4.3 Emerging and developing economies Flashcards
2 strengths of HDI to compare level of development between countries
- Holistic Measure: provides a comprehensive view of development by considering health, education, and living standards
- Global Comparisons: allows for comparisons between countries and over time, highlighting trends in human development
2 limitations of HDI to compare level of development between countries
- HDI only combines three key factors: does not include all dimensions of development e.g sustainability, gender equality, income distribution
- Data Quality: relies on data accuracy, which may be lacking in some countries leading to inaccuracies
What is development?
A sustainable increase in living standards/quality of life for a country, typically characterised by increases in life span, education levels, and income
What are the 3 dimensions of HDI?
- Health (life expectancy)
- Education (mean years of schooling)
- Income (GNI per capita)
Name 3 other measurements of development?
- Inequality-adjusted Human Development Index (IHDI)
- Multidimensional Poverty Index (MPI)
- Genuine Progress Indicator
What is the inequality-adjusted Human Development Index (IHDI):
An adjustment of HDI which includes fourth indicator, inequality
What is the multidimensional Poverty Index (MPI)?
Measures the percentage of the population that is multidimensional poor (uses broader data of health, education and standard of living) e.g school attendance, access to safe drinking water
What is the genuine Progress Indicator?
A measure calculated from 26 indicators grouped into three categories (economic, environmental and social) + aims to look at economic sustainability
What are 7 economic factors influencing growth and development?
- Primary product dependency
- Volatility of commodity prices
- Capital flight
- Savings gap
- Foreign currency gap
- Access to credit and banking
- Absence of property rights
How does primary product dependency influence growth/development?
- Supply shocks e.g natural disasters can lead to vulnerability
- Dutch disease (country becomes main commodity producer leading to an appreciation and higher export prices=uncompetitiveness)
How does volatility of commodity prices influence growth/development?
- Supply and demand for primary products is inelastic
- Relatively small changes in demand/supply leads to huge fluctuations in price
(lead to fluctuating export revenues, incomes)
How does capital flight influence growth/development?
- Rapid movement of large sums of money out of a country
- Can occur due to a lack of confidence in the country’s stability (economic + political)
- Leads to currency weakness (depreciation)=inflation
How does a saving gap influence growth/development?
(Harrod-Domar model)
- Lack of savings (caused by low incomes, high inequality)
- Little money available for investment
- Hinders development, capital stock and economic growth
How does a foreign currency gap influence growth/development?
- Country’s expenditures on imports and capital exceed its earnings from exports/foreign exchange
- Can be a result of international debt payments (=outflows), capital flight
How does access to credit and banking influence growth/development?
- Financial institutions enable individuals/firms to borrow which can be used for investment or to generate growth
- A lack of institutions e.g central banks can prevent this
How does an absence of property rights influence growth/development?
- Property is the main household asset which can be used to secure loans or generate income
- A lack of property rights can prevent this
Name 6 market-oriented strategies to promote growth/development
- trade liberalisation
- promotion of FDI
- removal of government subsidies
- floating exchange rate
- microfinance schemes
- privatisation
How can tourism be used as a strategy to promote growth/development?
- Employment creation
- Export earnings (service industry which generates foreign exchange earnings)
- increased capital investment in tourism infrastructure e.g airports
Name 4 Interventionist strategies to promote growth/development
- development of human capital
- protectionism
- managed exchange rates
- buffer stock schemes
What is one advantage and one disadvantage with debt forgiveness?
- Servicing debt leads to BoP problems/opportunity cost
- Sets a dangerous precedent (creates moral hazard)
What are sovereign wealth funds?
Describe buffer stock schemes
- Government imposes both a maximum and minimum price for goods
- Buys up stocks when there is excess supply
- Sells off stock when there is excess demand
- Used on commodities, where the prices are volatile
- Self-financing: money raised
when selling the products, allowing government to buy the next lot of stocks.
What is a developing economy?
A country which, relative to others, has a lower average standard of living/HDI
What is a benefit of buffer stock schemes?
- Stabilises prices (prevents sharp falls and rises in price)
- This encourages investment as producers gain more certainty
- Also this ensures that consumers can afford the good
