Emerging And Devoloping Economies Flashcards
HDI
A composite measure which is sued in the United Nations development report and which consists of three elements:
GDP per head, health (life expectancy) and education (years in school average)
Advantages of using HDI
Broader measure than GDP per capita
According to the UN programme, the three so essential contributors to development for people to lead a long health life, have access needed for decent living
Limitations of HDI
Too narrow, only takes into account three things
Only concerned with long term development outcomes
An average, so disguised disparities a inequalities within countries
Other indicators of development
Proportion of population with access to clean water,energy consumption per person, degree of inequality,mobile phones per thousand people etc.
Factors influencing growth and development (examples)
Education, infrastructure, debt, demographics, foreign currency gap, primary product dependency, absence of property rights etc.
Factors influencing growth and development: primary product dependency
Occurs in countries where the value of production in primary products accounts for a large proportion of GDP. Hard commodities (minerals) and soft commodities (agriculture)
Factors influencing growth and development: primary product dependency issues
Extreme price fluctuation, protectionism,finite supply (of hard commodities),fluctuation in producers revenue
Factors influencing growth and development: savings gap (Harrod Domar model)
Low income and output-> low savings -> low investment -> low capital accumulation -> low income and output
Suggest development limited
Factors influencing growth and development: savings gap (Harrod Domar model) limitations
Focus only physical capital and ignore human capital, assumes constant relationship between capital and income, savings gap can be filled (eg by FDI)
Factors influencing growth and development: foreign currency gap
Countries may have a shortage of foreign currency, which could be caused by- dependency on the export of primary products, dependency on imports of oil and manufactured goods, interest payments on debt to foreign countries
Factors influencing growth and development: demographic factors
In countries with greater population growth, GDP per head would decline, ageing population means smaller working population
Factors influencing growth and development: debt
Causes- dependency on primary product and falling terms of trade, borrowing money at times of low interest rates, loans taken to finance expenditure on military equipment, investment project etc.
Factors influencing growth and development: access to credit and banking
Important both for new entrepreneurs who need to borrow money to finance their start up expenses and for existing businesses which may need money to finance expansion and for cash flow reasons
Factors influencing growth and development: infrastructure
PhysicL and organisational structures and facilities which are required for the efficient operation of a society and its enterprises. If bad, it may deter domestic investment and FDI
Factors influencing growth and development: education and skills
If school enrolment ratio is low then the levels of literacy and numeracy are likely to be low, so productivity may be low and will act as a deterrent to FDI