Development Economics Flashcards Preview

IB Economics Outside Flashcards > Development Economics > Flashcards

Flashcards in Development Economics Deck (46)
Loading flashcards...

growth diagram with and without development


poverty cycle diagram 


dependency ratio

percentage of old-age adults and below-working age children relative to the number of working-age adults 


extreme poverty

earning less than $1.25, in purchasing poewr parity-adjusted terms, per day


millenium development goals

  • eradicate extreme poverty and hunger
  • achieve universal primary education
  • promote gender equality and empower women
  • reduce child mortality rate
  • improve maternal health
  • combat HIV/AIDS, malaria and other diseases
  • ensure environmental sustainability
  • develop a global partnership for development


expand on two millennium development goals 

eradicate extreme poverty and hunger

  • target: halve the proportion of people living on less than $1 per day
  • indicators: PPP values, poverty gap ratio, share of poorest quintile in national consumption

promote gender equality and empower women

  • target: eliminate gender disparity in primary and secondary education
  • indicators: ratio of girls to boys in primary, secondary and tertiary education, share of women in wage employment in non-agricultural sector, proportion of seats held by women in national parliament


human development index

composite indicator of development created by the UN which ranks country development on the basis of average income, education levels and life span


gender inequality index

composite indicator of the disparity in well-being between women and men in three areas: reproductive health, empowerment and the labor market


poverty trap

self-perpetuating mechanism that contributes to the persistence of poverty in a nation


natural resource trap diagram 


geography trap diagram 


education/poor governance trap diagram 


conflict trap diagram


institutional and political obstacles to economic development

  • ineffective tax structure: nation is unattractive to foreign investors because of uncertainty, rich households keep savings abroad
  • lack of property rights
  • political instability
  • inequality in income distribution
  • lack of infrastructure
  • lack of access to credit: ineffective banking systems



social and cultural obstacles to economic development

  • religion: especially if conflict exists
  • tradition


domestic factors that contribute to economic development

  • education 
  • health
  • banking, credit, micro-credit
  • reduced fertility rates: reduces burden on working members of society
  • women in workforce increases productive capacity


international obstacles to economic development

  • narrow range of exports
  • over-dependence of primary products: commodity prices fluctuate 
  • if value of dominant export declines, standard of living declines over time
  • protectionist policies by rich countries



provides financial credit or technology loans to entrepreneurs in poor communities to create small businesses (especially those with a socially beneficial purpose)


import substitution policies

protectionist policies meant to reduce domestic consumers' dependence of imported goods, for which they substitute domestic goods and services thus promoting the development of domestic industries


international factors that contribute to economic development

import substitution policies

export promotion policies

trade liberalization




export promotion policies

  • protectionist measures aimed at increasing the competitiveness of domestic producers in foreign markets
  • subsidies for domestic producers of exportable goods and intential devaluation of the nation's currency give domestic producers an advantage in international markets and promote export-oriented growth


diagram showing aid and FDI influence on poverty trap 


foreign direct investment

long-term investment by foreign firms into the domestic markets of other countries


multinational corporation

large company with trading, manufacturing or service operations across several countries 


why are MNCs attracted to developing countries?

low-cost labor

natural resource potential

political stability



examples of deregulation

  • profit repatriation
  • tax reduction for foreign companies
  • property rights
  • health and safety deregulation 


liberalised free market conditions

  • free trade
  • privatisation
  • tradable foreign currency


advantages of FDI: capital improvements

  • capital injections can break poverty cycle
  • money increase in capital account leading to more imports of foreign goods
  • investment in domestic infrastructure
  • provides opportunities for research and development
  • stimulate domestic industry if MNC buys locally produced capital goods and services
  • technology transfer improves country's capital stock


advantages of FDI: income, employment and training


  • employment is increased if MNCs hire significantly from domestic workforce, improve skills of local workers
  • increased income for workers subject to taxation


advantages of FDI: market efficiency and choice

  • MNCs may compete with complacent domestic industries
  • MNCs may help country realise its comparative advantages
  • greater choice in goods and services for domestic consumers