3.6.2 Reducing poverty

Question 1

How can a lack of property rights in developing economies affect growth and development?

Answer 1

Developing economies who have a lack of intellectual property rights will deter innovation from their firms due to firms knowing that their innovative/differentiated ideas and products may be copyrighted and so have no incentive hindering markets and potential trades.

Question 2

Advantages of giving aid

Answer 2

• The moral thing to do
• Can help improve trade and political relations

Question 3

Disadvantages of aid

Answer 3

• Aid is only effective if distributed correctly- aid focuses on the improvement of the industrial modern sector of the economy and so can increase wealth and income inequalities in thrid world countries as certian sectors may experience growth howeveragrivultural sectors will suffer causing for greater inequality.
• Also developing economies tend to have more political corruption and so aid will not be effective at all

Question 4

Another diasdvantage of aid

Answer 4

Aid through dumping of goods so the goods are exported to the developing country for much cheaper (which is a form of international price discrimination) can negatively affect the domestic firms of the developing economy driving them out of business as their goods are at a higher price. Thus further worsening the development of the economy.

Question 5

What are NGO’s?

Answer 5

Non governmental organisations which look to increase equality through raising funds and aid. These are not-for-profit organisations and are funded by the government.

Question 6

What are some examples of poverty reduction policies?

Answer 6

• promoting FDI flows
• improving infrastructure
• developing human capital
• establishing property rights
• protectionism measures

Question 7

Explain FDI flows

Answer 7

If the developing economy can gain macroeconomic stability it can attract greater FDI flows particularly from MNCs who are attracted to the developing economy and its markets perhaps due to it being a low wage economy. The greater FDI flows can boost economic prospects such as opening up of jobs helping reduce poverty within the economy as disposable incomes rise so less likely to fall into relative poverty.

Question 8

Explain protectionist measures

Answer 8

If a government decides to take protectionist measures on goods being exported in it can help the developing economy as the developing economy are usually less competitive in the global market and so cant compete with mored advanced economies in terms of choice price and quality. So putting measures in place to disencourage buying from foreign maarkets and instead from the domestic economy, can cause for greater inward investments and boost prospects of the developing economy reducing poverty.

Question 9

Explain infrastructure

Answer 9

Examples of physical infrastructure include transport, energy, water. Higher supply costs delay businesses and it reduces the mobility of labour. For example, India’s poor irrigation system makes it difficult to sustain food grain production if there is low rainfall. It hurts the poorest communities and it leads to rising food prices. With greater infrastructure projects and investments, business efficiency rises and geographical labour immobility is reduced. Prices in the agricultural sector are less likely to fluctuate meaning greater stability, increasing consumer confidence which will increase their MPC and living standards.

Question 10

Explain establishemnt of intellectual property rights

Answer 10

This increases the business incentive to differntiate and innovate their products as can claim copyrights. As a result consumers in the developing economies can benefit from higher quality goods for cheaper prices as the innovation and differentiation means theyre more dynamically efficient. Higher quality goods and services being more accesible means the avergae quality of living can rise moving more people away from the poverty line.