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823500
IB Economics SL: Development Economics
Description
MOAR notes, key points
No tags specified
ib
economics
development economics
ib economics sl
international baccalaureate
Mind Map by
Han Zhang
, updated more than 1 year ago
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Created by
Han Zhang
over 10 years ago
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Resource summary
IB Economics SL: Development Economics
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
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
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
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
Pollution and environmental degradation
Deforestation
Loss of biodiversity
Soil degradation
Hazardous waste
Air/ water pollution
Global warming
Income inequality
Prioritize growth
Investment from high income earners' savings
top 10%, unequal distribution
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
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
Diversity between ELDCs
Historical background (colonization)
Resource endowment and geographical factors
Political structures
Fiscal policies
Industrial structure
Ethic/religious factors
Poverty Trap
Low income Low saving Low investment Low econ growth
Low income Low education Low human capital, Low productivity
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
Measuring Development
Indicators of Development
Indicators: due to vagueness of development
Monetary/Financial
GDP/GNP
GDP/GNP per capita
Limited to income distribution
PPP with GDP/GNP per capita
Health
Birth rates
High in ELDCs
Life expectancy at birth
Low in ELDCs
Infant mortality rates
High in ELDCs
Population growth
High in ELDCs
Education
Literacy rates
Net primary education enrolment
Primary teacher/pupil ratio
Important: Compare and contrast figures
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
Domestic Factors
Education and health
Opportunity Cost from government
But its merit G&S
Entrepreneurs
High labor supply - low GDP per capita and vice versa
Appropriate technology
Investment
the forgoing of current consumption for increased future consumption
Appropriate to labor supply
Capital-intensive
Labor intensive
Low costs to marginally increase production
e.g. bikes or motorcycles
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
After some financial and skill training
Empowerment of women
Lower birth rates
Underemployment of women
Reduce child malnutrition
Reach few Development Goals
Income Distribution
Unequal constrains econ. growth
Low income high propensity to cosume
High income high propensity to import
Capital flight
Institutional Factor
Over-regulation
Property rights
Lack of infrastructure
Political instability
Large informal economy
International Trade
International Trade problems
Over-specialisation
Short range of exports
Deterioration of Term of Trade
Primary product price volatility
Hard to plan and invest
Oil and gas
Inability to access international markets
"Free Trade" EDCs subsidize commodities
ELDCs can't compete
Unable to export
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
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
Trade liberalisation
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
Bilateral and regional preferential trade agreements
Fair trade organization
Beneficial contracts and fair prices for producers in ELDCs
Training for long term stability
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
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
Aid and Multilateral Assistence
Sources of Aid
Donor government ODA
NGOs
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)
Evaluation
Adv
Fills saving and foreign exchange gaps
Funds health/education/infrastructure
Aids recovery from disaster
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
Trade vs. Aid
Free Trade Arguments
Protectionism Arguments
The IMF
Promote stabilization polices
Sharp shocks on ELDCs due to fiscal reforms
Ineffective
Dominated by rich countries
Sustainable econ. Growth
The World Bank
Breaking poverty cycles
Healthcare/education provision
Access to credit
Effective tax system
Property right
Empowerment of women
Reduced corruption
Infrastructure
Innovation
Dominated by rich countries
Scope leads to widening income distribution
International Debt
International finance
Debt hampers Growth and Development
Structural Reforms
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
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
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
Weaknesses
Market failure
Asymmetric info in market
Weak institutions needed for effective markets
Income/access to resource and credit inequality
Development of dual economy
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
Strengths
Correction of market failures
Stable macro objectives
Reduced income inequality and safety nets provided
Infrastructure provision
Weaknesses
Government failures
red tape, bureaucracy and corruption
Planning problems through lack of information and time-lags
Market with government intervention
Good governance
'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
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