T4.4.1 Factors Affecting Economic Growth and Development flashcards

What is primary product dependency

dependency related to the proportion of GDP that is accounted for by commodity exports

What is volatility of commodity prices

the more price inelastic the demand for a commodity, the more likely they are to experience fluctuations in price

What are saving gaps

the differences between actual level of saving in an economy and level of saving needed to finance the investment required for a higher rate of growth

What is the foreign currency gap

the difference between actual level of exports and level of exports needed to create higher economic growth for an economy

What is capital flight

savings sent abroad by companies which is seen as being more secure

What are demographics

dependency ratios - % of youth - can be dyanmic but when high they are a burden on systems like education and food demand

What are debts

countries look out loans when interest rates were low

to make repayments LDCs would borrow more which led to a third world debt problem

What are education/skills

raises human capital, productivity increases can be used to harness new tech

low middle income countries suffer ‘brain drain’

What is the absense of property rights

the absence of rule of law

can’t defend the ownership of assets the result is lower investment and output

What is corruption

rent-seeking behaviour which attempts to gain a share of an existing pot of income or wealther rather than creating higher income or wealth

What are remittances

migrants will work and send a large proportion of income home

Haiti - 21.1% of export earning are in remittances

What are the gender issues

women in LDCs disadvantaged compared to men, they complete few schooling years and therefore less human capital

excluded from many jobs, maternal death rates are significant

under use of half the population reduces the GDP

How does the environment contribute

As economies develop, damage to environment rises

LDCs govt more focused on growth rather than safeguading, environment regulations tend to relax

How does technology contribute

development requires countries to gain tech and then apply them to production process

must be affordable and a certain level of human capital is required

What is access to credit and banking

financial systems enable saving with interest, borrowing money, investing etc

What is the Harrod-Domar Model

states that investment, savings and technological change are the key variables in determining economic growth

saving money for investment, facilitates expenditure on new technology, increaseing productivity therefore LRAS shifts right

Issues with the Harrod-Domar Model

low incomes in developing countries reduce ability to save

lack of sound financial system - prohibits saving and investment

R&D needed to improve capital output ratio

6 non-economic factors that can impact developing countries

Corruption

Poor Governance

Wars

Geography

Health Factors

Gender Inequality

What is the Prebisch Singer Hypothesis

suggests long run prices of primary goods declines in proportion ot manufactured goods, which means those dependent on primary exports will see a dall in their terms of trrade

What is Dutch Disease

the impact of a sudden discovery of natural resources on the national economy via the appreciatoin of the real exchange rate and the subsequent worsening of export competitiveness