4.3: Development Flashcards
HDI n that cuzzy (43 cards)
SEN’s definition of economic development
The process of which improving peoples well being and quality of life, involving improvement in standards of living, reduction in poverty, improved healthcare and education along with increased freedom of economic choice
Characteristics of developing countries
-Low standards of living
-Low levels of productivity
-Low levels of savings
-High population growth
-Primary sector dominance (agriculture)
-Incomplete markets - lack of education and weak currencies
-High unemployment
-Low economic power on international stage
Benefits of economic development
-Higher incomes - More jobs, better quality of life - income inequality - reduction in poverty
-Higher profits - technology and jobs
-Fiscal dividend - Infrastructure - health- education
Costs of economic development
-Distribution of incomes
-Negative externalities - Azerbaijan - 80% of their exports is oil but it only accounts for 1% of oil and gas output globally
-Growth in one dominant sector - Senegalese fish industry
4 factors needed for development of a country
-Growth
-Uncorrupted/effective government
-Incentives for firms to reinvest
-Income distribution
Domestic factors affecting development
-Education
-Healthcare
-Infrastructure
-Taxation
-Appropriate use of technology
-Empowerment of women
-Income distribution
5 trade policies for economic development
-Import substitution industrialisation
-Export promotion
-Trade liberalisation
-Bilateral trade agreement and regional PTAs
-Diversification
Explain import substitution industrialisation as a trade policy for economic development
Tariffs on imported manufactured goods to allow domestic industries to grow
+ Protects domestic industries
+ Protects economy from foreign influence and potential dominance of MNCs
-Retaliatory protectionism (trump vs China)
Explain export promotion as a trade policy for economic development
A trade policy designed to encourage the production of goods and services for export as a means of stimulating economic development
+ Potential technological advancements
+ Primary product dependence of developing countries
- Protectionism abroad
- Wider income inequality
- Over dominance of MNCs
Explain trade liberalisation as a trade policy for economic development
A trade policy aimed at reducing or eliminating barriers to trade, such as tariffs, quotas, and import restrictions, to facilitate a freer flow of goods and services across borders.
+ Creating macroeconomic sustability
+ Sustainable growth
- Increased income inequality and exploitation of workers
- More poverty creation —> MNCs have too much power
Explain bilateral trade agreements as a policy for economic development
Trade policies in which two countries mutually agree to reduce or eliminate trade barriers such as tariffs, quotas, and restrictions to promote trade and investment between them
+ Better market access
+ Increased consumer choice
-Trade barriers in other countries
Explain Diversification as a policy for economic development
Involves expanding the range of goods and services produced within an economy to reduce reliance on a narrow set of industries or exports
+ Prevents over reliance on one sector
+ New technology
- Highly skilled workforce is needed
Benefits of trade for development
+ Exploit comparative advantage
+ Consumers benefit from lower prices and increased choice
+ Economies of scale and efficiency benefits
+Technological transfers and growth of secondary industries
CONS trade for development
- Resource depletion (primary commodity dependence)
- Price fluctuations
- Access to international markets is limited (protectionism)
- Long run decline in the terms of trade
Outline the role of markets in promoting development
To decrease intervention so markets are able and free to allocate resources more efficiently (price mechanism)
+More efficient allocation of resources
+Incentivises profit to be made
+Encourages FDI
-Infrastructure —> lack of quasi public/public goods —> Missing markets
-Market failure
-Under provision of merit goods e.g. Healthcare, education…
Role of the government in promoting development
Governments get involved to increase development in a country
+ Infrastructure —> Quasi public goods
+ Government is a major employer of jobs
+ Stable macroeconomy
+ Welfare state
- Bureaucracy
- Nationalised industries are X-inefficient
- Increased gov spending can lead to fiscal deficit
Benefits of FDI for development
+ Acts as an injection into circular flow of income
+ MNCs can expand infrastructure
+ Improved productivity domestically
+ Technological transfers
+ Total Tax revenue is higher —> Reduces chances of a fiscal deficit
Evaluation of FDI for development
- MNCs may only stay for a short time
- They may bring their own employees
- They may force politicians to give better tax deals
- Exploitation of workers
- Environmental costs
- May deplete natural resources
Definition of sustainable growth
Meeting the needs of present generations without compromising the ability of the future generations to meet their needs
+ Can promote higher profits which can be reinvested and used to develop more quantity and quality of FOP’s —> More innovation and technology —> Benefits future generations
+ Growth creates a fiscal dividend —> Increased gov spending on infrastructure spending –> increases productive capacity of an economy —> Boosts AD and development
- Resource depletion
- Deforestation (Palm oil in Indonesia)
- Overuse of fossil fuels
Indicators of development
-Proportion of the population who can access to clean water.
UK —> 100% of population
India —> 95% of population
-Proportion of the population who can access the internet
Uk —> 95% of population
India —> 30% of population
-Energy consumption —> Energy consumption is a lot higher in developed countries
UK—> average person uses 2800 kg of oil per year
India —> average person uses 670 kg of oil per year
-Proportion of the population in agricultural work, less developed = more people in agricultural work
UK —> 1% are farmers
India —> 45% are farmers
3 measures of development
-Human development index (HDI)
-Inequality adjusted human development index (IHDI)
-Multidimensional poverty index (MPI)
Explain the HDI as a measure of development
-Education —> Average number of years spent in school
-Health —> Average life expectancy at birth
-Living standards —> Looks at real gross national income per capita
Application for HDI.
How long do people spend in school in UK, India and Burundi
UK —> 15 years
India —> 9 years
Burundi —> 7 years
Application for HDI
Average life expectancies in UK, India and Burundi
Uk —> 81
India —> 68
Burundi —> 57