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
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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
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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
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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
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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
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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
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7
Q

Income

A
  • flow of earnings measured over a given time period e.g. rent or wages
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8
Q

Wealth

A
  • stock concept - total amount of assets a person owns with a market value that can generate income
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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
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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)
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