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Economics > ECONOMIC DEVELOPMENT > Flashcards

ECONOMIC DEVELOPMENT Flashcards

1
Q

ECONOMIC DEV- SEN

A 
process of improving 
wellbeing
quality of life
--> standards of living
--> reduction in poverty
--> improved health/education
--> increase freedom and economic choice
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2
Q

ECONOMIC DEV- TODARO

A

1) availability and distribution of life sustaining goods
- -> food, shelter, health

2) increase in standard of living (im/material)
3) expansion and economic social choices

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3
Q

growth vs development

A

growth is a necessary but not sufficient condition for development
growth and economic development have different definitions!
* distribution of income should not be assumed as there may be income inequality= social unrest
*-ve externalities + un-sustainability: pollution/ resource depletion
* growth in one dominant sector: nigeria and oil

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4
Q

growth vs development: increase in Y

A
  • -> jobs/ quality of life/ material standard of living
  • -> decrease income inequality
  • -> reduction in poverty
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5
Q

growth vs development: increase in profit

A

firms make profit and invest it in technology and job creation= sustainable economy

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6
Q

growth vs development: fiscal divident

A

due to greater economic growth Gov revenue from taxes (corporate/ Y/VAT..) increase thus the Gov (if effective) invests it in infrastructure, health, education

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7
Q

CHARACTERISTICS OF DEVELOPING COUNTRIES x8

4L PI 2H

A
  1. low standards of living (low Y/jobs/ poverty)
  2. low levels of productivity (low capital/I)
  3. low levels of savings (savings trap)
  4. high population growth (depend on children for labour force)
  5. primary sector dominant (agricultural–> fluctuations)
  6. incomplete markets (financial + undesired currency)
  7. high unemployment/ underemployment
    - -> even greater if unregistered as disheartened
  8. low economic power on international stage

BUT- THEY HAVE DIFFERING CHARACTERISTICS TOO
DO NOT VIEW THEM AS HOMOGENEOUS
THEY ARE UNIQUE/INDIVIDUAL

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8
Q

MEASURES OF ECONOMIC DEVELOPMENT-

GDP PER CAPITA

A 
average Y per person in the economy
GDP/ population
GDP has many limitations....
useful: blank measure of income
but dev is more than just income!

GNI per capita is used more
more adapted to our current situation esp dev countries as lots of FoPs do not stay in that one country–> movement of LABOUR
also FDI profits are repatriated back to country of origin
–> inflating GDP/ capita

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9
Q

MEASURES OF ECONOMIC DEVELOPMENT

SINGLE INDICATORS

A

GDP/ CAPITA (PPP)
HEALTH
EDUCATION
* problem: as development isn’t a single thing

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10
Q

MEASURES OF ECONOMIC DEVELOPMENT- HEALTH

A

life expectancy: increase= health institutions are of good quality + many doctors–> education + jobs
infant mortality–> education+ infrastructure…

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11
Q

MEASURES OF ECONOMIC DEVELOPMENT- EDUCATION

A 
adult literacy
enrollment in primary education
= education is strong
= jobs for teacher
= potential for greater growth/ dev
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12
Q

MEASURES OF ECONOMIC DEVELOPMENT- GNI as opposed to GDP/ capita

A

GNI per capita is used more
more adapted to our current situation esp dev countries as lots of FoPs do not stay in that one country–> movement of LABOUR
also FDI profits are repatriated back to country of origin
–> inflating GDP/ capita

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13
Q

PURCHASING POWER PARITY

A

the same basket of goods in one country can cost much less than in another country
India and the UK
1 $ is worth a lot more in India than in the UK
PPP/ capita rate gives a more accurate measure!

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14
Q

MEASURES OF ECONOMIC DEVELOPMENT-

COMPOSITE INDICATORS: HUMAN DEVELOPMENT INDEX (HDI) FACTORS

A

Pakistani economist Mahbub ul Haq and published by United Nations Development Program (UNDP)

  1. longevity (life expectancy/ infant mortality)
  2. knowledge (adult literacy/ school enrollment)
  3. standard of living (GDP/ capita PPP)

equal weighting

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15
Q

MEASURES OF ECONOMIC DEVELOPMENT- COMPOSITE INDICATORS: MILLENNIUM GOALS (9)

2 MED work with PH

A
  1. Eradicate extreme poverty and hunger.
  2. Achieve universal primary education.
  3. Promote gender equality and empower women.
  4. Reduce child mortality.
  5. Improve maternal health.
  6. Combat HIV/AIDS, malaria, and other diseases.
  7. Ensure environmental sustainability.
  8. Develop a global partnership for development
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16
Q

MEASURES OF ECONOMIC DEVELOPMENT-

COMPOSITE INDICATORS: HUMAN DEVELOPMENT INDEX (HDI) ADVANTAGES

A
  1. broad measure (brings in single indicators)
  2. focuses on development outcomes
  3. allows for progress to be measured/time (index value)
  4. attention/ allocating resources can be focused on those who really need it: low index= AID
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17
Q

MEASURES OF ECONOMIC DEVELOPMENT-

COMPOSITE INDICATORS: HUMAN DEVELOPMENT INDEX (HDI) DISADVANTAGES

A
  1. distribution of income?
  2. why are they weighted equally?
    - -> different countries= different needs
    - -> inefficient allocation as there is no specific target
  3. freedom of choice?
  4. crime/poverty levels/ corruption/ -ve E… NOT BROAD ENOUGH

MAYBE ITS SELECTIVITY MAKES IT SUCH A GOOD MEASURE

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18
Q

HDI SHOULD BE COMBINE WITH?

A

LORENZ CURVE + GINI COEFFICIENT = Y inequality

cumulative income- Y axis
cumulative population - X axis

area A/ area A+B
0= perfect equality
1= perfect inequality

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19
Q

INSTITUTIONAL FACTORS AND DEVELOPMENT

EDUCATION

A

MEASURE: adult literacy + school enrollment

BENEFIT
productivity
jobs: increase Y + choice
gender equality if women are educated + empowered = more willing to spend
health-vaccinations /HIV/ contraception
technology
BUT
funding
--> private sector=exclusive
underlying problem
--> as soon as children reach a certain age they are seen as workers (high primary education but low secondary education- cultural)
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20
Q

INSTITUTIONAL FACTORS AND DEVELOPMENT

HEALTHCARE

A

MEASURE: life expectancy/ infant mortality…

BENEFIT
productivity
jobs (educated jobs)
standard of living= :)
sanitation/ drinking water

BUT
funding
price- private sector
–> is it right to exclude people from health care based on price

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21
Q

INSTITUTIONAL FACTORS AND DEVELOPMENT

INFRASTRUCTURE

A

bridges/ports/telecomunication…

BENEFIT
access to markets
access to schools/ hospitals
FDI= growth/dev

BUT
funding

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22
Q

INSTITUTIONAL FACTORS AND DEVELOPMENT

TAXATION

A

BENEFIT- fiscal dividend from increase in gov R
education
healthcare
infrastructure

BUT

  1. corruption + tax exemptions
  2. low corporate activity and tax incentives
  3. informal markets
  4. role of WTO (decrease tariff = decrease gov R esp for dev countries :( )
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23
Q

INSTITUTIONAL FACTORS AND DEVELOPMENT

APPROPRIATE USE OF TECHNOLOGY

A

BENEFIT
solar cooker
weather based technology
–> promote econ dev: sustainability

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24
Q

INSTITUTIONAL FACTORS AND DEVELOPMENT

THE EMPOWERMENT OF WOMEN

A 
BENEFIT
children health
education
economic impact-productivity
smaller families: increase Y
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25
Q

INSTITUTIONAL FACTORS AND DEVELOPMENT

INCOME DISTRIBUTION

A

MEASURE: LORENZ/GINI

CONSEQUENCES
low investment= low savings= low investment
rich dominating politics
capital flight
–> repatriated profits/ remittances sent abroad

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26
Q

INSTITUTIONAL FACTORS AND DEVELOPMENT

POLITICAL STABILITY

A

stability: efficient in allocating resources
increase in FDI
increase AID when needed due to trust
democracy - faith in gov

but: instability (wars/conflict)
loss infrastructure
loss of investment
loss of FoPs (labour…)

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27
Q

INSTITUTIONAL FACTORS AND DEVELOPMENT

CORRUPTION

A

major threat to development

inefficient regulation

decrease in FDI

bribes:
- ->increase cost of production for firms
- -> gov investment lacking in healthcare/ infrastructure and education as it is not profit maximizing
- -> highest bider

legal:
legalities that need pursuing may not be enforced

we cannot make the assumption that gov are for the good of the people

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28
Q

POVERTY CYCLE/ TRAP

–> growth poverty cycle

A

low incomes
low levels of savings
low levels of investment
low economic growth

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29
Q

ABSOLUTE POVERTY

A

someone living below a certain income threshold determined by the world bank ($1.25/day)

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30
Q

RELATIVE POVERTY

A

someone’s income is below their country’s average income

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31
Q

POVERTY CYCLE/TRAP

–> development poverty cycle

A

low incomes
low levels of education and health
low levels of human capital (lack of skill): structural unE
low productivity

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32
Q

POVERTY CYCLES

A

are fundamental to break to promote both economic growth and development

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33
Q

MICRO-FINANCE/CREDIT USE

A

tackles essential dev problem: lack of savings and investment

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34
Q

MICRO-FINANCE/CREDIT DEF

A

the distribution of small loans to individual entrepreneurs or groups to stimulate business activity, profits and income

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35
Q

MICRO-FINANCE/CREDIT ADVANTAGES x4

A
  1. fill savings gap
  2. can relieve poverty
    - -> break poverty cycle
  3. source of finance w/o huge interest
  4. can empower women
    - -> studies show that they are more trustworthy (India/ South America)
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36
Q

MICRO-FINANCE/CREDIT DISADVANTAGES x3

A
  1. entrepreneurial ventures are not always successful
    - -> where does the money come from in the first place
    - -> what happens when it can’t be paid back
  2. lenders can still apply exorbitant interest rates and bully
  3. loans are not big enough to alleviate poverty
    - -> health?
    - -> education?
    - -> most money is used for direct consumption and not investment

promotes debt/ misery/ coercion
–> against dev outcomes

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37
Q

MICRO-FINANCE/CREDIT ORIGIN

A

Grameen Bank of Bangladesh with the micro-finance pioneer Mohammad Yunus(1970s)

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38
Q

LONG TERM SOURCES OF GROWTH AND DEVELOPMENT

FACTOR ENDOWMENTS

A

increase quantity and quality of FoPs: sustainable

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39
Q

LONG TERM SOURCES OF GROWTH AND DEVELOPMENT
FACTOR ENDOWMENTS
LAND- NATURAL FACTORS

A

increase quantity is very difficult but singapore and Japan have done it (MEDCS)

quality

  • -> fertilisation
  • -> better agricultural methods
  • -> building upwards
40
Q

LONG TERM SOURCES OF GROWTH AND DEVELOPMENT
FACTOR ENDOWMENTS
HUMAN CAPITAL

A

quantity
increase population?
–> emigration
–> but do you really want to increase birth rates…

quality
improve health/ education
vocational training and re-training

41
Q

LONG TERM SOURCES OF GROWTH AND DEVELOPMENT
FACTOR ENDOWMENTS
CAPITAL AND TECHNOLOGY

A

quantity
agricultural vehicles / factory buildings
–> but: funding + savings/ investments from individual

improving technology = improved productivity

42
Q

LONG TERM SOURCES OF GROWTH AND DEVELOPMENT
FACTOR ENDOWMENTS
INSTITUTIONAL FACTORS

A

banking system

legal system

education

infrastructure

43
Q

INTERNATIONAL TRADE AND DEVELOPMENT BENEFITS

Comp Ad

A 
1. exploit comparative advantage
= natural resources (LEDCs)
= increase exports
= increase AD
= increase growth
=increase development
44
Q

INTERNATIONAL TRADE AND DEVELOPMENT BENEFITS

CONSUMERS

A

consumer benefit from lower prices, increased choice and improved political relations

45
Q

INTERNATIONAL TRADE AND DEVELOPMENT BENEFITS

EOS

A

economies of scale and efficiency benefits
= increase profits
= increase corporation tax revenues
= increase fiscal dividend
= increase gov investment in infrastructure

46
Q

INTERNATIONAL TRADE AND DEVELOPMENT BENEFITS

TECHNOLOGY

A

Technological transfer and growth of secondary industries breaking dualistic structures (agriculture: primary sector dependence)

47
Q

INT TRADE AND DEV
BARRIERS/ PROBLEMS
‘RESOURCE CURSE’

A

depending on primary commodities: unsustainable

=falling prices (oil- russia/nigeria/ venezuela)
= falling AD
= falling Y

depletion of resources
= falling….

slowing demand

48
Q

INT TRADE AND DEV
BARRIERS/ PROBLEMS
fluctuations

A

primary commodities are very prone to fluctuations
as D/S are very inelastic

demand

  • -> necessity
  • -> few substitutes

supply

  • -> long time to produce corn ‘production time lag’
  • -> hard to store
  • -> go off quickly

better weather
= increase supply
= decrease R

worse weather
= decrease supply
= increase price
= a lot less consumed 
= consumers :(

fluctuations = no guarantee in economic growth/ dev

49
Q

INT TRADE AND DEV
BARRIERS/ PROBLEMS
ACCESS TO INT MARKETS LIMITED

A

protectionist measures
USA heavily subs corn producers: unfair competitive X
EU: regulations = C.O.P

tariff escalation

non- convertible currencies

50
Q

INT TRADE AND DEV
BARRIERS/ PROBLEMS
TERMS OF TRADE

A

long term decline in the terms of trade
X prices relative to M prices fall thus

purchasing capital M becomes more difficult

51
Q

PREBISCH- SINGER HYPOTHESIS

A

there will be a decline in the terms of trade for countries that depend on natural resource exports

52
Q

TERMS OF TRADE

A

index of export price
divided
index of import prices

53
Q

PREBISCH- SINGER HYPOTHESIS

YED AND WEALTH EFFECT

A

the natural resource exports are relatively income inelastic (necessity)

yet what people import are very elastic (capital/ manufactured goods)

increase in economic growth
= increase demand for manufactured goods
= increase prices for imports

X must increase to fund same quantity of M due to higher prices

54
Q

PREBISCH- SINGER HYPOTHESIS
YED AND WEALTH EFFECT
SOLUTION

A

advice: use revenues from exports to promote DIVERSIFICATION

55
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT

–> IMPORT SUBSTITUTION

A

IST import substitution industrialization

tariffs on imported manufactured goods to allow domestic industries to grow

56
Q

LONG TERM GOAL OF TRADE DEVELOPMENT POLICIES

A

increase growth
increase Y
increase job
but..!!
break away from over dependence on primary products
and try to move in to more advance technological ways of producing: manufacturing

57
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT

–>EXPORT PROMOTION

A 
remove protectionism 
encourage trade
increase GDP
increase Y
increase development

revenues/ gains of trade can be used to invest

58
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT

–> IMPORT SUBSTITUTION BENEFITS

A

protects domestic jobs

protects economy from foreign influence and potential dominance of MNCs

59
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT
–> IMPORT SUBSTITUTION
PROBLEMS

A

short run job creation vs long run unemployment as these industries in the future cannot compete with rivals oversees as they have not flourished enough (lack of incentive?)

loss of comparative advantage gains

  • -> consumers pay >P
  • -> specialization gains lost

retaliatory protectionism

60
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT
–>EXPORT PROMOTION
BENEFITS

A

SR: dev economies can exploit their comparative advantage of primary commodity and gain > R

LR: those revenues can be used to fund advancement of capital/technology
= allows them to break away from primary sector (agricultural) sector
= lucrative long term growth/ dev

61
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT
–>EXPORT PROMOTION
PROBLEMS

A

protectionism abroad

wider income inequality

  • -> will benefits be evenly shared
  • -> only a SR problem? as in the LR the benefits to the rich will trickle down to the poor

over dominance of MNCs
–> harm to environment?

62
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT

–> markets

A

trade liberalization/ the role of markets: washington consensus set by world bank and IMF to promote…

fiscal discipline/ market liberalization/ trade liberalization

63
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT

–> markets benefits

A
  1. sustainable growth and development in the LR due to allocative efficiency of reduced market failures
  2. promote macroeconomic stability
    - -> promote investment
  3. trickle down effect: benefits to all
    - -> reduce income inequality
64
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT

–> markets problems

A
  1. more poverty creation
    - -> MNCs with too much power
    - -> poor working condition
    - -> destroyed environments
  2. increase income inequality and exploitation of workers
  3. fiscal cuts in key ares like healthcare and education
65
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT

–> bilateral trade agreements and regional PTA benefits

A

better market access
lower transport costs

greater specialization gains

66
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT

–> bilateral trade agreements and regional PTA problems

A

coincidence of wants

increase costs of production due to trade diversion

trade barriers outside your PTA in other countries

67
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT

–> diversification benefits

A
  1. protect against resource curse and volatile prices of primary products
  2. new technology
    =new avenues for growth
    =high skilled labour
68
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT

–> diversification problems

A
  1. tariff escalation on manufactured products compared to low tariffs on primary commodities
  2. high skilled workforce but how?
    - -> need good education system
69
Q

FDI AND DEVELOPMENT :) 7

A
  1. injection into circular flow
    = employment
    = potential growth
  2. fills savings gap
  3. positive BoP effect
  4. MNCs = infrastructure development
  5. improved productivity domestically as they have to compete with MNCs
  6. technological transfer: increase R+D
  7. increase tax rev for gov
    - -> job opportunity increase = income tax
    - -> MNCs profits= corporate tax
    - -> goods sold-= VAT
70
Q

FDI why?

A

dev country abundant in natural resources

markets could be emerging= potential profits

lower cost of labour

lower regulations/ restrictions

71
Q

FDI AND DEVELOPMENT :( 6

A
  1. employment may be short term or less than expected
    - -> bring in own workers from home
  2. MNCs have too much power
    - -> exploitation
  3. MNCs may invest in labour saving technology
  4. MNCs may ship resources and leave
  5. environmental costs
  6. tax revenue collection may be lower than expected
    - -> corruption?
72
Q

FDI is successful if

A

sustainable

73
Q

growth can lead to sustainable development but…

A

profits re-invested :) but…

  1. resource depletion
  2. deforestation
  3. the over-use of burning fossil fuels
74
Q

sustainability

A

meeting the needs of the present without reducing the ability of future generations to meet their own needs

75
Q

FORMS OF AID

A

official development assistance (ODA)

unofficial aid (NGO)

76
Q

TYPES OF AIDS

A
  1. humanitarian aid
    - -> SR suffering
    - -> food aid
    - -> medical aid
    - -> emergency aid
  2. development aid

–> LR loans (low rates of interest paid back in long periods of time)

–> tied aid: M can only be purchased from donor country

–> project aid (world bank: funding of key infrastructure projects)

–> technical assistance (advancement R+D)

–> commodity aid: money is used to purchase commodities = lower costs= increase productivity

77
Q

CLASSIFYING AID

A
  1. bilateral aid: when aid is from one gov (donor) to another
  2. multilateral aid: aid is diverted through an international org (IMF/WB) and they judge who needs it most
78
Q

FOREIGN AID AND DEVELOPMENT CONCERNS x7

A
  1. corruption
  2. dependency: SR
    - -> welfare mentality
  3. aid weariness in dev countries (MEDCs have their own issues)
  4. loan repayments = indebtedness
  5. focused on industrialization = create greater gaps in income
  6. donor countries get aid to countries of economic/ political interest to them. Poorer countries can lose out as a result. (middle Y countries get aid instead of low Y countries)
  7. Donor countries may push developing to adopt policies that are in their interests
79
Q

INDEBTEDNESS AND DEVELOPMENT

A

persistent current account deficit financed by debt (F.A surplus)
+
3rd world debt crisis (oil exporting countries benefited from booms then invested profits into western banks who gave that money into loans to developing countries 1970s)

recession=
developing countries were greatly affected due to increase I.R= bankruptcy

80
Q

SOLUTIONS TO INDEBTEDNESS

A
  1. debt relief (HIPC) with conditions of increasing dev (education/ healthcare)
  2. reschedule debts (more time)
  3. debt swaps (UNICEFF debt for child relief)
    - -> debt goes to NGOs who redistribute it
    - -> lender country gets tax break in return: win win
  4. cancel the debts SR
    - -> underlying weakness not adressed
81
Q

MARKET BASED POLICIES AND DEVELOPMENT

A 
promoting FD1
privatisation
deregulation
trade liberalization
smaller state/ gov spending
82
Q

INTERVENTIONIST POLICIES AND DEVELOPMENT

A 
import substitution
protectionism
exchange rate intervention
regulation
nationalisation
increase gov spending
83
Q

HIPC

A

heavily
indebted
poor
countries

debt relief initiative

84
Q

MARKET BASED POLICIES AND DEVELOPMENT

BENEFITS

A
  1. more efficient resource allocation done by free market
    - -> no corruption problems
  2. incentives from competition and profit max
    - -> X efficiency
  3. encourages FDI
    - -> no un-necessary bureaucracy: corruption
85
Q

MARKET BASED POLICIES AND DEVELOPMENT

PROBLEMS

A
  1. infrastructure?
  2. markets are unlikely to efficiently allocate certain G/S
    - -> missing markets: public goods
    - -> under-provision of merit goods
    - -> education/ healthcare/defence
  3. market failures
    - -> environment
  4. income inequality
  5. protectionism in advanced economies
  6. lack of well function financial institutions
86
Q

INTERVENTIONIST POLICIES AND DEVELOPMENT

BENEFITS

A
  1. infrastructure development
    - -> overcome public good missing market/ merit good under-provision
    - -> education/ healthcare
  2. gov= major employer and investor in human capital within public sector
  3. stable macro-economy
  4. welfare-state/ pension provision
87
Q

INTERVENTIONIST POLICIES AND DEVELOPMENT

PROBLEMS

A
  1. bureaucracy, inefficiency, corruption
  2. nationalized industries
    - -> loss making
    - -> inefficient
  3. increase gov spending–> indebtedness
88
Q

Evaluation of free markets

And gov

A

Mixture

Free markets and gov intervention if gov is held accountable

89
Q

INT TRADE AND DEV

BARRIERS/ PROBLEMS

A

resource curse
fluctuations
access to international market
terms of trade

90
Q

INTERNATIONAL TRADE AND DEVELOPMENT BENEFITS

A

comparative advantage
EOS
consumers
technology

91
Q

INSTITUTIONAL FACTORS AND DEVELOPMENT x8

THE WIPE TY

A 
EDUCATION 
HEALTHCARE 
INFRASTRUCTURE 
TAXATION APPROPRIATE 
USE OF TECHNOLOGY 
THE EMPOWERMENT OF WOMEN 
INCOME DISTRIBUTION 
POLITICAL STABILITY CORRUPTION
92
Q

LONG TERM SOURCES OF GROWTH AND DEVELOPMENT

FACTOR ENDOWMENTS x4 CHITL

A

LAND- NATURAL FACTORS
HUMAN CAPITAL
CAPITAL AND TECHNOLOGY
INSTITUTIONAL FACTORS

93
Q

POLICIES TO PROMOTE TRADE AND DEVELOPMENT

MD BMX

A
  • -> markets
  • ->bilateral trade agreements and regional PTA benefits
  • -> diversification benefits
  • -> export promotion
  • -> import substitution
94
Q

INFRASTRUCTURE

A

large scale public systems (services and facilities) of a country

necessary for economic activity

an addition to the capital stock of a nation

usually supplied by the government

95
Q

TYPES OF AID

A 
grants •
concessional long-term loans 
•project aid •programme aid•
debt cancellation•
technical assistance
•humanitarian aid•
multilateral aid•bilateral aid.

Economics (12 decks)

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