Chapter 6 - Development Flashcards
(32 cards)
BRIC
Brazil, Russia, India, China
Developed countries
High income countries
Developing countries
Middle and low income countries
Economic development
Improvement over time of a wide range of economic indicators
Emerging countries
Middle income countries which could become high income countries over the 20/30 years
Tiger economy
An economy which undergoes rapid economic growth
Human Development Index
Health: life expectancy at birth
Education: mean years of schooling of adults aged +25 and the expected years of schooling of a 5 year old
Income: real GNI/capita at purchasing power parity
Advantages of HDI
Easy to calculate
Takes into account 3 factors - multi factor index
Disadvantages of HDI
Health doesn’t include quality of life
Education doesn’t include quality and success
Doesn’t include equality of income
Other factors affect development
Other measures of economic development
- The percentage of adult male labour in agriculture
- Access to clean water
- Energy consumption
- Access to internet/thousand of the population
- Access to mobile phones/thousand of the population
- Access to doctors/thousand of the population
Comodities and volatile prices (Constraints on growth and development - Impact of economic factors in countries)
Inelastic in demand and supply
Developed countries import them
Fluctuations make it hard to predict SR + LR revenues
Discourages investment
Makes GDP change drastically
Primary product dependency
(Constraints on growth and development - Impact of economic factors in countries)
Prebish-Singer hypothesis: in the long run, the price of commodities will fall
Developing depend on primary sector
Commodities - inferior goods while manufactured are normal goods - unable to develop
Eval: dutch disease
- discover natural resource, increase its demand and thus its price, increase currency demand
- appreciation, export price rise, decrease competitiveness
BUT: essential good - increase export revenue, increase investment, increase development
Subeval: premature industrialisation
Savings Gap (Constraints on growth and development - Impact of economic factors in countries)
Harrod - Domar model states investment, savings and technology changes are key in economic growth
Harrod Domar model
Increase national savings
Increase investment
Larger capital stock available
Increase productivity
Increase in real GDP/GNI
Increase income/capita
Repeat
Foreign currency gap (Constraints on growth and development - Impact of economic factors in countries)
Exports from a developing country are too low compared to imports
The country doesn’t have foreign currency to pay for imports
Capital flight (Constraints on growth and development - Impact of economic factors in countries)
Take money, assets, and investments out of the country
Reduced domestic investment
Weakened domestic currency
Loss of tax revenue
Higher borrowing costs
Debt (Constraints on growth and development - Impact of economic factors in countries)
Money that a country owes to foreign creditors
- occurs when a country borrows funds
- loans, bonds etc
Demographic factors (Constraints on growth and development - Impact of economic factors in countries)
Ageing population = harder to generate output
Infrastructure (Constraints on growth and development - Impact of economic factors in countries)
Developed = increase the value of infrastructure
Developing: Deters FDI and Reduces output
Education and skills (Constraints on growth and development - Impact of economic factors in countries)
Developed = increased quality
EVAL: structural unemployment increases in developed due to technical advances
Non economic factors which deter development
Corruption
Poor governance - no property rights = decrease investment
Civil wars
Migration
Terrorism
Measures to promote growth + development
Market orientated: rely upon free markets to deliver economic development
Interventionist: governments play a leading role, regulating and manipulating markets
Trade liberalisation (market orientated)
Removal of trade barriers - free trade - tariff graph
Benefit:
- export led growth - rise in AD
- specialisation
Eval:
- not protecting domestic industries and infant industries - due to increased international competitiveness
Promotion of FDI (market orientated)
FDI: investment from abroad
Investment increase AD
- harrod domar model
Eval: not protecting local businesses or labour
