
- corruption
- inadeqaute human capital
- lack of property rights
- primary product depenency
- undeveloped financial system
- instituional factors
policies to promote
market-based strategies
- trade liberalisation - removing or decreasing trade barriers
- removal of subsidies - often found on import substitutes
- policies to attract inward investment - such as removing legal barriers to foreign ownership allowing the price mechanism to work more freely - i.e. cancelling
- minimum and maximum prices in individual markets.
policies to promote
interventionist strategies
- infrastructure investment - e.g. in transport, technology and basic facilities (e.g. sanitation and health)
- education and training investment
- investment in tourism and other services
- overseas aid
- debt cancellation
- state investment in the welfare system.
role of trade in promoting econ growth and development
what does allowing free trade help
- development as countries benefit from specialisation in industries where they have comparative advantage.
- trade w/ minimal barriers = gains of specialisation can be shared between all.
role of trade in promoting econ growth and development
what do some economics argue about this?
in reality governments of developed
economies will protect their own industries from low-cost competition
in less-developed economies by claiming that these countries have an
‘unfair’ advantage in terms of low costs.
