Topic 3: Globalisation and Economic Development

Question 1

a) countries’ different development paths shaped by (6)

Answer 1

Initial conditions
Resource endowments
*Access to technology*
Quality of institutions
*Policy interventions*
Accidents of history

Question 2

a) how countries determine inward or outward trade strategy

Answer 2

setting tariff levels
their reliance on non-tariff barriers (such as quantitative restrictions)
policies on export promotion (like export subsidies and export taxes)
changes in trade policy (unilateral, minilateral or multilateral)
exchange rate policies

Question 3

a) outward orientation underpinned by

Answer 3

neoclassical economics

views globalisation as source of enrichment

Question 4

a) inward orinetation underpinned by

Answer 4

structuralist philosophy (developing countries "different")
 views globalisation as a potential source of 	impoverishment

Question 5

b) case for outward orientation underpinned by

Answer 5

static gains from resource allocation ( reaping welfare gains by specialising in the production of those goods with the lowest opportunity cost and trading the surplus of production over domestic demand,
dynamic gains from specialisation (shift outwards the PPF by augmenting the availability of resources for production through increasing the productivity of resources and their quantity.)

Question 6

c) Case for inward orientation

Answer 6

> Prebisch-Singer Hypothesis
(exporting low value products won’t generate enough forex to pay for essential imports)
Export instability
(D&S for primary products inelastic, markets susceptible to shocks -> price instability -> earnings instability)
Pervasive infant industries