20558618
IB Economics SL: International & Development
- Introduction to development
- Economics Growth
- Increase in GDP
(quantitative
measure)
- Limitations of GDP as
measurement
- Shadow economy not registered
- Regional variations
- Externalities
- Quality change
- Amount of leisure time
- Difference in purchasing power
- Shadow economy not registered
- Limitations of GDP as
measurement
- Increase in GDP
(quantitative
measure)
- Economics Development
- Improvement in quality of
life (qualitative measure)
- Reduction in poverty and
unemployment, improved
health care and education;
distribution of income; freedom
of choice; environmental
protection
- Improvement in quality of
life (qualitative measure)
- SR: each can exits without the other
LR: Both need to be there, otherwise
fails
- Characteristics of Economics Growth
- Variations in long-run growth rates
- ELDC high rates due to low income
EDC low rates due to high income
- GDP per capita
- ELDC high rates due to low income
EDC low rates due to high income
- Changes associated with economic growth
- Primary- Secondary- Tertiary
(due to income elasticity of
demand)
- Urbanization
- Growth in GDP per capita
- Increased productivity
- Increased international trade
- Primary- Secondary- Tertiary
(due to income elasticity of
demand)
- Pollution and environmental degradation
- Deforestation
- Loss of biodiversity
- Soil degradation
- Hazardous waste
- Air/ water pollution
- Global warming
- Deforestation
- Income inequality
- Prioritize growth
- Investment from high income earners' savings
- top 10%, unequal distribution
- top 10%, unequal distribution
- Investment from high income earners' savings
- Prioritize growth
- Sustainable development
- economic growth in the short run
must not compromise the ability of
an economy in the long run to meet
the needs of future generations
- Solutions
- Government provision of basic
sanitation and clean water
- Extension of property rights
- Prohibition of polluting activities
- Pollution taxes
- Tradable pollution permits
- Education of farmers and communities
- Family planning
- Removal of subsidies
that encourage the use
of fossil fuels
- Government provision of basic
sanitation and clean water
- Common characteristics of ELDCs
- Low levels of GDP per capita
- High level of poverty
- Relatively large primary sector
- Large informal markets
- High birth rates
- Low levels of productivity
- High levels of
unemployment/
underemployment
- Dependent upon developed economics
- Low levels of GDP per capita
- Diversity between ELDCs
- Historical background (colonization)
- Resource endowment and geographical factors
- Political structures
- Fiscal policies
- Fiscal policies
- Industrial structure
- Ethic/religious factors
- Historical background (colonization)
- economic growth in the short run
must not compromise the ability of
an economy in the long run to meet
the needs of future generations
- Poverty Trap
- Low income
Low saving
Low investment
Low econ
growth
- Low income
Low education
Low human
capital, Low
productivity
- Low income
Low saving
Low investment
Low econ
growth
- International Development Goals
- Eradicate
extreme poverty
and hunger
- Achieve universal
primary education
- Promote gender
equality and
empower women
- Reduce child
mortality rate
- Improve
maternal
health
- Combat
HIV/AIDS and
other diseases
- Ensure
environmental
sustainability
- Develop a global
partnership for
development
- Eradicate
extreme poverty
and hunger
- Variations in long-run growth rates
- Economics Growth
- Measuring Development
- Indicators of Development
- Indicators: due to
vagueness of
development
- Monetary/Financial
- GDP/GNP
- GDP/GNP per capita
- Limited to income
distribution
- Limited to income
distribution
- PPP with GDP/GNP per capita
- GDP/GNP
- Health
- Birth rates
- High in ELDCs
- High in ELDCs
- Life expectancy at birth
- Low in ELDCs
- Low in ELDCs
- Infant mortality rates
- High in ELDCs
- High in ELDCs
- Population growth
- High in ELDCs
- High in ELDCs
- Birth rates
- Education
- Literacy rates
- Net primary
education enrolment
- Primary teacher/pupil ratio
- Literacy rates
- Important: Compare
and contrast figures
- Monetary/Financial
- Composite Indicator
- Human Development Index (HDI)
- GNP per capita,
life expectancy
and literacy rates
- Compare and Contrast
- Difference in HDI
ranking and GNP
per capita
- Difference in HDI
ranking and GNP
per capita
- GNP per capita,
life expectancy
and literacy rates
- Human Development Index (HDI)
- Indicators: due to
vagueness of
development
- Indicators of Development
- Domestic
Factors
- Education and health
- Opportunity Cost
from government
- But its merit G&S
- But its merit G&S
- Entrepreneurs
- High labor supply -
low GDP per capita
and vice versa
- Opportunity Cost
from government
- Appropriate technology
- Investment
- the forgoing of current
consumption for increased
future consumption
- the forgoing of current
consumption for increased
future consumption
- Appropriate to labor supply
- Capital-intensive
- Labor intensive
- Capital-intensive
- Low costs to
marginally increase
production
- e.g. bikes or motorcycles
- e.g. bikes or motorcycles
- Investment
- Credit and micro-credit
- Investment needs
Saving, which requires
surplus of income
- Micro-credit schemes
- Systems of small loans for
income-generating activities
which enable poor communities
in ELDCs to gain some
economic stability
- Aim to diversify skills
in local communities
- Combat over-specialisation
- Combat over-specialisation
- After some
financial and
skill training
- Systems of small loans for
income-generating activities
which enable poor communities
in ELDCs to gain some
economic stability
- Investment needs
Saving, which requires
surplus of income
- Empowerment of women
- Lower birth rates
- Underemployment of women
- Reduce child malnutrition
- Reach few Development Goals
- Lower birth rates
- Income Distribution
- Unequal constrains econ. growth
- Low income high propensity to cosume
- High income high propensity to import
- Capital flight
- Capital flight
- Low income high propensity to cosume
- Unequal constrains econ. growth
- Institutional Factor
- Over-regulation
- Property rights
- Lack of infrastructure
- Political instability
- Large informal
economy
- Over-regulation
- Education and health
- International Trade
- International Trade problems
- Over-specialisation
- Short range of exports
- Deterioration of
Term of Trade
- Deterioration of
Term of Trade
- Short range of exports
- Primary product price volatility
- Hard to plan and invest
- Oil and gas
- Oil and gas
- Hard to plan and invest
- Inability to access international markets
- "Free Trade" EDCs subsidize commodities
- ELDCs can't compete
- Unable to export
- Unable to export
- ELDCs can't compete
- "Free Trade" EDCs subsidize commodities
- Over-specialisation
- Trade
Strategies
- Open, outward-orientated (export promotion)
- Free Trade
- Specialize in manufactured goods
rather than primary goods which
ELDCs have comparative advantage
- Commodities have low YED
- E.g. China and India
- E.g. China and India
- Commodities have low YED
- Specialize in manufactured goods
rather than primary goods which
ELDCs have comparative advantage
- Free Trade
- Closed, inward-orientation (import substitution)
- Protectionism: Tariff, Quotas and substitutes
- Low growth due to lack of movement of resources
- e.g. Ghana and South American countries
- e.g. Ghana and South American countries
- Low growth due to lack of movement of resources
- Protectionism: Tariff, Quotas and substitutes
- Trade liberalisation
- Movement towards free
trade, specialise in G &S
with comparative
advantages
- Movement towards free
trade, specialise in G &S
with comparative
advantages
- WTO
- Diversification
- Aim to gain stable
revenue from
manufactured
goods
- Capital
investment and
technology
- Aim to gain stable
revenue from
manufactured
goods
- Bilateral and
regional
preferential trade
agreements
- Fair trade organization
- Beneficial contracts
and fair prices for
producers in ELDCs
- Training for long
term stability
- Training for long
term stability
- Beneficial contracts
and fair prices for
producers in ELDCs
- Open, outward-orientated (export promotion)
- International Trade problems
- Foreign Direct Investment
- Activities of MNCs
- Potential Adv.
- Investments helping to overcome saving "gap"
- Employment
- Training and education, expertise and R&D
- Improvements to local infrastructure
- Tax Revenue
- Local multiplier effects
- Competitive benefits
- Wider choice
and lower prices
for ELDC
consumers
- Investments helping to overcome saving "gap"
- Potential Dis.
- MNCs don't use
local employees for
high income
positions
- Profits repatriated and taxes avoided
- Crowding out
- Political Influences
- Take advantage in
different tax rates
- Use then leave
- Take advantage of
"relaxed" labor and
environmental
regulations
- MNCs don't use
local employees for
high income
positions
- Potential Adv.
- Activities of MNCs
- Aid and Multilateral
Assistence
- Sources of Aid
- Donor government ODA
- NGOs
- Donor government ODA
- Types of Aid
- humanitarian (food, medical and
emergency relief in short term)
- Development (grants, long-term
loans, project and tied aids and
technical assistance for long term
development goals)
- Bilateral (individual governments) and
Multilateral (e.g. World Bank)
- humanitarian (food, medical and
emergency relief in short term)
- Evaluation
- Adv
- Fills saving and foreign exchange gaps
- Funds health/education/infrastructure
- Aids recovery from disaster
- Fills saving and foreign exchange gaps
- Dis
- Does not reach
those most in need
- ELDCs lack skills to carry
out projects effectively
- Food aid
causes
dependency
- Dependency
culture develops
- Aid strengthens
government
control
- Corruption
- Unsustainable industrilaisation
- Does not reach
those most in need
- Adv
- Trade vs. Aid
- Free
Trade
Arguments
- Protectionism
Arguments
- Free
Trade
Arguments
- The IMF
- Promote stabilization polices
- Sharp shocks on ELDCs due to fiscal reforms
- Ineffective
- Ineffective
- Sharp shocks on ELDCs due to fiscal reforms
- Dominated by rich countries
- Sustainable econ. Growth
- Promote stabilization polices
- The World Bank
- Breaking poverty cycles
- Healthcare/education provision
- Access to credit
- Effective tax system
- Property right
- Empowerment of women
- Reduced corruption
- Infrastructure
- Innovation
- Healthcare/education provision
- Dominated by rich countries
- Scope leads to
widening income
distribution
- Scope leads to
widening income
distribution
- Breaking poverty cycles
- Sources of Aid
- International Debt
- International finance
- Debt hampers Growth and Development
- Structural Reforms
- Pays debt, but
widens income
distribution and
loss of welfare
- Pays debt, but
widens income
distribution and
loss of welfare
- Capital Flight
- Non-converertible
currency
- Debt relief Funds with
strict policies to aid
ELDCs with high debts
- Debt hampers Growth and Development
- International finance
- Markets vs. Intervention
- Market-oriented Policies
- Policies
- Free Trade
- Floating exchange rate
- Labor market reforms
- Deregulation and privatisation
- Liberalised flows of
capital, goods and
services
- Free Trade
- Strengths
- Reduced incidence
of government
failure
- Efficient working of
the price mechanism
- Competition and
efficiency
- Allocative and productive
efficiency from reduced
barriers to entry and the
movements of resources
- Reduced incidence
of government
failure
- Weaknesses
- Market failure
- Asymmetric info in market
- Weak institutions
needed for effective
markets
- Income/access to
resource and credit
inequality
- Development of dual economy
- Market failure
- Policies
- Interventionist Policies
- Policies
- Provision of
infrastructure
- State
provided/subsidized
education and
healthcare
- Welfare safety nets
(basic levels of welfare)
- Demand-side
policies to maintain
macro stability
- Provision of
infrastructure
- Strengths
- Correction of market failures
- Stable macro objectives
- Reduced income
inequality and safety
nets provided
- Infrastructure provision
- Correction of market failures
- Weaknesses
- Government failures
- red tape, bureaucracy and corruption
- Planning problems through lack of information and time-lags
- Government failures
- Policies
- Market with government intervention
- Good governance
- 'How' rather than 'what'
- 'How' rather than 'what'
- Interventionism good at education/healthcare
- Market good at export promotion, privatization and less barrier to trade
- However, every countries is unique, thus no "blue print"
- Start with interventionism then
gradually move to market-based
is ideal
- Good governance
- Market-oriented Policies
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