4.3 Emerging and Developing Economies Flashcards
economic development
Long run improvements in broad measures of income per capita, education and health outcomes
HDI
consists of
life expectancy
knowledge: adult literacy, mean years of schooling
plus GNI per capita adjusted to PPP
pros: broad measure, focuses on development goals, allows for comparison over time
cons: does not take into account qualitative factors e.g. cultural identity, political freedom, no account of income distribution, quality of education not taken
harror domar
rate of gdp growth = savings ratio/capital output ratio
growth depends on savings
does not guarantee faster econ growth, depends on quality of investment decisions and ability of labour force to make productive use
primary product dependence
Heavy dependence measured as a share of GDP, total exports or employment from the extraction/cultivation of primary commodities
volatile global prices
foreign currency gap
currency outflows exceed currency inflows, when:
persistent current account deficit
capital flight
fall in value of remittances
prebisch singer hypothesis
terms of trade between primary goods and manufactured products deteriorate over time
due to yed of comoditities is lower than manufactured goods
dutch disease
sudden discovery of natural resources on economy via appreciation of exchange rate and decline in competitiveness of exports
investment into sector where natural resource found, diverts investment into other industries, X rate increase, less competitive X
microfinance
credit service offered to low-income individuals not traditionally serviced by the formal banking sector
overcomes savings gap
encourages entrepreneurship
high rates of repayment as it is built on social trust
low success rate for small businesses
high interest rates
forcible collection of debt
human capital
measure of individuals’ skills, knowledge, abilities, social attributes, personalities and health attributes. These factors enable individuals to work
lewis model
dualistic economy, consisting of rural agricultural and urban manufacturing sectors. It is a model of structural change
As people and countries grow richer, employment in agriculture declines.
Urban workers, engaged in manufacturing, tend to produce a higher value of output than their agricultural counterparts. The resultant higher urban wages (Lewis stated that a 30% premium was required) might therefore tempt surplus agricultural workers to migrate to cities and engage in manufacturing activity. High urban profits would encourage firms to expand and hence result in further rural-urban migration
role of world bank
provides grants and low interest loans
offers policy advice and technical assistance to developing countries
co-ordinates projects with government
risk averse, hugely over staffed
role of imf
global monetary cooperation, secure financial stability, facilitate global trade, promote
high employment and sustainable economic growth, and reduce poverty around the world
financing to its members when they are suffering economic difficulties
