Ch 30 - Barriers to Development
Poverty trap (poverty cycles): any linked combination of barriers to growth and development that forms a circle, thus self-perpetuating unless the circle can be broken
- High income inequality can be a barrier to growth and development for a number of reasons
- Low level of savings, low investments = low growth
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- How does a lack of infrastructure and tech hinder economic progress?
- Lack of access to infrastructure:
- Transport
- Public utilities and services
- Communication services
- Lack of appropriate technology
- Tech appropriate to use with existing factor endowments
- Lack of access to infrastructure:
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How does low human capital affect economic progress?
Lack of access to education
Improve role of women in society
Improve levels of health
Lack of access to healthcare
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Dependence of primary sector in relation to economic progress:
- If a country is dependent on a narrow range of exports, they will face a great vulnerability and uncertainty
- Price elasticity of demand for commodities and price elasticity of supply commodities to be relatively inelastic
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Capital fight: is the movement of large sums of money out of a country as a reaction to political or economic instability
a. Debt repayments cause a major drawbacks to money borrowed previously
b. Landlocked countries trade less and have slower growth rate than countries that have coasts
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How does debt influence economic progress?
Debt repayments cause a major drawbacks to money borrowed previously
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Political and social barriers to development:
Legal systems and property rights
Right to own assets
Right to establish use of assets, benefit from assets, selling of assets
- Ineffective tax structure (tax revenue provides governments with means of finance
- Banking system (most developing countries have dual finance markets
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Lack of governance and corruption:
- corruption: dishonest exploitation of power for personal gain
- political instability
- unequal political power or status
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