29. Domestic factors and development

Question 1

What are the institutional factors affecting development?

Answer 1

• education: more efficient workforce, improves role of women, improved levels of health
• health care: better health care system - longer life expectancy, lower mortality (disparities between urban - rural areas)
• infrastructure: more efficient economic activity - transportation, sanitation - higher standards of living
• political stability and corruption: more stable more likely to attract FDI and aid, citizens more involved, more certainty, trust
• legal system: basket of legal rights (ownership -> improvement, benefit, sell, exclude others form suing)
• financial system: savings - > investment, micro-credits
• taxation:curruption free govs acn finance public goods / services with tax revenue
• use of appropriate technology: if low capital - no need for high technology - no work for labour - have to match the abilities and increase efficiency
• women’s empowerment: improves future generations’ prospects - positive externalities (education, standards of living, no child labour, contraception)
• income distribution: rich dominate both politics and economy - capital flight - restricts growth / development

Question 2

Define institutions

Answer 2

Institutions - structures that are imposed on human human interaction, therefore, define the incentives that determine the choices that individuals make which shape the performance of the society and economy over time

Question 3

Define infrastructure

Answer 3

Infrastructure - essential facilities and services - roads, airports, sewage treatment, water systems, railways, telephone - necessary for economic activity

Question 4

Define corruption

Answer 4

Curruption - the dishonest exploitation of power for personal gain