Topic 1

Diversification Among Regions

Diversification of Poland

Economic Diversification

  • Part A: More developed western regions (e.g., Warsaw, Wrocław, Poznań) with diverse economies in technology, finance and services attracting foreign investments.

  • Part B: Less developed eastern regions relying more on agriculture and traditional industries, facing higher unemployment and lower average incomes.

Geographical Diversification

  • The Vistula River runs through key economic areas, linking major cities like Warsaw and Kraków.

  • West of the Vistula is more industrialized and urbanized, while East of the Vistula is characterized by agricultural activities and less economic diversification.

  • There is a clear contrast between the west and east.

Diversification of Italy

  • North is more industrialized, while the South is less developed.

Diversification of Germany

  • The East is poorer compared to the richer West.

Economic Growth

  • Definition: Economic growth refers to an economy’s capacity to produce goods and services. It is often represented as a percentage change in produced goods and services in comparison to the previous year.

  • Economic growth records typically quantitative changes, generally relating to a single year.

Economic Potential

  • The ability of an economy to produce tangible and intangible goods within a specific period.

  • A measurable indicator of economic potential includes the global value of goods and services produced across various spheres of social and economic life, often measured in absolute terms such as GDP, GNP, or GNI.

Economic Growth vs. Economic Development

Economic Growth:

  • Increasing the economy's capacity to produce goods and services, measured by the growth rate (the percentage increase in manufactured goods and services values within a year).

Factors of Economic Growth:

  1. Land

  2. Labour

  3. Capital

  4. Entrepreneurship

  5. Technology

Measured in:

GDP – how labor effects achieved by the country’s society; measured the economy, describes value of final goods produced by national/foreign factors of production

GNP – value of all final products produced by national factors of production

GNI – value of national economy by domestic firms – inside and outside the country. Takes into account total income

Economic Development:

  • A long-term process of changes in the economy, encompassing both quantitative and qualitative changes (i.e., changes in societal organization).

  • Economic development is broader than economic growth.

Determinants of Economic Development

  1. Resources

  2. Human Capital

  3. Capital (Infrastructure)

  4. Knowledge Resources

  5. Institutions

Measured in:

-          HDI (Human Development Index) – life expectancy, education level, income per capita

-          Gini Coeffcient – measured income inequality the higher, the bigger gap between poor and rich

-          Multidimensional Poverty Index (MPI) – look sat health, education and living standards beyond income (GDP higher and quality)

Stages of Economic Growth and Their Representatives

  1. Resource Driven Economic Growth (Stage 1):

  • Focused on natural resources; low processed agricultural crops, large/cheap labor.

  • Oriented towards external markets with heavy dependence on global prices.

  • Examples: Democratic Republic of Congo (diamonds, gold, copper), Ghana (cocoa), Sri Lanka (tea).

  1. Investment Driven Economic Growth (Stage 2):

  • Domestic market focus, investing in basic social systems (schools, hospitals, airports, energy/water systems).

  • Characterized by low labor costs and receptive global markets.

  • Examples: Brazil, China, Georgia.

  1. Innovation Driven Economic Growth (Stage 3):

  • Focused on creating innovation, technology, and innovative products, with robust R&D capabilities.

  • Aimed at developing Knowledge-Based Economy (KBE).

  • Examples: Finland, France, Singapore.

  1. Welfare Driven Economic Growth (Stage 4):

  • High consumer demand share in GDP, ageing population, and high budgetary spending on health and elderly care.

  • Examples: Australia, Denmark, Japan.

Countries in Transition Between Stages

  • Stage 1 to Stage 2: Azerbaijan and Kazakhstan

  • Stage 2 to Stage 3: Chile, Poland, Turkey

Classification of Countries According to GNI per Capita

World Bank Countries Classification by GNI per Capita (2022)

  • High-Income Economies (> USD 13,206): 81 countries

    • Groups:

      • Stable economies converting over the years (e.g., Australia, USA, Canada).

      • Small island-based economies reliant on tourism (e.g., Bahamas, Bermuda).

      • Transforming centrally-planned to market economies (e.g., Poland, Estonia, Latvia).

      • Oil empires, high revenues from oil exports (e.g., Bahrain, Brunei).

      • Countries with significant growth between the 1960s-1980s (e.g., Hong Kong, Singapore).

  • Upper Middle-Income Economies (USD 4,256 - 13,205): 54 countries

    • Mostly former Soviet republics, Western Asia, African countries, southern Europe.

    • Examples: Turkey, Bulgaria.

  • Lower Middle-Income Economies (USD 1,086 - 4,255): 54 countries

    • Includes India, some African and Asian countries, and Ukraine.

  • Low-Income Economies (< USD 1,085): 28 countries

    • Four non-African countries: North Korea, Afghanistan, Yemen, Syrian Arab Republic.

    • Common issues: hot/humid weather, political instability.

  • Leapfrogging: Jumping from an agricultural economy directly to the service sector, bypassing industrial stages.

Division of European Territory and Its Role - NUTS

Nomenclature of Territorial Units for Statistics (NUTS):

  • a geocode standard for referencing the subdivisions of countries for statistical purposes.

  • Is used to collect, compline and disseminate comparable data across the EU for specific regional statistic ( regional accounts, demographic, labor market and information society )

  • Only for countries which are the member states of the EU ( or candidates (Albania, Montenegro, North Macedonia, Serbia and Turkey ) and members of EFTA ( European Free Trade Association ) ( Iceland, Liechtenstein, Norway and Switzerland.

Level

Minimum

Maximum

NUTS 1

3,000,000

7,000,000

NUTS 2

800,000

3,000,000

NUTS 3

150,000

800,000

  • In 2021, EU countries were divided as follows:

    • Macro Regions (NUTS 1): 92 units

    • Regions (NUTS 2): 1242 units

    • Sub-regions (NUTS 3): 1166 units

For Poland:

  • Macro Regions (NUTS 1): 7 regions

  • Regions (NUTS 2): 17 regions

  • Sub Regions (NUTS 3): 73 regions

Includes:

  • EU member states

  • Candidates for EU (Albania, Macedonia, Serbia)

  • EFTA members (Iceland, Norway, Switzerland)

Division of the World and Groups of Countries

Brandt Line: Division between the rich North and poor South, used to describe the contemporary political and economic system of the world.

World-System Theory (Immanuel Wallerstein)

  • The core-periphery model in development is a concept that describes the spatial and economic divisions between developed core regions and less-developed periphery regions. The model suggests that core regions, typically urban and industrialized areas, experience higher levels of economic development, infrastructure, and access to resources, while periphery regions, often rural and remote areas, lag behind in terms of development indicators.

  • Countries categorized based on size, regional economic share, type of exports, and financial control ability:

    • Core Regions: Most developed countries (e.g., USA, Canada, Japan), producing >50% of global GDP.

    • Semi-Periphery Regions: Fast-growing countries aspiring to core status (e.g., Russia, Europe).

    • Peripheral Regions: Exploited by the core, slower development (e.g., stagnant countries).

    • Background Regions: Marginalized countries suffering from socio-economic issues (e.g., Afghanistan, Cambodia).