Theme 4: Emerging and Developing Economies Flashcards
(46 cards)
What are the 5 indicators of development?
1) access to clean water
2) number of mobile phones
3) access to the internet
4) energy consumption
5) proportion of agricultural work
What are the 3 measures of development?
1) human development index (HDI)
2) inequality adjusted human development index (IHDI)
3) multidimensional poverty index (MPI)
What is economic development?
An increase in living standards in an economy.
What are the 3 things that the HDI measure?
1) education
2) health
3) living standards
What are the 3 measurements used in the HDI?
1) average number of years in school
2) life expectancy at birth
3) Real GNI per capita
How do you calculate the HDI?
We geometrically get the average: times all of the units and cube root it
What is the HDI for these categories? (Low/medium/high/very high developments)
0-0.49 = low development
0.50-0.69 = medium development
0.70-0.79 = high development
0.80-1.00 = very high development
What is one advantage and one disadvantage of using the HDI as a measurement?
+ The first advantage of the HDI is that it is holistic
-> it focuses on a range of indicators rather than just one.
- The first disadvantage of the HDI is that it can still be unreliable because there are many indicators that it does not use.
What is one advantage and one disadvantage of using the HDI to compare other countries?
+ The second advantage of the HDI is that it is good for comparing countries as it makes it easy to see which countries are most developed and which are least developed.
- The second disadvantage of the HDI is that it ignores the distribution of development which can be measured by looking at the Gini coefficient.
What is HDI?
It is a measure of development which includes education (average years of schooling), health (life expectancy) and living standards (real GNI per capita).
What is the IHDI?
The IHDI is the normal HDI adjusted to account for different levels of inequality. If the IHDI is below the HDI, then there is inequality.
What does the MPI measure?
Measures education, health and living standard using 10 different indicators. It measures the number of people in poverty and the average intensity of poverty.
What are the 10 Constraints of growth and development?
1) Poor Education (Madagascar)
2) Poor Infrastructure (India)
3) Poor Health (Kenya)
4) Population Growth (Tanzania)
5) Savings Gaps (Bangladesh)
6) Dead Capital (Columbia)
7) Corruption (Venezuela)
8) Being Landlocked (Burundi)
9) Infant Industries (Malawi & China)
10) Price Instability (Chile & Swaziland)
11) Foreign Currency Gaps
How does poor education constrain growth and development? (Give 5 chains)
Low human capital → Low productivity → Shifts LRAS to the left → Limits real GDP → Limits economic development
Give 3 key facts about Madagascar’s problem with poor education
- In 1975, the prime minister wanted the citizens to learn Malagasy but the teachers weren’t prepared to teach in classes
- this caused poor education creating the lost generation of workers and some of them took low paying jobs in the black market (e.g. tortoise smuggling and illegal logging)
- Between 1980 and 1990, GNI per capita in Madagascar fell from $460 to $240.
How do you tackle poor education?
By improving education
How would improving education can lead to growth and development? (By using an example)
In Madagascar in 2002, the President trained thousands of teachers and built hundreds of new schools. This improved the standard of education. When people receive a better education, they leave school with higher human capital meaning they have the knowledge and skills to make them more productive workers.
An increase in productivity shifts the long-run aggregate supply curve to the right and increases real GDP, thereby increasing economic growth.
Higher productivity also means that workers’ incomes will increase. This means that they will pay more income tax and so the government will receive more revenue. This gives them more money to spend on development.
By using an example, explain why improving education might not work effectively?
In Madagascar, it’s common for children to pick thousands of vanilla pods a day. So building schools in remote areas may mean that children move from working on farms to being in school meaning less labour
What will happen in the short-run of improving education? (As an evaluation with 7 chains)
More children in school → Less labour supply → Lower incomes → Less consumption → Less aggregate demand → Decrease real GDP → Limits economic growth
What will happen in the long-run of improving education? (As an evaluation with 3 chains)
Even in the long run, if the standard of education is poor then students will leave school with low levels of human capital -> meaning the education they received did not make them more productive. -> In that case, economic growth will still be limited.
What is low human capital?
When workers don’t have the necessary knowledge, skills or assets to be productive.
How does the removal of subsidies encourage growth and development?
As subsidies make the market price artificially low and encourage inefficiency. Therefore through removing them it encourages a market to become more efficient.
How does microfinance schemes encourage growth and development?
Microfinance is the availability of small scale loans to be available to entrepreneurs and businesses. In developing countries they do not have access to loans which doesn’t allow growth. So the availability does the contrary.
