LS11 - Poverty and Inequality Part 2 Flashcards
1
Q
Causes of poverty
A
- population growing faster than GDP -> lower GDP per capita
- lack of education/training
- minimum wages (not living wage)
- natural disasters
- corruption
- government policies on taxation and benefits
- primary product dependency
- war
2
Q
Explain how primary product dependency leads to poverty
A
- developing economies tend to be heavily reliant on exporting primary products e.g. Nigeria and Angola
- Prebisch-Singer hypothesis states this is a problem as over time the TOT for primary commodities declines compared to manufactured products
- therefore, PPD countries will be able to import less and less leading to a fall in living standards
3
Q
Explain and evaluate how corruption leads to poverty
A
- living standards tend to be lower in corrupt countries because government officials and business owners are more likely to engage in rent seeking
- this is aiming to increase one’s share of existing wealth without creating new wealth e.g. business owners may collude to keep prices high and limit R&D spending
- rises in income and employment will also be limited
- EVAL - corruption appears to surmountable if the gov has an overall growth strategy e.g. China fostered export-led growth strategy resulting in economic development
4
Q
Application (own knowledge) of corruption
A
- Norway and Russia have similar percentage of GDP dependent on oil but poverty is far worse in Russia partly due to significantly higher levels of corruption by Russian oligarchs
5
Q
Effect of natural disasters on poverty
A
- natural disasters can lead to severe economic disruption and large numbers of fatalities
- therefore FaOPr deteriorate resulting in negative economic growth and falling living standards
- securing food, shelter and employment can become difficult
6
Q
Evaluate effect of natural disasters on poverty levels
A
- depends on intensity of disaster
- depends on how effectively a country can respond e.g. Japan recovered quickly from tsunami in 2011
7
Q
Income
A
- flow of earnings measured over a given time period e.g. rent or wages
8
Q
Wealth
A
- stock concept - total amount of assets a person owns with a market value that can generate income
9
Q
How are income & wealth mutually reinforcing?
A
- high incomes allow for the purchase of assets which generate more income which lead to more assets etc
10
Q
Reasons for differentials in income & wealth
A
- age (wealth accumulated over time + more experience -> higher incomes)
- education
- ownership of financial assets
- ownership of property
- wage differentials (includes state benefits)