Session 4

Question 1

Define the term developing country and name characteristics

Answer 1

(By UN) A developing country is a country with a low standard of living:

• Low GDP per capita
• Low education level
• Insufficient infrastructure
• Poverty

Question 2

What does import-substitution do?

Answer 2

Import-substitution policies protect infant industries to let them grow until they can compete with big international competition, to avoid market failure.

Question 3

Name Pro and Cons for import-substitution

Answer 3

Pro: Developing countries have a chance to use comparative advantage

Con:
May never grow up; Resources might be wasted
Government intervention

Question 4

Why did market liberalization evolved in the 80s?

Answer 4

Import substitution countries grew slower and new industries did not become competitive

Failure led to liberalization which lead to increase in traded quantities for many countries.

Question 5

Discuss the success factors of export oriented policies critically

Answer 5

Correlation seems to connect to education, deregulation and maybe high savings and investment rates. It is not clear as difference between latin america and asian countries show.