Econmoic Development Flashcards
Common characteristics of developing nations (5)
• Small GDP per capita
• Focus on primary and secondary sector
• Low life expectancy
• High birth rates
• Weakness in institutions
How EG can spur economic development (4)
• Increase GDP per capita
• Creates new jobs
• Profits meaning investment
• More tax revenue = improved public services (Healthcare and education)
Issues with GDP being an indicator of development
• Figures high due to wealth concentrated in the top earners
• Info gathered may be unreliable
• Some economies (Bangladesh) don’t use money often
• Purchasing power parity
HDI involves
• Life expectancy at birth
• Mean years of schooling
• GDP per capita
Limitations of HDI (2)
• Doesn’t include qualitative factors (human rights)
• No account of distribution of income
Good measure of development involves (5)
• GDP
• Environment degradation
• Happiness/ mental health
• Misery index (UE and inflation)
• Levels of poverty
Domestic sources of financing ED (2)
• Savings from private sector
• Tax revenues
External sources of financing ED (4)
• Foreign aid
• Loans from international banks ( IMF and world bank)
• FDI
• Remittance
What is a remittance?
Money sent ‘home’ from people working abroad, often from a developed country to a developing country (UK to Senegal)
Advantages of remittances (4)
• Increases living standards
• Reduced poverty
• Lowers Gini coefficient
• Can use money to invest and become self sufficient
Disadvantages of remittances (3)
• Reduces size if the workforce in that area
• X🔺R to appreciate, damaging X
• Moral Hazard (disincentives to work)
Harris Domar growth formula
Savings ratio
———————
Capital output ratio
Development strategies (5)
Aid
Liberalisation
FDI
Isi
Esi
How to increase FDI (4)
• Financial incentives
• Special economic zones
• Improve infrastructure quality
• Open capital markets
Advantages of FDI (5)
Job creation
Tax revenue
Diversification of economy
More competition
Improves labour productivity
Disadvantages of FDI (5)
Inequality
Land grabs
Poor ethical standards
Volatile FDI flows
Limited job creation effects
Debt relief advantages (4)
• Increased social spending
• Increase growth and job
• Reduced poverty
• Benefits global trading system
Debit relief disadvantages (3)
• Moral Hazard
• Increased IR
• Resources are diverted (OC)
Forms of aid (5)
Debt relief
Bilateral aid
Multilateral aid
Humanitarian aid
Development aid
Advantages of official development assistance (4)
• Overcome savings gap
• Building capital stock
• Human capital and post conflict help
• Increase growth and trade spillovers
Internal liberalisation
Lessening government regulations and restrictions in an economy (privatisation)
Liberalisation advantages (3)
Jobs
Efficiency
Tax revenue
Profit motive
Politics removed
Competition
Liberalisation disadvantages (7)
Dividends lost
Regulatory capture
Exploration of consumers
Externalities
Efficiencies: job losses
Natural monopoly
Inequality
Import substitution industrialisation
Targets the protection and incubation of domestic industries so that the goods produced are competitive with imports
