(Gavin, 1998) Nature, Development and Distribution in Latin America Flashcards
What is the main argument of the source regarding Latin America’s natural resource endowments?
Latin America’s significant natural resource endowments are associated with slower economic growth and greater income inequality.
This challenges the expectation that resource-rich countries would automatically experience rapid growth.
What was the initial expectation of trade liberalization in Latin America?
It was expected to benefit the region’s abundant labor and lead to growth in labor-intensive industries.
However, it resulted in a focus on resource-intensive exports instead.
What do the findings suggest about resource-rich economies compared to resource-poor ones?
Resource-rich economies can experience slower economic growth than resource-poor economies.
This is confirmed by the analysis of tropical countries with high land intensity and abundant natural resources.
How does natural resource intensity relate to economic growth?
Natural resource intensity, particularly in metals and minerals, is negatively correlated with economic growth.
Countries with abundant agricultural land and natural resources tend to grow more slowly.
What is the relationship between distance from the equator and income inequality?
Greater distance from the equator is linked to lower income inequality.
Being at the latitude of the United States instead of the equator could lower the Gini coefficient by more than 8 percentage points.
What association exists between land intensity and income inequality?
Land intensity is associated with higher income inequality.
The difference in land intensity between Latin America and emerging East Asia accounts for roughly 3 percentage points of the difference in their Gini coefficients.
How does macroeconomic volatility impact economic growth and income distribution?
Macroeconomic volatility negatively impacts both economic growth and income distribution.
It is often linked to reliance on natural resource exports.
What are the effects of macroeconomic volatility on education?
Volatility can lead to lower educational attainment and greater educational inequality.
Economic hardship during downturns can cause youths to abandon their studies.
What challenges do tropical conditions pose to labor productivity?
Tropical conditions may reduce labor productivity and wages due to disease and climate issues.
Historical agricultural technology innovations were more suited to temperate regions.
What is meant by natural resources acting as a ‘capital sink’?
Natural resources might limit capital for manufacturing and modern services without creating significant demand for unskilled labor.
This exacerbates income distribution issues.
What policy recommendations does the source make regarding resource-based industries?
The source suggests avoiding special incentives for resource-based industries and focusing on managing macroeconomic volatility.
This includes fiscal policy and financial regulation.
True or False: The source advocates for a return to import substitution policies.
False.
The authors do not advocate a return to import substitution policies.
Fill in the blank: The source finds a strong association between natural resources and a more _______ distribution of income.
unequal
What are the implications of the study on Latin American economic history theories?
The study challenges the expectation that trade liberalization leads to growth driven by abundant labor and suggests that natural resource abundance can hinder diversification and growth.
It also highlights the importance of geographical factors in economic development.
What was the outcome of the study regarding openness to trade?
Open trade policies are generally associated with more rapid economic growth.
However, the impact on inequality can vary depending on a country’s factor endowments.
What historical factors influenced land ownership in tropical regions?
The production of tropical crops on large-scale plantations facilitated extreme concentration of land ownership.
The historical legacy of slavery also impacted labor market conditions.
What is the link between low rural productivity and wages in the modern sector?
It leads to a ‘buyer’s market’ for labour and higher inequality.
This suggests that when rural productivity is low, employers have more power over wages, often resulting in lower pay and increased income disparity.
What reinforces the mechanisms related to technologies for tropical crops?
They favour large-scale plantations and concentrated land ownership.
This can create economic structures that disadvantage small farmers and contribute to inequality.
What historical legacy affects labour market power in tropical and subtropical climates?
The legacy of slavery.
This historical context can have lasting impacts on social and economic structures, influencing current inequalities.
What influenced colonial-era land, immigration, and labour policies in Latin America?
Factor endowments.
This refers to the natural resources and labor available in a region, impacting economic development.
What is Hypothesis 2 regarding natural resources?
Natural resources are a ‘capital sink’.
This implies that they attract investment that could otherwise support diverse economic growth.
What are the capital requirements for exploiting mineral resources?
They are high.
This can divert investment from other sectors like manufacturing.
What is the impact of limited demand for unskilled labour in resource-based industries?
It can lead to lower real wages and worsened income distribution.
This scenario can perpetuate cycles of poverty and inequality.
What does the evidence suggest about natural resources and macroeconomic volatility?
Natural resources create macroeconomic volatility, leading to low growth and high inequality.
This includes the impact of external shocks on economies dependent on resource exports.
What correlation exists between terms of trade volatility and real GDP growth volatility?
There is a strong correlation.
This indicates that fluctuations in trade can significantly impact economic stability.
How does economic instability contribute to income inequality?
It forces poor families to make short-term adjustments, negatively affecting human capital accumulation.
For example, children may have to leave school during economic downturns.
What is the relationship between macroeconomic volatility and educational attainment?
There is a negative association.
Increased volatility can lead to greater educational inequality.
What correlation exists between geography and income inequality?
There is a striking correlation between physical environment (latitude) and income inequality.
This suggests that geographical factors can significantly influence economic outcomes.
What are some implications for human capital accumulation in lower-income agricultural regions?
Mitigating adverse effects of tropical conditions (disease, etc.) is crucial.
These conditions can hinder economic development and perpetuate inequality.
What does the paper suggest regarding trade liberalization?
It encourages specialization in resource-based industries in resource-abundant regions.
This can lead to lower growth and higher inequality.
What is the potential effect of openness on macroeconomic volatility?
Evidence suggests openness is negatively associated with macroeconomic volatility.
This means that more open economies may experience greater stability.
What is a key policy implication regarding natural resource industries?
Taxing them at least as much as other sectors is recommended.
This is due to the capital-intensive nature of resource extraction and potential externalities.
What does the paper suggest about special tax incentives for resource-based industries?
They should not be provided despite their export importance.
This is to avoid negative impacts on growth and equity.
What is one area requiring policy adaptation due to macroeconomic volatility?
Fiscal policy and public debt management.
These areas are crucial for protecting vulnerable populations from external shocks.
What was the initial expectation of trade liberalization’s effect on Latin America’s economy?
It was expected to raise demand for labour.
This expectation was based on trade theory that predicted growth in labour-intensive exports.
What is the primary reason Latin America is considered special in the global economy of the 1990s?
Its enormous endowment of natural resources.
This abundance influenced foreign investment patterns post-liberalization.
What did Sachs and Warner find regarding natural resource abundance and economic growth?
An inverse relationship; resource-rich economies often grow slower than resource-poor ones.
Their findings highlighted the ‘resource curse’ phenomenon.
What is the relationship between a country’s latitude and its economic growth rate?
There is a negative correlation.
This suggests that countries closer to the equator tend to have slower growth rates.
What does Table 2 indicate about land intensity and economic growth?
There is a strong negative correlation.
More arable land per capita is associated with slower economic growth.
What association exists between macroeconomic volatility and income inequality?
A strong positive correlation.
This indicates that unstable economies tend to have greater income disparity.
What does the counterfactual analysis in Table 4 suggest about latitude and income inequality?
Latitude is the most important factor in explaining income inequality differences between Latin America and Europe.
It accounts for over 40 percent of the difference.
What role does agricultural technology play in Hypothesis 1?
It historically suited temperate climates, disadvantaging tropical regions.
This has implications for rural productivity and income inequality.
What does Table 7 reveal about trade openness and income inequality?
There is essentially no direct correlation.
This suggests trade liberalization alone did not significantly impact inequality.
What is one key policy implication regarding natural resource industries?
Avoid providing special incentives for resource-based industries.
This is to promote more equitable economic development.
What are the key policy areas that require attention due to vulnerability to external shocks?
Fiscal policy and public debt management, regulation and supervision of the domestic financial system
These areas are critical for reducing the impact of terms of trade shocks on the domestic economy.
Why are stronger macroeconomic frameworks crucial in Latin America?
To mitigate the consequences of external disturbances on growth, inequality, and economic security
This is particularly important due to the region’s reliance on natural resources.
What broader implications does the research have for addressing income inequality in Latin America?
Importance of addressing the intergenerational transmission of inequality
This includes compensatory policies and historical factors that influence inequality.
What compensatory policies are suggested to improve income distribution?
Improving the quality and affordability of education, reducing barriers to labour force participation
Special focus on measures for lower-income families and women.
Fill in the blank: The significant vulnerability to terms of trade shocks necessitates policy responses aimed at reducing the impact on the _______.
[domestic economy]
True or False: Strong macroeconomic frameworks are only necessary for countries not reliant on natural resources.
False
Macroeconomic frameworks are crucial for all countries to mitigate external disturbances.
What is a key factor in designing effective strategies for income equity in Latin America?
Recognising the long-lasting impact of historical factors, including geography and initial factor endowments
These factors play a significant role in shaping income distribution.
