Chapter 19: Barriers to Economic Growth and Development

Poverty Trap

Low incomes → low savings → low investments in physical, human and natural capital (resources from nature like land/access to water) → low productivity of labour and of land → low growth in income.

Transmitted from generation to generation.

Infrastructure

The large scale physical capital needed for economic activity to take place.

Human Capital

Skills, knowledge and experience of people that is valuable to families, communities and organisations.

Primary Sector

Sector that produces primary commodities, which are goods arising from the factor of production land.

Tariff Escalation

When importing countries impose higher tariffs on finished goods rather than raw materials (makes it difficult for countries in primary sector to move to producing manufactured products).

Informal Economy

Economic activities that are unrecorded and unregulated.

Capital Flight

Large-scale transfers of privately-owned financial capital (funds) to another country. Results from high uncertainty and risk in holding domestic assets and occurs when ppl/businesses are fearful.

Indebtedness

Is when a an individual, firm or government has borrowed money and now owes money to another party.