Development Economics Definitions Flashcards
Economic Growth
The increase in a country’s output over time, that is an increase in national income or an increase in real GDP.
Economic Development
A much broader concept than merely economic growth, often involving non-economic and often quite intangible improvements in the standard of living, such as freedom of speech, freedom from oppression, health care, education and employment.
Sustainable Development
Refers to the use of the factors of production by the current generation that result in the resources being available for future generations.
Human Development Index (HDI)
a composite statistic of life expectancy, education, and income per capita indicators. A country scores higher HDI when the life expectancy at birth is longer, the education period is longer, and the income per capita is higher.
Infant Mortality Rate
The number of live-born infants who die before one year old per 1,000 of the population.
Trickle Down
The theory that rapid economic growth will filter down to the rest of the economy, primarily the lower and middle classes, in time. Primarily used by supply side theorists to rationalize giving tax breaks for business and the wealthy.
Absolute Poverty
Where income falls below that required for minimum consumption, such as insufficient basic goods and services like food and water to sustain life.
Diversification
The strategy to reduce reliance on the export of a narrow range of goods and services to reduce the risk of overspecialization.
Relative Poverty
A situation where individuals do not have access to the same living standards as enjoyed by the average person. Those people whose level of income falls near the bottom of income distribution in their particular country live in relative poverty. For example, low-income person in Australia may be in the top income levels of income in some sub-Saharan countries.
Poverty Cycle
The connection between low incomes, low savings, low investment and so on and the idea that poverty perpetuates itself from one generation to the next.
Standard of Living
The level of well-being of a person or groups of people
Staple Food
A food that is eaten by lots of people, particularly those on a relatively low income
Corruption
the abuse of public office for private gain, the dishonest use, or abuse, of power.
Primary Health Care
Refers to the provision of health services based upon preventing, rather than curing, diseases. I.e. Providing clean water and immunization.
Subsistence Agriculture
The production of farm output mainly for own consumption.
Primary Production
the sector of the economy engaged in producing goods that can be found in, or depend upon, nature. i.e. iron ore, nickel, precious metals, rare-earth, coal-mining
Primary School Enrollment Rate
The percentage of children of primary school age that attend primary school.
Multinational Companies/Corporations (MNC)
A firm that owns production units in more than one country.
Less Developed Country (LDC)
Refers to countries with a low standard of living, such that many people do not have the basic necessities of life such as adequate food, water, clothing, health and education.
Most Developed Country (MDC)
Refers to a country where its people have the basic necessities of life, plus the majority of people have money for luxuries. A country that has a high level of economic development - Real GDP per capital plus a high standard of living.
Lorenz Curve
Measures income inequality within the population.
Low-Income Households
Refers to households where the basic necessities of life cannot be met. Covers approximately 3 billion of the world’s population.
Infrastructure
Areas such as good roads, railways, gas, electricity, water, schools, hospitals and housing need to be in place for development to occur
Property Rights
A system protecting people’s property rights needs to be in place to enable security to investors and also landowners
Capital Flight
A transfer of funds to a foreign country by a local citizen or business.
Export promotion (Outward oriented)
Encourages free trade in goods and the free movement of capital and labor. The theoretical justification is that export promotion increases output and growth arising from the use of comparative advantage.
Import Substitution (Inward oriented)
A deliberate effort to replace major consumer imports by promoting the emergence and expansion of domestic industries such as textiles, shoes and household appliances.
Infant Industry
The need to protect newly formed industries until they can compete on the international market. Tariffs can be removed once they are large enough and efficient enough.
International Indebtedness
The amount of borrowings a country has obtained from overseas. A major problem for LDCs.
Privatization
The transfer of ownership of property or businesses from a government to a privately owned entity.
Sovereign Debt Crisis
A sovereign default is the failure or refusal of the government of a sovereign state to pay back its debt in full.
Total Debt Service as a % Of GDP
Expresses the relationship, in percentage terms, between a country’s total interest payments on external borrowings and the value of their GDP. The higher the figure, the less export income a country has to fund future economic growth and development.
Micro-Lending
Refers to the lending of very small amount of money to private small businesses. It is has the potential to be an important source of funding in LDCs.
Micro Credit
The practice of giving small loans to individuals who otherwise would be excluded from the finance sector (usually due to lack of income or collateral , and would have to resort to secondary financial markets (loan sharks).
• It has the potential to be an important source of funding in LDCs.
• Usually based on a group responsibility, predominantly women but not always.
Manufactured goods
Goods produced from raw materials
Non-Government Organisations (NGO)
Refers to organizations that are not government bodies. They are involved in unofficial aid programs in LDCs
i.e. the Red Cross and Oxfam.
Dual Economies
two distinct economies
i. CBD usually modern and somewhat similar to MDC’s (BGC) and
ii. slums (RIO, Bombay and Manila) which often have informal markets
Bilateral Aid
Aid given directly from one government to another
Multilateral Aid
Aid given through a multilateral agency like the World Bank, Regional Development Bank and UN agencies.
OECD
Organization of Economic Co-operation and Development.
Official Development Assistance (ODA)
Net disbursements of loans or grants made on concessional terms by official agencies of member countries of the OECD
Grant Aid
An outright transfer payment, usually from one country to another (Foreign aid); a gift of money or technical assistance that does not have to be repaid.
Soft Loans
Concessional loans that are given at an interest rate that is below market rates, or where repayments are delayed to after a certain date
Tied Aid
Foreign aid in the form of bilateral loans or grants that require the recipient country to use the funds to purchase goods and services from the donor country
Fair Trade Organizations
A policy promoted by some MDCs to allow goods to be imported from LDC’s with no or limited restrictions. Manufacturers in LDC’s must be locally based co-operatives, using ethical labor and environmental standards e.g. Starbucks fair trade coffee
Foreign Direct Investment
Long term overseas investment by multinational corporations in fixed capital and financial investments like stocks and bonds, in order to gain income.
Market-led and Interventionist Strategies
The IMF and World Bank both encourage a market led approach of export promotion, less use of subsidies by governments, an exchange rate more open to market forces, and the elimination of factor price distortion.
International Monetary Fund (IMF)
Primarily involved in arranging credit and providing mainly macroeconomic advice to LDCs. Often accused by LDCs as being interfering in their internal affairs as credit provided often comes with stringent conditions which have political and social consequences for borrowing governments.
IMF Stabilization Packages
centered on three areas:
- Increased use of market mechanism (free market approach)
- Stabilize exchange rates (allow them to float)
- Help countries meet debt obligations
World Bank
an international financial institution that provides loans (mostly concessional) to developing countries for capital programs, primarily infrastructure projects. The World Bank is part of the United Nations system.
Commodity Agreement
Agreement made by countries to form a cartel to issue quotas and the percentage the cartel is willing to supply.
