4.15.2 - Economic Growth and Development Flashcards
How can economic development be measured?
- A general improvement in living standards
- Access to resources such as food and housing
- Access to opportunities for human development
- Sustainability and regeneration
- Access to healthcare
What are indicators of development?
The main methods by which countries measure development.
e.g. GDP per capita, GNI per capita etc.
Why is GDP per capita normally higher than GNI per capita in developing economies?
Profit outflows and interest payments out of developing countries to developed countries lead to GNI falling.
What is economic welfare made of?
Welfare derived from goods and services purchased + welfare derived from public goods + economic welfare derived from QoL factors
What is HDI?
An index based on life expectancy, education and income per capita.
How is HDI ranked?
- Very high human development
- High human development
- Medium human development
- Low human development
How is HDI constructed?
- Life expectancy at birth
- Mean years of schooling and expected uears of schooling
- GNI per capita, reflecting PPP in US dollars
What issues does HDI not take into account?
Income equalities.
Illustrate how economic growth does not always lead to economic development.
As the economy grows from PPF1 to PPF2, the economy actually uses more of its available resources on producing armaments and reduces the amount of education it provides.
What are the main barriers to growth and development?
- Corruption
- Institutional factors
- Poor infrastructure
- Lack of human capital
- Lack of property rights
Why is corruption a barrier to growth and development?
Resources are diverted away from more productive uses to protect less efficient resource use.
This causes production costs and consumer prices to rise.
What are institutional factors?
Factors such as the rule of law, legal structures, public administration systems, financial institutions etc.
Why are institutional factors barriers to growth and development?
If rules of law are not upheld, then the ‘law of contract’ would not be upheld. If this necessary step is not upheld, then businesses and consumers are less likely to do business as there is no guarantee of the provision of goods or payment.
Why is poor infrastructure a barrier to growth and development?
Poorer developing countries do not have infrastucture that allows them to trade effectively.
The lack of infrastructure by the public sector damages external economies for the private sector, and disincentivises MNCs to trade in those countries with weak infrastructure.
Why is a lack of human capital a barrier to growth and development?
If the stock of human capital is not improving in quality or size, the country cannot develop their economy as their productive capacity will not really improve.
Technological improvements are great, but if there are no workers who understand how to use the technology, then the productive capacity benefits sum to pretty much zero.