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Economic Development
Read Chapter 19 pages 394- 412
I The Nature and Challenge of Economic
Development
A) Much of the world’s population live in
very poor countries with very poor
medical care.
B) Rich and Poor Nations
1) A developing country is a country that is
not among the high-income nations of the
world.
2) Two techniques for classification
a) World Bank’s International Comparison
Program (ICP) ranks countries based on
purchasing power of income.
b) Simple conversion of per capita GDP
based on exchange rate.
C) Characteristics of Low-Income Countries
1) Income Inequality is more extreme as
indicated by the Lorenz curves.
2) Health and Education levels are low.
3) Unemployment rates are very high.
4) Economies rely on Agriculture.
D) Economic Development is a process that
produces sustained and widely shared gains
in per capita real GDP.
United Nations Indexes.
1) Human Development Index (HDI)
2) Gender Development Index (GDI)
3) Human Poverty Index (HPI)
II Population Growth and Economic
Development
A) Population Growth is relatively rapid in
developing countries.
B) Per capita income growth = Aggregate
income growth – population growth.
C) High rates of population growth do not
necessarily imply low rates of growth in
per capita income.
D) The Malthusian Trap and Demographic
Transition.
1) The Malthusian trap is a point at which the
world is no longer able to meet the food
requirements of the population and starvation
becomes the primary check to population
growth.
2) Thankfully the Malthusian trap has not come
to pass.
3) Furthermore, demographers have identified a
process of demographic transition in which
population growth rises with a fall in death rtes
and then falls with a reduction in birth rates.
III Keys to Economic Development
A) Domestic Policy and Economic
Development
1) Market Economies and Development
2) The Rule of Law and Development
3) Investment and Saving
B) International Economic Issues in
Development
1) Dependency Theory and Trade Policy.
a) Dependency theory concludes that
poverty in developing countries is the result
of their dependence on high-income
nations.
b) Suggests curtailing free trade and
forcing economic independence.
2) Import Substitution Strategies and ExportLed Development
a) Import substitution is a strategy of
blocking most imports and substituting
domestic production of those goods.
b) Has not been a successful strategy.
3) Development and International Financial
Markets.
C) Development Successes – Asia and parts of
Latin America
1) Embraced market economies.
2) Low levels of government intervention.