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
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
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
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
- 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
How does debt influence economic progress? * Debt repayments cause a major drawbacks to money borrowed previously
Political and social barriers to development:
1. Legal systems and property rights 2. Right to own assets 3. 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
- Lack of governance and corruption:
1. corruption: dishonest exploitation of power for personal gain 2. political instability 3. unequal political power or status