MACRO - 8. development economics ✅ Flashcards
difference between growth and development
DEVELOPMENT is expanding economic freedoms by increasing human welfare through a standard of higher social and economic opportunities
but GROWTH is a rise in country’s productive capacity and productivity of factors of production
how can growth increase development (4)
- catalyst for rising incomes by job creation tackling wealth inequality
- increased per capita GDP/GNI = greater financial resources to save
- higher profits by growth reinvested promoting increased productivity
- generate higher tax revenues = higher funds to finance public/merit goods and welfare spending
how is human capital a measure of development
- physical/emotional health, educational knowledge/skills/experience
- with better education/health = higher productivity = drives long run growth
what is the human development index
- KNOWLEDGE - mean/expected years of schooling
- LIFE EXPECTANCY - minimum of 25 max of 85
- STANDARD OF LIVING - uses GNI per capita adjusted to purchasing power parity standard (PPP)
limitations of hdi (3)
- no qualitative factors eg cultural identity, political freedoms, income distribution
- inequitable development isnt human development
- PPP values adjust GI data change quickly
what are barriers to development (5)
- unequal opportunities available to women
- secondary + further school enrolment is low and teaching quality/attendance is poor
- weak human capital constrains labour productivity
- high malnutrition rates, impairs brain development
- savings needed to finance investment is insufficient in many lower/middle class countries
what is the harrod domar model
importance of savings and investment. rate of growth depends on:
- level of national saving (S)
- productivity of capital investment (capital-output ratio)
- capital output ratio (COR)
what is the long term importance of capital investment for developing countries (6)
- injection of demand for capital goods industries
- multiplier effects through vertical supply chains
- bigger capital stock can lift rural productivity/incomes
- economies of scale in fledging sectors
- investment to cope with rural-urban migration
- investment to sustain export-led growth
how do infrastructure gaps limit economic growth and human development (6)
- increase supply costs = higher prices = real incomes lowered
- reduce geographical mobility for labour (higher structural unemployment
- damage export competitiveness
- less attractive to FDI
- economy vulnerable to climate change
- contributes to gender inequality
what is capital flight
uncertain and rapid movement of large sums of money out of country
what are the types of poverty and relative poverty line
- ABSOLUTE (extreme) poverty - when a household doesnt have sufficient income to sustain basic standard of living
- RELATIVE poverty - level of household income lower than median level
UK relative poverty line = disposable income less than 60% of median income
what is the kuznets inequality curve
suggest inequality rises during rapid industrialisation and urbanisation but there may be a point when increased welfare provision, progressive taxes and more balanced income growth = fall in inequality at higher per capita incomes
what are strategies to reduce primary product dependency and price volatility (5)
- BETTER GOVERNMENT - more transparency/accountability so its clear where natural resource revenues are going
- STABILISATION FUND/SOVEREIGN WEALTH FUND - to fund human capital and infrastructure to give boost in demand
- HIGHER TAXES OF NATURAL RESOURCE PROFITS - reinvestment into domestic economy
- BUFFER STOCK SCHEMES - to reduce effects of price
- DIVERSIFICATION - includes processing, manufacturing and tourism making economy less susceptible to shocks
types of overseas development assistance (aid) (8)
- BI-LATERAL AID - from one country to another
- MULTI-LATERAL AID - channeled through international bodies
- PROJECT AID - direct financing of projects for a donor country
- TECHNICAL ASSISTANCE - funding of expertise of various types
- HUMANITARIAN AID - emergency disaster relief, food aid, refugee relief and disaster preparedness
- SOFT LOANS - loan made to a country on concessionary basis
- TIED AID - projects tied to suppliers in donor country
- DEBT RELIEF - cancellation, rescheduling, refinancing of countrys external debts
what is the IMF
- an organisation working to foster global monetary cooperation, secure financial stability, facilitate international trade and promote high employment with sustainable growth and reduction of poverty
- provides finances in times of economic difficulty
