4.3 Emerging and developing economies Flashcards
(78 cards)
What does HDI stand for
Human development index
What is the HDI
- introduced in 1990 UN
is a composite index measuring the average achievement in basic areas of economic development
Consists of
- health
- education
- living
What is the health section of HDI
measured by the life expectancy at birth
- represents levels of national healthcare
What is the Knowledge section of HDI
first an educational component kade of the
- means years of schooling
- expected years of schooling
What is the income section of HDI
as measured by the real Gross national income per capita at PPP
What does the HDI do
published by the UNDP and focuses on longevity, basic education and minimal income
- it tracks progress made by countries in improving these three outomes
- the inclusion of education and health indicates sign of successful government policies in providing access to important merit goods
Why is GNI used instead of GDP for the HDI
GNI is now used rather than GDP because of the growing size of remittances in the global economy and the importance of international aid payments
What are the advantages of of using HDI
- composite indicator which provides a more useful comparison metric than single indicator do
- corporates 3 important household metrics
- wifely used all over the world which provides an opportunity for meaningful comparisons
- provides a goal for governments to use when developing their policies
- provides citizens at understanding how their quality of life compares to other countries
What are the disadvantages of the HDI
- it does not measure the inequality that exists as it uses the mean GNI/capita
- it does not measure or compare the levels of absolute and relative poverty that exist
- many countries it does not provide useful short-term information as gathering the data required for the calculation is difficult. This means the data often lags by several years.
What does IHDI stand for?
Inequality adjusted HDI
What is the IHDI
adjusts the HDI for inequality distribution of each dimension across the population
What are the characteristics of IHDI
- created to deal with the lack information that hid provides
- will be equal to HDI value when no inequality, but falls below the HDI value as inequality
- the IHDI measures the level of human development when inequality is accounted for
- difference between the two can be presented as a percentage
- it provides greater insight into the differences in human development that exist in a country as opposed to the average development
What does MPI stand for
multi dimensional poverty index
What is the multi dimensional poverty index
reflects the mult deprivations that poor people face in education, health and living standards
What are the economic factors that influence growth and development
- primary product dependency
- volatility of commodity prices
- the savings gap
- the foreign currency gaps
- capital flight
- demographic factors
- access to credit and banking
- infracture
- education and skills
- absence of property rights
Primary product dependency
- tend to have low YED, as world incomes rice there is a less proportional increase in demand which means there is limited scope to continue increasing demand
- very little added value, exporting manufactured products raisers the added value incomes and profits
Volatility of commodity prices
- due to the inelastic nature of demand and supply of commodities, small changes in demand or supply can lead to large changes in price
- commodities account for larger proportions of some LEDC’s therefore when commodities prices rise exports rise and thus gdp increases
- however a more diversified range of exports prevents this
What benefits does the harrod domar model identify from increased saving?
Increased saving
Increased investment
High capital stock
Higher economic growth
Increased saving
The saving gap: Harrod-domar model evaluation
increases in capital stock lead to growth
- does not account for many other factors such as labour productivity, corruption, technological innovation
- bases in data from wealthier industrialising nations opposed to very poor underdeveloped countries
- only focuses on physical investment and ignored other types such as investment in labour
Foreign currency gaps
when currency outflows > currency inflows, develop when:
- oil importing countries have to pay more when oil prices rise whereas oil exporting countries receive less when world oil prices fall
- large international debt payments may require continual outflows of currency
- capital flight due to uncertainty or sanctions
- this means central banks are forced to use their reserves to buy vital imports
- develops a diversified, healthy export market preventing foreign currency gap from developing
Capital flight
When money or assets rapidly leave a country
- may happen due to political upheaval, economic sanctions war or changes to government policy
- reduces money available for investment, reducing growth and development
What is the dependency ratio
Ratio of number of dependents (children/pensioners) to the total working age population
Demographic factors
A high dependency ratio means less money available for savings and investments
Many developing countries have a high dependency ratio
Access to credit and banking
- financial institutions enable individuals and firms to borrow money which can be used for investment or to generate growth
- a lack kid financial institutions prevents this from happening
