ch 2 Comparative Economic Development.pptx

7/24/2019 ch 2 Comparative Economic Development.pptx

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ComparativeEconomicDevelopment


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Characteristic of Developing world

HDI indicators for4 stages ofdevelopment.It is sometimescalled the ladderof development.


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The objective is to highlight thecommonalities among the poor or

developing countriesThis will show what are the common

problems which we share

The dicult is that there is still

diversit within the developing countriesthat is causing issue of proposing acommon plan for development.

Diversit within commonalit


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!ower !evels of"roductivit

#4$ of worldpopulation earns about4%$ of world income

This is because ofvicious circle where

their low education leadto low income whichagain lead to lowereducation and health

This slows growth and

called economicstagnation


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!ower !evels of Human CapitalHuman capital is health& education and s'ills

(nder ) ear mortalit is %* times more in developing as compared todeveloped

Enrolment rates low and the teacher pupil ratio are high in this region

+other,s education is crucial for the mortalit rate to improve


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High !evels of Ine-ualit and bsolute "overt/0$ of world poorest onl have %.)$ of the world income.

The /0$ lowest income people which are about %.4 billion peopleare poor as per 1%./) a da """.

It will onl re-uire /$ income of richest %0$ to bring these out ofpovert

Absolute Poverty:The situation of being unable or onl barel ableto meet the subsistence essentials of food& clothing& shelter& andbasic health care.


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Higher "opulation2rowth 3ates

ow a das& developingcountries are center forhigh population too.

High population meansthe resources will bespread thin

The population growth ofpoor countries is /./$and the rich is onl 0.*$

It creates dependencyburden& which is the

proportion of the totalpopulation agesbetween 0 to %) and5)6 which areeconomicall

unproductive and notcounted in labor force.


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2reater 7ocial 8actori9ation

Factorizationmeans the signi:cant number of

ethnic& linguistic and other social divisions incountr.

It create internal strife and political instabilit.3egions within countr clash each other. Itwea'ens international relations.

Half of the world,s developing population isfacing interethnic con;ict. It lead to destructionin countries li'e fghanistan& Ira-& etc.


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!arge rural population with high rural to urbanmigration

+ost of the people live in villages which no access toinformation or mar'ets.


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!ow !evels ofIndustriali9ation andmanufacturede>ports

Developedcountr onldepend %$ onagriculture.

!owindustriali9ationin developing ledto e>port primarproducts whichare not e>pensive

products


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dverse 2eograph

+ostl poor economies are landloc'ed and tropicalwhere weather is e>treme.

7ince weather is e>treme it leads to man diseasesli'e malaria etc.

These economies have short amount of resourceendowment& which is nations suppl of useable factorsof production including minerals and labor.


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(ndeveloped +ar'ets

These countries often lac'

legal sstem&stable currenc

infrastructure of roads

ban'ing and insurance sstem

mar'et information availabilit

long run business contractsInfrastructure: facilities that enable economic activit and mar'etssuch as transportation& communication& and distributions networ's&utilities& water& sewer and energ suppl sstems.

Imperfect market: a mar'et in which the theoretical assumptions of

perfect competition are violated because of fewer buers or sellers&barriers of entr into business& and incomplete information

Incomplete information: the absence of information that theproducers and consumers need to ma'e ecient decisions resultingin underperforming mar'ets.


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!ingering colonial impacts

These countries are e?ected b their colonial rulers. !i'e ternal dependenc is the major issue for the economies whowere not developed b them selves rather than in;uenced b the

rulers.


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How low income countriestoda di?er from developedcountries in their earlier stages

This compares the situation which todaeconomies faced which are di?erent from

the developed economies.


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Physical and Human Resource Endowments

The todas developing countries are morepopulated thus less educated and less s'illed toe>ploit the natural endowments for long termdevelopment.

7econdl most of the naturall endowmentregions are under con;ict li'e gulf and frica.

Relative levels of !P

The toda developing countr per capita incomesare lower then the developed countr,s incomes

when the were developing.

The developed countries were economicalladvanced and strong :nanciall


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"limatic !i#erences

Todas developing countries are located in thehigh temperature 9ones which lead to fall in soiland agriculture productivit. "oor human andanimal health. nd the colonialists used

unhelpful e>tractive approach where the feltthat it is not comfortable to settle.

Population size

the population growth of developed countries

never crossed the /$ mar' and it onl grewwhen the death rate fell. This high populationgrowth rate has been the hindrance of all thecurrent developing countries.


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Internal mi$ration

8or the case of developed economies thee>perienced international migration to (7 andustralia before the world war I& most of themwere poor or uns'illed.

Toda the migration laws are restrictive for thedeveloping economies. 7econdl onl those aremigrating who are s'illed and educated whichis causing problems in developing economies.


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Rule of international trade

The developed economies were fortunate withthe free tradewhich propelled them in %@thcentur.

ow even though some of the developingcountries are able to produce low cost productsli'e te>tiles& shoes etc. the are facing tradebarriers in the form of tari? and nontari?coupled with several conditions li'e sanitarre-uirements& intellectual propert claims and

antidumpin$investigations. Their &erms oftrade is also lower then developed


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&echnolo$ical research

Currentl developed economies had theadvantage of rapid technological development.Even toda the are highl investing inresearch and development for sophisticatedproduction processes' In contrast the currentdeveloping economies are based on simpleproduction and capital saving methods and labororiented production.

E(cacy of domestic institutions

The developed economies had strong politicaland social institutions when the weredeveloping which promoted opportunities.Ahere as in the developing economies the

institutions are wea'.


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re living standards of developingand developed nations convergingB

!iver$ence:

tendenc for per capita income to grow faster inhigher income countries than in lower incomecountries so that income gap widens acrosscountries over time

"onver$ence:

The tendenc for per capita income to grow fasterin lower income countries than in higher incomecountries so that lower income countries arecatching up over time.


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3easons for Convergence 8irst reason is due to technolog transfer

Developing countries do not have to reinvent the

wheel. The can leapfrog the earl stages oftechnolog development.

(= double its output per person in 50 ears and(7 did it in 4) ears where as 7outh =orea did it

in %/ and china did it in @ ears.This concept is named as advanta$e ofbackwardnessb le>ander 2reschen'ron


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3easons for Convergence 7econd 3eason is due to similarit in factor

accumulation

7ince developed economies have higher phsicaland human capital which according to law ofdiminishin$ returns the would e>pect lowreturns. nd as developing has lower capital and

high stoc' of labor& investing here will lead tohigher returns.


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3easons for Divergence 8irst reason is diversit among poor countriesll the poor countries are not performing similarl&some of them are facing sta$nation. Hence it isincreasing the gap between the low income andmedium income countries.

7econd reason is trade bargaining

ll the rich countries have similar conditions and havetrade bargaining power hence the are enjoing tradewith lower barriers.

+aturit of institutions

The institutes in developing economies are not matureand it will ta'e time too which is re-uired forconvergence.

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ch 2 Comparative Economic Development.pptx