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ECON 313 - All Lectures with Some Book Notes Added

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Economics (Arts)
ECON 313
Mehnaz Rabbani

Introduction to Comparative Economic Development Introduction to Development Economics - What is Economics? - What is Development Economics How is it different from Traditional Economics and Political economy The role of values - Why do we need to study Development Economics? What we know and dont know What is Development? 1. K 2. B 3. C 4. D 5. E What is development? - Amartya Sen development as freedom of availability of commodities, functioning, capabilities - Core values: sustenance, self esteem, freedom - What is the reality? Large disparities between and within countries - To help categorize, developed versus developing countries, LDCs (World Bank definition) So what can we do to achieve what we want from what we have? - Increase the availability and widen the distribution of basic life sustaining goods - Raise standards of living - Expand the range of economic and social choices Developed countries are characterized by: - Low levels of living and productivity - Low levels of human capital - Higher levels of inequality and absolute poverty - Higher population growth rates - Greater social fractionalization - Larger rural populations, but rapid rural-urban migration - Lower levels of industrialization and manufacture exports - Adverse geography - Underdeveloped financial and other markets - Colonial impacts *Note: this is not a comprehensive list of common features. For most of these points, it is unclear if they are causes and/or results of underdevelopment What have we to learn from the past? How does development happen? - The change in economic structure: o Declining share of agriculture in output and employment o Industry gains a lot of ground o Declining proportion of disposable income spent on food - Urbanization o Migration from rural areas to cities (arrival cities!) o Rise of urban poverty - Changes in the scale of production: o On average, the size of producing unit (farm/firm) increases o Due to moving away form agriculture toward more established input markets - Technology: o Becomes more capital intensive - Education o On average increases - Demographic Transition o Population growth begins to rise then falls * Not a comprehensive list stylized facts But there are differences between developing countries today and developed countries when they used to be developing. - Physical and human resource endowments - Per-capita incomes and levels of GDP - Climate - Population size, distribution, and growth - Historical role of international migration - International trade benefits - Scientific/technological research - Efficacy of domestic institutions Before we can change anything we need to identify and understand the problems - Can we think of a complete list of problems that need to be fixed - Are they the same for all countries? Are these problems the cause or result of other problems? - Step 1 Come up with measures to: (1) Evaluate the situation and whether it has improved (2) Evaluation of policies (3) Set goals accordingly (4) To compare (5) To better understand - Is there a unique/perfect measure for development? Income Measures Traditional measures of wellbeing GDP, GNP - Gross Domestic Product (GDP): Market value of all goods and services produced within a country in a given period of time - Gross National Product (GNP) Market value of all goods and services produced by permanent residents of a nation within a given period of time Problems with income as measure of well-being - Distribution/ inequality - Ignores things the cannot be/are not measured - Cross country comparisons difference in relative prices/ exchange rates Purchasing Power Parity (PPP): The purchasing power of a countrys currency the number of units of that currency required to purchase the same basket of goods and services that a US dollar would buy in the US - Does not provide a full picture growth can happen without improvement in well being Indices (Traditional) Human Development Index (HDI) - HDI: calculates an index based on longevity (life expectancy), education (literacy), and real per capita PPP GDP - Example: GDP per capita of country X - $1870 UNs Minimum and maximum- $100 to $40,000 Life expectancy of country X 63.3 years UNs minimum and maximum 25 to 8 years Adult literacy of country X 41% UNs minimum and maximum 0 -100% Gross enrollment in country X 57% UNs minimum and maximum 0 100% - Index = (country X- minimum)/(maximum minimum) - HDI = 1/3 Income index + 1/3 Life Expectancy Index + 1/3 Education Index Human Poverty Index (HPI) - Measures deprivation (1) Illiteracy (2) Malnutrition (3) Early Death (4) Poor health care (5) Poor access to safe water - Places emphasis on individuals at the bottom end of the income distribution GINI coefficient - A measure of statistical dispersion developed by an Italian in 1912 - Measures the inequality among values of a frequency distribution (like levels of income) - A coefficient of zero expresses perfect equality where all values are the same and a coefficient expresses maximal inequality among values Once we decide on a measure/index, we can evaluate the current situation and then set goals/targets of what we want to achieve Millennium Development Goals - Signed by 189 countries in 2000 - Millennium Development Goals (MDGs) (1) Eradicate Extreme Poverty and Hunger a. Halve, between 1990 and 2015, the proportion of people whose income is less than $1 a day b. Achieve full and productive employment and decent work of all, including women and young people c. Halve, between 1990 and 2015, the proportion of people who suffer from hunger (2) Achieve Universal Primary Education a. Ensure that, by 2015, children everywhere, boys and girls alike, will be able to complete a full course of primary schooling (3) Promote Gender Equality and Empower Women a. Eliminate gender disparity in primary and secondary education, preferably by 2005, and in all levels of education no later than 2015 (4) Reduce Child Mortality a. Reduce by two thirds, between 1990 and 2015, the under-five mortality rate (5) Improve Maternal Health a. Reduce by three quarters the maternal mortality ratio b. Achieve universal access to reproductive health (6) Combat HIV/AIDS, Malaria and Other Diseases a. Have halted by 2015 and begun to reverse the spread of HIV/AIDS b. Achieve, by 2010, universal access to treatment for HIV/AIDs for all those who need it c. Have halted by 2015 and begun to reverse the incidence of malaria and other major diseases (7) Ensure Environmental Sustainability a. Integrate the principles of sustainable development in country policies and programmes and reverse the loss of environmental resources b. Reduce biodiversity loss, achieving, by 2010, a significant reduction in the rate of loss c. Halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation d. By 2020, to have achieve a significant improvement in the lives of at least 100 million slum dwellers (8) Develop a Global Partnership for Development a. Develop further an open, rule-based, predictable, nondiscriminatory trading and financial system b. Address the special needs of least developed countries c. Address the special needs of landlocked developing countries and small island developing states d. Deal comprehensively with the debt problems of developing countries e. In cooperation with pharmaceutical companies, provide access to affordable essential drugs developing countries f. In cooperation with the private sector, make available benefits of new technologies, especially information and communications - Each goal has a number of targets as seen by sub-points - Common concerns - New Challenges Food prices, conflict, climate change Classic Growth Theories Overview - Intro need for a theory? How does development occur - Where to start? Historical Experience - Types of Models: (1) Linear stages (2) Structural Change (3) International Dependence (4) Neoclassical to Endogenous Growth Linear Stages Rostows Stages of Growth (Rostovian Take-off Model) - Argued all developed nations went through a stage of take off into self sustaining growth, most underdeveloped nations were either still in traditional society or preconditions - The principle strategy, the mobilization of domestic and foreign saving, to generate sufficient investment Stages of Growth (1) Traditional Society (2) Pre-conditions for take-off into self sustaining growth
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