theme 4: emerging and developing economies Flashcards
what is the HDI based on
knowledge- time in school/ literacy rate
long and healthy life- better healthcare
decent standard of living- GNI per capita adjusted for purchasing power parity
Pro of HDI
easy to calculate
can compare countries
broader comparison than GDP
success of gov policies
con of HDI
excludes- housing, employment, environment
not include income equality and distribution
freedom of people
doesn’t account for qualitative factors- (cultural identity, political freedoms)
economic growth meaning
sustained rise in a country’s productive capacity
increase in real value of GDP/ GNI per capita
increase in the productivity of factors of production
economic development meaning
Increase in economic and social opportunities and freedoms
characteristics of developing nations
relatively low incomes per capita
low levels of saving
lower absolute levels of poverty
high dependency on exports
low diversification
large numbers employed in rural areas (farms)
lack of welfare
large informal sector
poor technology
fast growth of population
rapid urbanisation
poor infrastructure
tariffs
economic growth lead to development
increase per capita incomes- less extreme poverty
increase per capita GDP/ GNI- households have greater finances
new jobs
higher incomes decrease income and wealth inequality
fast economic growth means higher profits
higher tax revenue- increase welfare
GNI meaning
gross national income
where is the UK placed in HDI
18th in the world
sustainable development goals
end poverty
end hunger
healthy lives/ well being
learning opportunities for everyone
gender equality
availability of clean water
sustainable energy
good work
encourage innovation
prebisch singer hypothesis
PSH
price of primary goods declines in proportion to price of manufactured goods
emerging economies have low-income elasticity of demand so as people get wealthier they don’t buy primary products (inferior good) and buy manufactured goods (normal good/ luxury)
savings gap meaning
different between actual savings and savings needed for higher economic growth
harrod domar model
savings - investment - capital and tech - output and income
lewis model
development of dualistic economy
rural agricultural and urban manufacturing
economies grow when they can transition form rural to urban
higher wages in urban vs rural
diminishing marginal returns in rural (land is fixed)
in urban:
more skills , better quality goods, more expensive to live, more FDI
limitations of lewis model
not all economies are dualistic
innovation occurs in the faming sector
over dependent on X for food
100% migration
people may want to move to rural for non-monetary benefit.
policies promoting growth and development
free trade
promotion of FDI
removal of government subsidies
floating exchange rate
microfinance schemes
development of human capital
protectionism
manage exchange rate
infrastructure development
promoting joint ventures
industrialisation - lewis model
development of tourism
development of primary industries
fair trade
aid
debt relief
4 external sources of finance for emerging economy
remittances
overseas development assistance (aid)
debt and portfolio investment
FDI
total remittances globally
top remittances GDP/ $
globally- $800 billion 2022
India- $100billion in 2022
Tonga- 50% of GDP 2022
pro of remittances
additional disposable income helps fund education and health care
helps families invest in land, seeds, livestock and equipment
lower risk of extreme poverty
collateral for loans including micro-finance debt
less malnutrition
low gigi coefficient
higher productivity
helps to deal with economic shocks
deal with savings gap
improves CA
con of remittances
high cost of money transfer so money is lost
no traditional banking so money is not available
brain drain of workers
exchange rate appreciation
moral hazard- people stay inactive when receive remittances
