structural change

Question 1

structural change

Answer 1

when some sectors in an economy expand while others shrink, we refer to this as structural change

Question 2

capital flight

Answer 2

investing their capital in worldwide markets instead of in the domestic economy

Question 3

patronage

Answer 3

the creation of inefficient jobs as a way to buy votes

Question 4

sectoral growth

Answer 4

the expansion of specific sectors of the economy

Question 5

balanced growth

Answer 5

all economic sectors grow at the same rate

Question 6

unbalanced growth

Answer 6

sectors grow at different rates

Question 7

sectoral composition

Answer 7

a change in the weight of each sector in terms of the economy’s output

Question 8

intersectoral linkages

Answer 8

the effects of conditions in one sector on other related sectors

Question 9

backward linkages

Answer 9

• effects on upstream sectors that play the role of suppliers for a given sector
• promotes development of suppliers

Question 10

forward linkages

Answer 10

• effects on downstream sectors that are clients for a given sector
• promote downstream customer sectors

Question 11

big push theories

Answer 11

theories that promote the idea that development can only be successful when a government makes efforts to expand, simultaneously, various sectors on a very large scale

Question 12

complementaries

Answer 12

• complementaries exist when the objects must be combined in certain proportions in order to be effective

Question 13

coordination problems

Answer 13

occur when each sector makes independent decisions but one sector’s decision depends on another sector’s decision

Question 14

development banks

Answer 14

specialize in giving long-term loans for development purposes (export-oriented industrial firms)

Question 15

import substitution strategies

Answer 15

focus on the development of a country’s domestic industry with the objective of a gradual decline in imports of industrial products while the domestic sectors develop

Question 16

export promotion strategies

Answer 16

focus on developing competitive sectors for the successful export of products to the world market

Question 17

terms of trade

Answer 17

the ration of the export price index to the import price index

Question 18

prebisch-singer hypothesis

Answer 18

countries specializing in exports of primary commodities are doomed to experience a decline in their terms of trade. based on idea that as the world economy develops, demand for primary commodities will fall behind the demand for manufactured goods.

Question 19

primary commodities

Answer 19

raw materials, agricultural products

Question 20

import substitution

Answer 20

following the path of industrialization such that domestic industry and manufacturing would replace imports from advanced industrialized countries

Question 21

infant industries

Answer 21

newly established firms that did not have a foothold in the global marketplace, or the experience and knowledge of long-established industries

Question 22

export promotion

Answer 22

employing policies that included preferential credit for exportation firms, easy access to imports, and even governmental subsidies to help firms offer competitive prices -> encouraged industries to develop and export competitive products on world markets

Question 23

poverty trap

Answer 23

if a country is very poor, it cannot afford to save because it must allocate all of its income to consumption with no resources left for investment.

Question 24

three assumptions of lewis model

Answer 24

• labor can be moved from agriculture to industry at no cost
• the labor market in the modern sector is competitive, and given excess labor in the agricultural sector, wages remain at subsistence level
• profits from the modern sector are reinvested only in that sector
• free movement, subsistence wage, reinvesting

Question 25

lewis model limitations

Answer 25

- initial scarcity of capital limits growth - profits not always reinvested domestically - inefficient government investment - unions - creation of informal sectors

Question 26

role of institutions in lewis model

Answer 26

- high taxes, regulation, corruption, inflation, expropriation -> capital flight - gov-directed industrialization -> patronage

Question 27

assumptions of harris-todaro model

Answer 27

- migration is a rational decision - decision based on expected wage - the probability of obtaining a city job inversely related to urban unemployment

Question 28

flexible wage case equilibrium

Answer 28

Wa = Lm / Lurb) x Wm: wages in agriculture and manufacturing are equal and there is no urban unemployment

Question 29

urban fixed wage equilibrium

Answer 29

Wa = Lm / Lurb (Wm): fixed wages in urban creates unemployment in that sector

Question 30

expected wage equation harris-todaro

Answer 30

prob of job x wage = (Lm / Lurb) x Wm

Question 31

harris-todaro implications

Answer 31

- excess migration - urban congestion - adverse effects of rural edu - higher unemployment - response: restrict migration or increase rural income

Question 32

asian miracle

Answer 32

- export promotion - strong institutions to provide the framework for competition and respect for the "rules of the game" - at least partly due to close communication coordination between governments and the private sectors and among complementary sectors such as steel and autos

Question 33

flying geese model

Answer 33

intends to explain the catching up process of industrialization of latecomer economies

Question 34

intra-industry

Answer 34

product development with a particular developing country, with a single industry growing over three time-series curves: import, production, export

Question 35

inter-industry

Answer 35

sequential appearance and development of industries in a particular developing country, with industries being diversified and upgraded from consumer goods to capital goods and/or from simple to more sophisticated producs

Question 36

international aspect

Answer 36

subsequent relocation process of industries from advanced to developing countries during the latter's catching-up process

Question 37

main drive of fg model

Answer 37

- 'leader's imperative for internal restructuring' due to increasing labor costs - leade goose shifts from labor intensive to capital intensive based on comparative advantage - sheds it low-productivity production to nations further down in the hierarchy in a pattern then reproduces itself between the countries in lower ties

Question 38

Trade openness

Answer 38

the share of exports to GDP

Question 39

Trade share

Answer 39

region’s exports as a percentage of world exports

Question 40

theory of comparative advantage

Answer 40

- explains how economies benefit from trade through specialization and, therefore, greater efficiency - provides the justification for free trade that is almost unanimously accepted among economists.