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development economics > de1 > Flashcards

de1 Flashcards

1
Q

Define economic growth

A

Increase in real output of an economy over time

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2
Q

Sources of Economic Growth

A

Natural, Human capital, Physical capital, Institutional

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3
Q

Natural factors in economic growth

A

Land reclamation through landfills \n\nFertilization\nBetter planning of land usage\nImproved agricultural method \n\nBuilding upward instead of outward

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4
Q

Human capital factors

A

Encouraging population growth\nIncreasing immigration levels\nImproving health care, education training, access to fresh water

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5
Q

Physical or technological factors

A

Factories, machinery, shops, offices\nSocial capital: schools, roads, hospitals, houses

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6
Q

Capital widening

A

Extra capital used with increased amount of labor bu ratio of capital per worker does not change

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7
Q

Capital deepening

A

Increase in amount of capital for each worker, improvements in labor productivity

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8
Q

Institutional factors

A

Banking, legal, education, infrastructure, political stability, good international relationships

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9
Q

Economic development

A

An improvement in welfare from viewpoints: \n\nReducing widespread poverty\nRaising living standards\nReducing income inequalities\nIncreasing employment opportunities

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10
Q

Relationship between growth and development

A

1 Higher incomes–> Improves standard on living \n\n2 Higher government revenue–>Govt able to provide education, healthcare and infrastructure \n\n3 Creation of inequality \n\n4 Lack of sustainability because of pollution

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11
Q

Common characteristics of developing

A

1 High birth rates \n\n2 Low levels of GDP per capita\n3 Large agricultural sectors \n\n4 Large urban informal market \n\n5 Poverty trap

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12
Q

Poverty trap

A

A self perpetuating mechanism that contributes to the persistence of poverty in a nation\n\n\nLow income–> savings –> investment –> productivity

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13
Q

What do LEDCs not have in common

A

Climate\nResource endowments\nPolitical system \n\nHistory (warfare, colionalism)

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14
Q

Absolute poverty

A

do not have access to the basic necessities needed to sustain life

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15
Q

Relative poverty

A

living standards are well below an observed “average” in an economy

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16
Q

Millennium Development Goals

A

GAP RICEE \n\n\n\nGlobal partnership for development\n\nAchieve universal primary education\nPromote gender equality and empower women \n\n\nReduce child mortality \n\nImprove maternal health\nCombat HIV/AIDS, malaria and other diseases\nEradicate extreme poverty and hunger \nEnsure environmental stability

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17
Q

GDP VS GNI

A

GDP: Total economic activity in country regardless of who owns productive assets \n\nGNI: Total income earned by a country’s factors of productions regardless of asset location \n\nFDI increases GDP above GNI

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18
Q

Purchasing power parity (PPP)

A

A technique used to determine the relative value of different currencies by comparing prices of identical goods and services in different countries

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19
Q

Exchange rate vs PPP

A

– EX attempts to equate PPP of currencies in different countries \n– Very volatile and relevant to trading products\n– GDP based on market EX tend to over–estimate cost of living in developing countries

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20
Q

Measures of welfare

A

1 Health\n– Life expectancy at birth\n– Infant mortality rate\n\n2 Education \n\n– Adult literacy rate: proportion of adults aged 15 or above who are literate \n\n– Net enrollment in primary school:\n3 Composite indicators

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21
Q

Human development index (HDI)

A

A measurement of economic development, which accounts for education level, health provision and decent standard of living (GDP per capita). A value between 0 and 1, with higher values representing higher levels of development\n\n\n\nHigh: Singapore, Australia \n\nMedium: India, China\nLow: Nigeria, Ethiopia

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22
Q

Problems with HDI

A

Only an average figure that can mask inequalities within the country. Likely to occur between:\n– Rural and urban citizens\n– Genders\n– Ethnic groups

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23
Q

Domestic factors that contribute to economic development

A

1 Education\n2 Healthcare\n3 Technology\n4 Access to credit and micro–credit schemes\n5 Empowerment of women\n6 Income distribution

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24
Q

Micro–finance

A

Micro–credit offers loans to people on low incomes to start their own businesses. Enabling and empowering bottoms–up tool to poverty alleviation. \n\n\n\nCredit creates opportunities for self–employment liberating poor from poverty to gain income \n\n\n\nEnables them to invest

25
Q

Why is unequal income distribution a barrier to growth and development?

A

– Tend to be lower saving because poor save very small proportion of their income \n\n– Rich tend to dominate both politics and economy so policies favor the rich\n– Rich move large amounts of funds out of economy

26
Q

International barriers to economic development

A

1 Over specialization on narrow range of products\n2 Price volatility of primary products (Suppy–elastic). PES is relatively inelastic so changes will lead to large price fluctuation. Makes it difficult for producers to plan ahead \n\n3 Inability to access international markets due to protectionism. Cannot benefit from comparative advantage. Rate of tariff increases as processing increases so cannot move away from raw materials

27
Q

Strategies for achieving economic growth and development

A

–Import substitution\n–Export promotion\n–Trade liberalisation \n\n–Bilateral and regional preferential

28
Q

Aids

A

Any assistance that is given to a country that would not have been provided through normal market force. Two types are humanitarian which are short term and development which is long term

29
Q

Why give aid?

A

–Help people who have experienced some form of natural disaster or war\n–Help developing countries achieve development\n–Create alliances\n–Fill savings gap in developing countries\n–Improve quality of human resources\n–Improve levels of technology\n–Fund specific development projects

30
Q

Humanitarian aid

A

Given to alleviate short–term suffering: droughts, earthquakes \n\nGrant aid: does not have to be paid \n\nFood aid: food or money to buy it\nEmergency aid: shelter, tents, clothing \n\nMedical aid

31
Q

Development aid

A

Given to alleviate poverty in the long run. Called “Official Development Assistance” (ODA). Provided by individual countries or multilateral organisations

32
Q

Types of Aid

A

Long term loans: Soft loans with low interest rates \n\nTied aid: Grants or loans that have to be used to buy goods from donor country\nProject aid: For one project that does not require repayment \n\nTechnical assistance: Improve tech and human capital in its use\nCommodity aid: Finance for commodities to aid industries

33
Q

Concerns about aid

A

1 Corruption: LDC may distribute it unfairly\n2 HDC may dsitribute aid for political reasons \n\n3 Tied aid does not provide employment in LDC and is not an efficient method of allocating resources\n4 Short term provision of food may have same effect as dumping such as in Ethiopia \n\n5 Dependence on future aid \n\n6 Aid may be focused on industrial sector therefore accentuating income disparity \n\n7 Washington Consensus strings attached for free trade and MNC access to new markets \n\n8 Aid fatigue in HDC – don’t want to give aid \n\n9 Loan repayments cause mounting problems \n\n\nIt is estimated that less than half the aid goes to poor countries, instead it is based on the military, political and business interests of the donors, a reward to those in power\n\n\nLoans and grants may be contingent on changes in tax laws, wage and price systems, food subsidy programs, and whether the money is used for rural or urban development.

34
Q

Organizations for aid

A

1 The World Bank: provides aid and advice to developing countries \n2 International Finance Corporation (IFC): promotes private sector investment \n3 International Development Guarantee Agency (IDA): interest free loans

35
Q

Non–government Organisations (NGOs)

A

To promote economic development, humanitarian ideals, sustainable development eg by lobbying governments

36
Q

Odious Debt

A

When government leaders use borrowed funds in ways that don’t benefit or even oppress citizens\n\n\nDebt borrowed by dictators and corrupt regimes on behalf of the government for personal interests

37
Q

Structural Adjustment Policies (SAPs)

A

AKA Washington Consensus criteria \n\nIMF lent money to countries that needed it but have restrictions that resulted in \n\n1 Govt spending curbed to pay back loans \n\n2 Increased unemployment \n\n3 Fall in real wage levels \n\n4 Prices rose as subsidies were removed \n\n5 Often led to de–development

38
Q

The future of aid

A

Debate on cancelling developing world debt \n\nDebt servicing to cancel interest \n\n– Eg Nigeria borrowed $17bn, repaid $18bn and owes $34bn \n\n– Malawi spends more on debt servicing than healthcare

39
Q

Market led vs Interventionist growth strategies

A

Market: Export led, FDI, Washington consensus + SAPs\nInterventionist: Import substitution, protectionist trade, exchange rate intervention

40
Q

Problems with interventionist

A

Eg Argentina: \n1 Public sector grew and became bureaucratic \n2 Corruption in public sector increased\n3 Nationalised industries were inefficient and loss making \n4 Govt spending was excessive (budget deficit) \n5 Money supply increased leading to inflation\n5 Large infrastructure project saw little success (Indonesia)

41
Q

Problems with market based

A

Thatcher and Reagan (80s) & Success of Asia Tigers based on export led growth and FDI \n\n\n\n1 Infrastructure not created\n2 Developed world want free trade but do not always practice it \n\n3 Economic growth is benefit in long run but not always in short run \n\n4 Urbanisation: growth in urban areas only

42
Q

Conditions that result in economic development

A

Trade justice, debt relief, efficient domestic market, political stability, good governance, elimination of corruption, effective targeted aid

43
Q

Corruption

A

The abuse of public office for private gain

44
Q

Informal sector

A

Part of an economy that is untaxed, unregulated by the government and not included in the calculation in any national income statistics

45
Q

Sustainable developments

A

Development that meets the needs of the present without compromising the ability of future generations to meet their own needs

46
Q

GDP per capita

A

Total market value of all final goods and services produced by factors of productions residing in an economy in one year divided by population

47
Q

Gross National Income

A

GDP per capita plus the net income from abroad per capita \n\n\n\nDeducting domestic income generated by non–nationals and adding incomes earned aboard by nationals

48
Q

Infant mortality rate

A

Number of infants dying before reaching one year of age, per 1000 live births in a given year

49
Q

Literacy rate

A

Percentage of population that can read and write simple statements on their everyday life

50
Q

Primary enrollment rate

A

Proportion of children at official primary school age who are enrolled in primary school

51
Q

Export promotion

A

Attempt to achieve economic growth led by exports

52
Q

Import substitution

A

A policy to deliberately reduce imports through protectionism

53
Q

Trade liberalisation

A

Attempts to open up markets, without govt intervention for free trade

54
Q

Foreign direct investment

A

Long term investment by multinational corporations in a foreign country

55
Q

Multinational corporations

A

Conducts economic activities in more than one country

56
Q

Foreign/external debt

A

Loans borrowed from creditors of another country\n

57
Q

Indebtedness

A

Amount of money a country owes to other countries/international institutions

58
Q

Infrastructure

A

Essential facilities and services such as roads, airports, sewage treatment that add to the capital stock of the economy and help with economic activity

development economics (3 decks)

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