4.3 Emerging and Developing Countries Flashcards
How are countries categorised based on their wealth and development?
High income countries (HIC’s) = Developed
Middle income countries (MIC’s) = Emerging = Newly Industrialised countries (NIC’s)
Low Income counties (LIC’s) = Developing
What are tiger economies?
Economies with very high growth rates
What characteristics do developing countries have?
Lower incomes per capita
Lower physical and human capital
Lower health and morality rates
Higher population growth rates
Higher unemployment and underemployment
Agriculture is a bigger sector vs manufacturing
Poor government
Under pressure environment as less of priority
What are 4 measurements of economic development?
Human Development Index (HDI)
Inequality-adjusted HDI (IHDI)
Multidimensional Poverty Index (MPI)
Genuine Progress Indicator (GPI)
What is Human Development Index (HDI)?
Index based on 3 indicators:
- Health
- Education
- Income measured by real gross national income (GNI) per capita at purchasing power parities
These are given weightings and a geometric mean is taken from 0-1
- higher score = better economic development
Quite easy to calculate
Real GNI per capita at purchasing power parities doesn’t take inequality domestically into consideration
Don’t have other variables such as housing, employment and environment
What is Inequality-adjusted HDI (IHDI)?
Adds inequality as a fourth indicator
Longevity, education attainment and standards of living are adjusted for inequality using measures like Gini coefficient
- called the Atkinson Index
IHDI is a broader measure than HDI
But doesn’t take other variables into consideration
What is Multidimensional Poverty Index (MPI)?
Measure % of people who are multidimensionally poor
Uses a broader range of indicators
Focuses on data linked to poverty
Not possible to gain all this data for all countries
Don’t take environment into consideration etc
What is Genuine Progress Indicator (GPI)?
Attempts to give a more comprehensive measure than HDI and MPI
Calculated by 26 different indicators
- grouped into 3 main categories: economic, environmental and social
Contributed to proof the antigrowth case
- So its a biased indicator
- Biased to countries not growing as much
What economic factors influence development?
Political and institutional factors
Education and skills
Infrastructure
Technology
Absolute Poverty
Income distribution
Access to credit and Microfinance
Demographic factors
International trade
Commodities
- however, the recourse curse or dutch disease may effect
Large proportion saved and lower capital needed to produce output (Harold-Domar model - Growth = s/k)
Debt
FDI and portfolio capital flows
Remittances
What non-economic factors influence development?
Gender issues
Environment
War
Diseases
Geographical location
What is the recourse curse?
Where countries rich in commodities often experience slower economic growth and worse development
Could be over-relied on resources
- Price shocks and volatility really slows down economy
What is the Dutch disease?
Where exploitation of commodities leads to a rise in the exchange rate and loss of international competitiveness
What’s the Harold-Domar growth model?
States the higher proportion an economy saves and the lower capital to output ratio, the more growth an economy has
Growth = s/k
s=saving proportion of economy where S=sY
k= capital-output ratio where k=ΔK/ΔY
Derivation:
Investment, I=ΔK (change in capital)
Investment is roughly the same as savings in an economy, so I=S
Economic growth =ΔY/Y
Rearranging equations so ΔY=ΔK/k and Y=ΔK/s
ΔY/Y=s/k
Economic growth =s/k
What’s the savings gap?
The difference between the savings of the country vs the amount needed to finance investment investment for a higher economic growth
What’s the foreign exchange gap?
The difference between actual level of exports vs level of exports needed to boost growth
