Factors Affecting Growth And Development 2 Flashcards
What is corruption due to
A failure of governing institutions who lack transparency both in where their tax revenues are coming from and in how state resources are spent
How do high levels of corruption damage growth and development
- restricts FDI
- allocative inefficiency
- inequality
- loss of trust
- lack of collected tax revenues
How can government failure show through
- abuse of foreign aid
- lack of property rights
- power elites control monopolies
- chronic failures to provide basic public services
How do infrastructure gaps limit growth and human development
- increase business costs
- damage export competitiveness
- geographical immobility of labour
When do foreign exchange gaps occur
When currency outflows persistently exceed currency inflows
Example of when foreign exchange gaps occur
- current account deficit
- outflow of capital from investors in money and capital markets
- fall in the value of inflows of remittances from nationals living and working overseas
What is capital flight
The uncertain and rapid movement of large sums of money out of a country
Reasons for a lack of investor confidence (capital flight)
- political unrest
- XR uncertainty
- unstable banking system
What can capital flight do
Undermine the stability of the financial system and also bring about a weaker currency which in turn then increases the prices of essential imported goods and makes it harder (more expensive) for a country to finance their external debts
According to the World Bank, how many working-age adults globally do not use formal financial services
2 billion
What is absolute poverty
When a household does not have sufficient income to sustain even a basic acceptable standard of living / meet basic needs
What is relative poverty
A level of household income that is considerably lower than the median level of income within a country
Main causes of persistent extreme poverty
- fast growing population
- severe savings gap
- high debt
- absence of property rights
What does the Kuznets Curve suggest
That inequality often rises during a phase of rapid industrialisation and urbanisation but there may come a point when increased welfare provision, progressive taxes and more balanced income growth across industries might lead to a fall in overall inequality at higher per capita incomes
Why high levels of inequality / relative poverty can damage / limit growth and development
- causes a self-perpetuating poverty cycle
- misallocation of scarce resources
- social and political unrest / tensions
