Economic Growth And Development Flashcards
Give three effects of Growth
1) Higher Incomes
2) Higher profits
3) Fiscal Dividend
Give three negatives of growth
1) Distribution of income (income inequality)
2) Negative externalities
3) Sustainability
4) Growth in one dominant sector e.g. Nigeria is dominant in oil sector
Measures of development single indicators
1) GDP/ Per Capita
2) GNI
3) PPP
4) Health measures
5) Education measures
What’s GNI
GNI, looks at incomes generated of all of a companies factor of a production.
It takes into account remittances, as FDI could take place in a country but a lot of GDP may be going back to the domestic country.
Give two examples of health measures.
Life expectancy
Infant mortality
Give two examples of Education Measures
Adult literacy
School enrollment
Where did HDI rise from 1970 to 2010, and due to what nations.
1970 - 0.48
2010 - 0.68
Due to East Asia, Healthcare and infrastructure
3 Instructional factors of development
Major 3
Education
Healthcare
Infrastructure
+ Taxation
What effects effectiveness of Institutional factors
1) Corruption
2) Low corporate activity and tax incentives
3) Informal markets
4) Role of WTO
5) Appropriate us of technology
6) The empowerment of women
7) Income distribution
3 factors of Political stability
FDI
AID
Democracy
Factors of instability
1) Loss of infrastructure, wars (civil wars)
2) Loss of investment
What’s a major threat to development economics
Corruption, so that leaders can take advantage and thus benefit from political stability.
What are 3 examples of corruption
1) Inefficient regulation
2) Lower FDI, due to not sticking to your word
3) Bribes and corruption
4) Legal politicians, not adhering to legal issues
What does corruption lead to
A misallocation of resources, government failure and lower economic development.
What’s the growth poverty cycle in order 1–4
1) Low levels of investment
2) Low economic growth
3) Low incomes
4) Low levels of saving
Development poverty cycle in order 1–4
1) Low levels of education and health
2) Low levels of human capital
3) Low productivity
4) Low incomes
Why is microfinnace (microcredit) useful
Problems for developing countries is a lack of saving and investment
The distribution of small loans to individuals entrepreneurs or groups to stimulate business activity profits and incomes
Advantages of micro finance
1) Fills saving gap
2) Can relive poverty
3) Source of finance without huge intrest
4) Can empower women entrepreneurs
Downsides of micro finance
1) Entrepreneurial ventures not always successful
2) Lending can still apply exorbitant interest rates and bully, which promoted poverty and debt
3) Loans not big enough to alleviate poverty most money actually used for consumption
Benefits of international trade and development
1) Exploit competitive advantage, natural resources. This increases exports which increases AD which increases growth and thus increases economic development
2) Consumers benefit from lower prices
3) Economies of scale, higher profits, higher fiscal dividend (corporation tax)
4) Technoloigical transfer, break away from primary sector dependence
Policies to promote trade and development
1) Import Substitution Indsutrialisation, tariffs on improved manufactured goods to allow domestic industries to grow. inward looking policy
2) Export promotion
3) Trade linearisation
4) Bilateral Trade agreements
5) Diversification
Import Substitution Industrialisation - Benefits and negative
Benefits
1) Protects domestic jobs
2) Protectes economies from domestic influence, dominance of MNCs
Negatives
1) Short run job creation vs long run employment growth
2) loss of competitive advantage
3) Retailory protectionism
Export promotion - Benefits and Negatives
Benefits
1) Primary product dependence on developing countries
2) Potential technological advancements
Negatives
1) Protectionism abroad
2) Wider income inequality
3) Over dominance of MNC’s
Trade liberisation - Benefits and Negatives
Benefits
1) Sustainable growth & development.
2) Creating macroeconomic stability, increased Confidence, Investemnt & FDI
3) Trickle down effect
Negatives
1) More poverty creation, MNCs too much power
2) Higher income inequality and exploitation of workers
3) fiscal cuts in key areas such as healthcare and education
Bilateral Trade Agreemants - Benefits and Negatives
Benefits
1) Better market access
2) Greater specialisation of goods
Problems
1) Coincedence of wants
2) Higher cost of production
3) Trade barriers
Diversification - Benefits and Negatives
Benefits
1) Protect against resource curse
2) New technology
Negatives
1) Tariff escalation
2) Highly skilled workforce needed
Barriers to trade and development
1) resource curse
2) Price fluctuations
3) Access to international markets
4) Long term deadline in the terms of trade
5) Savings Gap
What are the concerns of Aid
1) Corruption
2) Dependancy of Aid
3) Aid ‘weakness’ in developing countries
4) Loan repayments can cause indebtedness
Market orientated strategies
Measures which make the economy more free, the minimum government intervention
Give 3 types of market oriented startergies
Trade liberalisation
Promotion of FDI
Floating exchange rate
Micro finance schemes
Removal of government subsidies
Privatisation
Deregulation
Market orientated startergies - Benefits and Negatives
Benefits
1) More efficient resource allocation
2) Incentive for competition and profit maximisation
3) Encourages FDI
Negatives
1) The private sector will not consider infastructure
2) Markets won’t efficiently produce roads, healthcare education etc
3) Market failure e.g.environmental
4) income inequality
5) Protectionism
6) Lack of job security
Interventionist startergies
The government intervenes in the market to try and influence growth and development using interventionist strategies.
Types of interventionist stratergies
1) Development of human capital
2) protectionism
3) Fixed exchange rates
4) Infastructure management
5) Import substitution
Interventionist startergies - Benefits and negatives
Benefits
1) Infrastructure development
2) Government a major employee and investor in human capital within the public sector
3) Welfare/ State pension provision
Negatives
1) Bureaucracy, Inefficiency, Corruption
2) Natioanlised industries, loss making inefficiencies
3) Gov spending increases through borrowing and debt leads to higher indebtness
Evaluation of market and interventionist startergies
1) Mixture of both market and interventions startergies are more beneficial
2) It depends on whether such problems can be taken care of
