de2 Flashcards
Absolute poverty
Meeting only bare subsistence essentials of food, clothing, and shelter to maintain minimum levels of living
Subsistence economy
Production is mainly for personal consumption and the standard of living yields no more than the basic necessities
Development
The process of improving the quality of all human lives
Important aspects of development
raising levels of living (sustenance) through relevant economic growth processes, self–esteem, freedom
Developing countries
high rates of population growth, low income per capita, and general economic and technological dependence on developed economies
Development economies
Concerned with the efficient allocation of existing scarce (or idle) productive resources and with their sustained growth over time\nAlso deals with the economic, social, political, and institutional mechanism, public and private, that are necessary to bring about rapid and large–scale improvements in levels of living
MDC\nLDC
More Developed Countries\nLess Developed Countries
LDC’s
highly imperfect economies\nconsumers/producers have limited info\nmajor structural changes in both society and economy\nmultiple equilibria possible\ndisequilibrium situations often prevail\nEconomic calculations are dominated by political and social priorities\nOther considerations than utility
Value premises
A value judgment reflects personal or class beliefs.. principles, standards, or qualities considered worthwhile or desirable.
Social system
the interdependent relationships between economic and noneconomic factors
Non–economic variables
Elements of interest to economists in their work but not given monetary value or expressed numerically because of the intangible nature\nE.g. education, health, cultural, political and institutional factors
Gross National Income vs. Gross National Product
GNI: Total domestic and foreign output claimed by residents of a country (total value produced within a country (GDP) combined with its income received from other countries)\nGNP: production of any nationals and adding it up
Income per Capita
Total GNP of a country divided by total population
Trickle down
Rapid gains in overall and per capita GNI growth would “trickle down” to the masses in the forms of jobs and other economic opportunities
Development must include:
Acceleration of economic growth, reduction of inequality, and eradication of poverty
Sen’s “Functionings”
what a person does (or can do) with the commodities of given characteristics that they come to possess or control
5 Sources of disparity between real incomes and actual advantages
Personal heterogeneity\nEnvironmental diversities\nVariations in social climate \nDifferences in relational perspectives \nDistribution within family
Sen’s “Capabilities”
freedom that a person has in terms of the choice of functionings
7 factors affect national happiness
Family relationships\nFinancial situation\nWork\nCommunity and friends\nHealth\nPersonal freedom\nPersonal values
Absolute underdevelopment
when any of food, shelter, health or protection are absent or in critically short supply
Indifference curve
graph showing different bundles of goods between which a consumer is indifferent, downward sloping (due to trade off)
Purchasing Power Parity (PPP)
The purchasing power of a country’s currency: the number of units of that currency required to purchase the same basket of goods and services that a US dollar would buy in the US
Human Development Index
calculates an index based on longevity (life expectancy), education (literacy), and real per capita PPP GDP
Rostow stages model
Stage 1 – Traditional society\nStage 2 – Preconditions for take–off\nStage 3 – Take–off\nStage 4 – Drive to maturity\nStage 5 – Age of (high) mass–consumption
Harrod Domar Model
Engine of growth: savings and investment\nS=I=?K=k?Y\nsY=k?Y
Lewis Structural Change Model
Two sector model\nWhen MPL > 0, inequality will decrease
International–Dependence: Neocolonial Dependence Model
Hub and Spoke model\nUnequal power relationship between rich and poor countries
International–Dependence: False Paradigm Model
Underdevelopment is a result of good intentions but inappropriate advice from Western “Experts”
International–Dependence: Dualistic Development
“Inferior” versus “superior” set of conditions\nno “trickle–down”\nLewis Model assumes it
Neoclassical Counter–Revolution
Advocates of ‘free markets’\n‘Underdevelopment’: a result of bad state intervention
Solow Growth Model
Adds labour and technology to the H–D Model\nAssumes Constant Return to Scale (CRS): ? Y = F(? K, ? L)
Endogenous Growth Theory: The Romer Model
This model can generate Solow model as a special case.. if Beta = 0
Size distribution of income
amounts of income received by the rich, poor, and middle–class individuals or families and often is interpreted as a direct measure of welfare\nin terms of income deciles (tenths) or quintiles (fifths)
Lorenz curve
Depicts the cumulative distribution of income
Head Count Index
Proportion of individuals living under the poverty line: HCI=H/N
Poverty Gap
The amount of money needed to bring everyone below the poverty line up to the poverty line
Foster–Greer–Thorbecke
Looks at income inequality among the poor
Welfare function
W = W(Y,I,P)
Dualistic Development
Modern sector enlargement, traditional sector enlargement and Lewis–style modern sector enlargement (good)
Poverty and Growth
Poverty alleviation policies need not be bad for growth
