Factors influencing growth and development Flashcards
Primary Product Dependency
One product dominates the export industry of a country
Problems of PPD
Commodities are low value add, can only dig up and sell them
Fluctuations in price lead to economic instability due to swings in earnings and exchange rates
Products are immune to inflation, as they are income inelastic. Imports are income elastic however, leading to worsening terms of trade.
Volatility of Commodity Prices
Subject to global market prices, leading to very little market power.
Lack of diversity - if market crashes huge consequences. Econ instability created, FDI discouraged.
Harrod-Domar Model
Increased Savings -> Increased Investment -> Large Capital Stock -> Increased Output -> Increased Incomes
Savings ratio
Measure of levels of savings
Capital-Output ratio
Measures efficiency of capital used to produce output.
Low Level Equilibrium Trap
Poor people can’t save money, no funds for banks to lend, firms can’t buy capital to expand output.
Foreign Currency Gap
Limited exports results in lack of access to currency to purchase capital imports,. This limits growth and developmental opportunities.
Capital Flight
Outwards flow of money due to political/economic instabilities. This limits access to credit and currency depreciation.
Demographical Factors
High discrimination leads to lower literacy rates, leading to more lower skilled jobs.
High dependency ratio removes portion of labour available.
Geography
Land locked countries have poor access to ports, pushing prices up, decreasing competitiveness.
Debt
Tax revenue is being used to pay higher repayments and not capital expenditure.
Access to Credit
Lack of financial identity leads to difficulty borrowing, leading to reduced investment
Infrastructure
Geographical mobility of labour is low, labour pool is reduced
Poor utilities means that businesses cant grow as easily
Education
Poor quality of human capital cant use machinery, limiting productivity and econ growth
