sustainable development
define
development that meets the needs of the present without compromising the ability of future generations to meet their own needs
pollution of affluence
define
- pollution driven by “high-income production and consumption activities”
- based on large energy consumption (fossil fuels) and consumption (food, amnufacturing consumption), and use of common pool resources
- occurs mainly in developed countries
pollution of poverty
define
- pollution driven by extreme poverty
- based on over-exploitation of scarce resources
- a lack of capital to ensure resources are sustainable + increased urgency to exploit scarce resources
- occurs mainly in developing countries
single indicators of development
definition + examples
provide data and insights to individual attributes and characteristics of development
- GDP/GNI per capita
- health indicators (life expectancy, infant mortality rate, etc.)
- education indicators (literacy rates, % of population with high school diploma, etc.)
- economic inequality indicators (Lorenz curves, Gini coefficients, etc.)
- social inequality indicators (child labour, gender inequality, etc.)
- energy indicators (energy consumption per capita, access to electricity, etc.)
- environmental indicators (CO2 emissions per capita, animals threatened, etc.)
composite indicators of development
definition + examples
a summary measure of several dimensions or goals of development
- human development index (measure 3 dimensions: long and healthy life [life expectancy], access to knowledge [mean years of schooling], and decent standard of living [GNI pero capita])
- gender inequality index (measures gender inequality in 3 dimensions: reproductive health [maternal mortality ratio], empowerment [share of parliamentary seats held by women], and labour market participation [proportion of women in the workforce])
- inequality-adjusted human development index (same dimensions as HDI but adjusted for inequality)
- happy planet index (a measure of sustainable well-being that takes into consideration life expectancy, people’s feelings about their own well-being, and ecological footprint)
limitations of measures of economic development
- each indicator only captures part of the development it measures
- different indicators sometimes present conflicting perspectives
- based on statistical information (some countries have limited capacity for collection of statistical data, often international agnecies do not have access to recent data so they compare data from different years, definitions of variables may vary from country to country)
How is poverty transmitted across generations?
- people cannot afford to send their children to school, either because the children work to supplement the family income, or because the parents cannot afford transport costs / school fees
- they cannot the necessary medical care for themselves or for their children, and sometimes cannot provide enough food for the family, leading to malnourished and physically disadvantaged children
- they often have large families, whether because they see children as a source of additional income (if the children work), or as a source of security in old age, or because they do not have access to cotraceptives/birth control. This means the budget must be stretched fopr more people.
economic barriers to development
Limited access to infrastructure
- problems of financing
- inadequate maintenance and poor quality
- limited access by the poor
- misallocation of resources
- neglect of the environemtn
Limited access to appropriate technology
- different factor supplies (labour-intensive vs capital intensive technologies)
- difficulties in development of appropriate technologies
Low levels of human capital
- barriers to education
- barriers to achieving good health
Dependance on primary sector production/exports
- overspecialization
- price volatility of primary products
Limited access to international markets
- tarriff barriers
- other forms of trade protection
The informal economy
- workers are unregistered so the govt. loses tax revenue
- no worker protection
Capital flight
- loss of financial capital
- often forces govts. to devaluate the currency
- plays a major role in worsening a country’s external debt
Indebtedness
- self-explanatory
Geography
- landlocked countries
- borders that separate or force together different ethnic groups or diverse geography
Tropical climates or endemic diseases
- climate determines types and methods of agricultural production
- diseases lead to low-quality human capital
political and social barriers to development
Weak institutional framework
- legal framework and access to justice
- ineffective taxation structures
- banking
- property rights and land rights
Gender inequalities
- health and education
- labour market
- inheritance rights and property rights
Inappropriate governance and corruption
- self-explanatory
Unequal political power and status
- political power
- social class and status
- racial and ethnic issues
- political stability
trade strategies to promote economic growth and/or development
- Import substitution
- Export promotion
- Economic integration (including regional free trade agreements and bilateral free trade agreements)
What is diversification?
(as a strategy to promote economic growth and/or development)
Involves a reallocation of resources into new activites that broaden the range of goods and services prouceds. As a country grows and develops, the relative share of the primary sector in GDP usually shrinks, becoming progressively replaced by manufacturing and later services. As the country diversifies into manufacturing and services, its exports are more likely to become varies accordingly.
What is social enterprise?
(as a strategy to promote economic growth and/or development)
A type of commercial organization that aims to achieve particular social goals to improve people’s well-being and promote social change.
market-based policies to promote economic growth and/or development
- trade liberalisation
- privatisation
- deregulation
interventionist policies to promote economic growth and/or development
- redistribution policies (tax policies, transfer payments, minimum wages)
- provision of merit goods (education programmes, health programmes, infrastructure)
What is inward foreign direct investment?
(as a strategy to promote economic growth and/or development)
Investment by firms based in one country (home country) in productive activites in another country (host country), with control of at least 10% of the firm in the host country. FDI is the most important source of finance flows to developing countries.
A firm that undertakes FDI is referred to as a multinational corporation (MNC).
foreign aid to promote economic growth and/or development
- humanitarian/development aid
- Official Development Assistance (ODA)
- Non-Governmental Organizations (NGOs)
- Debt Relief
multilateral development assistance to promote economic growth and/or development
- the World Bank
- the International Monetary Fund (IMF)
institutional change to promote economic growth and/or development
- improved access to banking (microfinance and mobile banking)
- women’s empowerment
- reducing corruption
- property rights and land rights
strengths and weaknesses of market-oriented policies
(as a strategy to promote economic growth and/or development)
STRENGTHS:
- allow social surplus to be managed, thus achieving allocative efficiency
- policies that encourage competition result in greater efficiency in production
- labour market reforms allow resource allocation to improve
- incentive-related policies make the signalling and incentive functions of the price mechanism more effective, improving resource allocation
- trade liberalisation makes markets bigger, resulting in increased competition
LIMITATIONS:
- cannot deal with market failures
- cannot improve institutions (which developing countries often need)
- some lead to increased inequality
- may lead to the informal ecnomy as workers lose their jobs due to privatisation or labour-market policies
strengths and weaknesses of interventionist policies
(as a strategy to promote economic growth and/or development)
STRENGTHS:
- correct market failures
- provide infrastructure
- aid the development of stronger institutions
- promote investment in human capital
- promote gender equality
- play an important role in helping develping countries develop their industries and diversify into higher value-added activities
- provides a stable macroeconomic environment
LIMITATIONS:
- require the use of budget funds (which are usually in short supply in developing countries), leading to opportunity costs and potential budget deficits
- might lead to the protection of inefficient producers
- potential poor governance
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Textbook Glossary474
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Demand, supply, and elasticities56
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Govt. Intervention21
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Market failure31
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Market Power28
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Measuring economic activity15
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AD & AS18
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Macroeconomic objectives32
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Inequality and Poverty17
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Macroeconomic policies44
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Exchange rates + Balance of payments42
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Development20
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Paper 3: Policies190
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Formulas43
