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2 Chapter Comparative Economic Development Copyright 2009 Pearson Addison-Wesley. All rights reserved. Common Characteristics of developing countries Lower levels of living and productivity Lower levels of human capital Higher levels of inequality and absolute poverty Higher population growth rates Greater social fractionalization Larger rural population- rapid migration to cities Lower levels of industrialization and manufactured exports Adverse geography Underdeveloped financial and other markets Colonial legacies- poor institutions etc. Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-2 Defining the Developing World World Bank Scheme- ranks countries on GNP/capita LIC, LMC, UMC, OECD (see Table 2.1 and figure 2.1) Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-3 Table 2.1 Classification of Economies by Region and Income, 2007 Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-4 Table 2.1 Classification of Economies by Region and Income, 2007 (continued) (Latin America and the Caribbean) (Sub-Saharan Africa) Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-5 Table 2.1 Classification of Economies by Region and Income, 2007 (continued) Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-6 Figure 2.1 Nations of the World, Classified by GNI Per Capita Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-7 Measuring Development for Quantitative Comparison across Countries Gross National Income (GNI) Gross Domestic Product (GDP) PPP method instead of exchange rates as conversion factors (see figure 2.2) Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-8 Figure 2.2 Income Per Capita in Selected Countries Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-9 Table 2.2 A Comparison of Per Capita GNI, 2005 Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-10 Some Basic Indicators of Development Health Life Expectancy Education HDI as a holistic measure of living levels HDI also varies for groups within countries HDI also varies by region in a country HDI also reflects rural-urban differences Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-11 Table 2.3 Commonality and Diversity: Some Basic Indicators Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-12 Figure 2.3 Human Development Disparities within Selected Countries Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-13 Figure 2.3 Human Development Disparities within Selected Countries (continued) Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-14 Table 2.4 Human Development for 23 Selected Countries (2004 Data) Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-15 Table 2.4 Human Development for 23 Selected Countries (2004 Data) (continued) Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-16 Table 2.5 Human Development Index Variations for Similar Incomes (2004 Data) Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-17 10 Characteristics of the Developing World: Diversity within Commonality 1. Lower levels of living and productivity 2. Lower levels of human capital (health, education, skills) 3. Higher Levels of Inequality and Absolute Poverty Absolute Poverty World Poverty 4. Higher Population Growth Rates Crude Birth rates Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-18 Figure 2.4 Shares of Global Income, 2005 Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-19 Table 2.6 The 12 Most and Least Populated Countries and Their Per Capita Income, 2005 Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-20 Figure 2.5 Under-5 Mortality Rates, 1990 and 2005 Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-21 Table 2.7 Primary School Enrollment and Pupil-Teacher Ratios Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-22 Figure 2.6 Correlation between Under5 Mortality and Mother's Education Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-23 Figure 2.7 People Living in Poverty, 1981-2002 Copyright 2009 Pearson Addison-Wesley. All rights 2-24 reserved. Table 2.8 Crude Birth Rates Around the World, 2005 Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-25 10 Characteristics of the Developing World: Diversity within Commonality 5. Greater Social Fractionalization 6. larger Rural Populations but Rapid Ruralto-Urban Migration 7. Lower levels of Industrialization and Manufactured Exports 8. Adverse Geography Resource endowments Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-26 Table 2.9 The Urban Population in Developed Countries and Developing Regions Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-27 Table 2.10 Share of the Population Employed in the Industrial Sector in Selected Countries, 2000-2005 (%) Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-28 10 Characteristics of the Developing World: Diversity within Commonality 9. Underdeveloped Financial and Other markets Imperfect markets Incomplete information 10. Colonial Legacy and external dependence Institutions Private property Personal taxation Taxes in cash rather than in kind Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-29 Low Income Countries Today And Developed Countries Then Eight differences Physical and human resource endowments Per capita incomes and levels of GDP Climate Population size, distribution, and growth Historic role of international migration International trade benefits Scientific/technological research Efficacy of domestic institutions Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-30 Convergence? Evidence of unconditional convergence is hard to find Per capita income convergence? Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-31 Figure 2.8 Convergence among OECD Countries but Divergence in the World as a Whole Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-32 Figure 2.9 Per Capita GDP Growth in 125 Developing Countries, 1995-2005 Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-33 Figure 2.10 Growth Convergence and Absolute Income Convergence Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-34 Long-Run causes of Comparative Development Schematic Representation Geography Institutional quality- colonial and post-colonial Colonial legacy- pre colonial comparative advantage Evolution and timing of European development Inequality- human capital Type of colonial regime Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-35 Figure 2.11 Schematic Representation of Leading Theories of Comparative Development Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-36 Role of Institutions Acemoglu, Johnson, and Robinson's "reversal of fortune" and extractive institutions Bannerjee and Iyer's , "property rights institutions". Landlords versus cultivators Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-37 Case Study: Pakistan Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-38 Case Study: Bangladesh Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-39 Concepts for Review Absolute poverty Brain drain Crude birthrate Convergence Death rate Dependency burden Developed world Economic Institutions Foreign exchange Gross domestic product (GDP) Gross national product (GNP) Human Development Index (HDI) Imperfect markets Income gap Income inequality Incomplete information Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-40 Concepts for Review (cont'd) Infant mortality rate International poverty line Labor productivity Least developed countries (LLDCs) Levels of living Low income countries (LICs) Copyright 2009 Pearson Addison-Wesley. All rights reserved. Malnutrition Middle-income countries (MICs) Mixed economic systems Newly industrialized countries (NICs) Physical resources 2-41 Concepts for Review (cont'd) Primary industrial sector Production function Purchasing power equivalent Purchasing power parity (PPP) Resource endowment Secondary industrial sector Tertiary industrial sector World Bank Copyright 2009 Pearson Addison-Wesley. All rights reserved. 2-42

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