Introduction to Development Flashcards
(33 cards)
Economic Growth
- Increase in real output over time, measured as a % increase of GDP
- GDP = total value of all goods and services produced by a country in a given amount of time
Economic Development
Improved welfare and quality of life through:
- Freedom
- Reduced poverty
- Better living standards
- Education
- Healthcare
- Equality
- Employment
Sources of Economic Growth
- Natural Factors
- Increase in human capital
- Increase in physical capital
- Technological factors
- Institutional changes
Gini Coefficient
A measure of the degree of income inequality of a country that ranges from 0-1
- 0 = pefect income inequality
- 1 = pefect inequality
Capital goods
Goods that are used to produce something else
Human Capital
People, their skills, their productive capacity (the knowledge, skills, and health that people invest in and accumulate throughout their lives)
Physical Capital
assets which are owned and employed by an organisation
factories, machines, vehicles, roads, etc
Financial Capital
Money, credit, (saved-up financial wealth, especially that used in order to start or maintain a business)
What is the relationship between Economic Growth and Development?
Limited economic development is possible without growth, but long-term development typically requires economic growth.
Under certain circumstances economic growth may not lead to economic development
Sources of Economic Development
When does Economic Growth lead to Economic Development?
- Higher incomes
- Improved economic indicators of welfare
- Higher government revenues
- Removal of inequality
- Fewer externalities
- Sustainability
Using appropriate diagrams, explain how it is possible to have both economic growth and development and how it is possible to have just economic growth without development.
Using the PPC:
- Suppose that the economy produces some combinations of industrial goods and merit goods
No Economic Growth, Yes Economic Development:
- If the economy reallocates its resources, increasing merit goods and move from A to B
Yes Economic Growth, No Economic Development:
- PPC shifts outward = growth, but economy does not allocates its resources (B to C)
Yes Economic Growth, Yes Economic Development:
- PPC shifts outward, and increasing merit goods (B to D, E)
What is sustainability? (sustainable development)
Development that meets present needs without compromising future generations
Uneconomic Growth
Production increases at a greater cost to resources and well-being than the value created
Relationship between sustainability and poverty (HL)
- Poor people need to rely on natural resources (wood, water) → harm the environment (e.g. cutting down trees) → unsustainable → resources decrease → people are stuck in poverty due to lack of resources
- Poor people can’t own good land → bad land → doesn’t grow much food → can’t make enough from the land to improve their lives
LDC
LDC - Least Developed Country
A country that is still in the process of development and:
- In poverty = has not yet reached an arbitrary per capita living standard
- Suffers from human resource weakness
- Suffers from economic vulnerability
Common characteristics of LICs/LEDCs
- Low standard of living: income inequality, poor health, inadequate education, low incomes, savings, and investment.
- Low productivity
- High dependency burdens: rapid population growth and size. Dependency ratio = (% under 15 + % over 65) / % aged 16-64.
- High unemployment/underemployment.
- Reliance on primary products (agriculture).
- Imperfect markets: lacking banks, infrastructure, legal systems, and accurate information; large informal sectors.
- Dependence and vulnerability in international relations.
- Low investment, savings, poor capital-labour ratio, and underdeveloped financial infrastructure.
Informal sector
- Unrecorded or illegal economic activity not taxed by the government
- Often referred to as parallel markets, shadow economy, or clandestine markets
Sustainable Development Goals (SDGs)
A set of 17 UN goals addressing global environmental, political, and economic challenges.
What is purchasing power parity? (PPP)
An exchange rate that attempts to remove a distortion of values in market rates.
GDP - evaluation and analysis - Advantages
Data on GDP is easy to get for most countries.
GDP - evaluation and analysis - Disadvantages
Does not consider how income is distributed but it is an average.
What’s the problem of using GDP (per capita) as a measure of welfare?
- Does not include informal economy
- Difficult to measure the market value of public and capital goods
- Includes military spending → does not contribute to welfare
- Doesn’t take into consideration of negative externalities
- Doesn’t measure quality of life
Single Indicators
- GDP/GNI per person (per capita) at PPP
- Health and education indicators
- Economic/social inequality indicators
- Energy indicators
- Environmental indicators
Health indicators
- Infant mortality rate
- Life expectancy (at birth)
- Population per doctor
- Population per hospital bed
