Cp 2 Comparative Economic Development - Cp 2 Comparative Economic Development I Defining the Developing World Ten important features that developing

Cp 2 Comparative Economic Development - Cp 2 Comparative...

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Cp 2 – Comparative Economic Development I. Defining the Developing World Ten important features that developing countries tend to have in common: o Lower levels of living and productivity o Lower levels of human capital o Higher levels of inequality and absolute poverty o Higher population growth rates o Greater social fractionalization o Larger rural populations but rapid rural-to-urban migration o Lower levels of industrialization o Adverse geography o Underdeveloped financial and other markets o Lingering colonial impacts as poor institutions and often external dependence Defining the developing world o Most commonly used method – income per capita o System used by World Bank – Gross National Income, GNI Low-income countries, LIC’s Lower middle- income countries, LMC’s Upper middle-income countries, UMC’s Middle-income countries High income OECD’s, and other high income countries o Newly industrialized countries, NIC’s A special distinction is often made among UMC’s indicting that some that have achieved relatively advanced manufacturing sectors o Least developed countries 2010 49 countries o 33 – Africa o 15 – Asia 1
o Haiti Three criteria Low income Low human capital High economic vulnerability o Emerging markets In the finance world, it reflects the presence of active stock and bond markets Though financial market development is important, it reflects only one aspect of development Referring to nations as “markets” may lead to an under-emphasis on some non-market priorities in development Dialectic in nature There is no generally accepted designation of which markets should be labeled emerging or not II. Basic Indicators of Development: Real Income, Health, and Education Purchasing Power Parity o Gross National Income, GNI The total domestic and foreign output claimed by residents of a given nation Consists of: Gross domestic product, GDP o Total market value of all final goods and services produced domestically by both residents and non-residents (+) resident factor incomes earned abroad (-) non-resident factor incomes earned domestically Total domestic and foreign value added claimed by a country’s residents without deducting depreciation of domestic capital Fig. 2.2 – Income Per Capita in Selected Countries 2
o Purchasing power parity An alternative calculation of GNI using a common set of international prices for all goods and services Takes into consideration the purchasing power of different currencies so as to provide better and more accurate comparisons of levels of living across nations It is a long-term approach to calculating exchange rates and their changes Absolute PPP model E H/F = P H /P F Nominal exchange rate = ratio of price levels Relative PPP model ΔE H/F /E H/F = π H – π F Rate of depreciation (of nominal exchange rate) = inflation differential o Table 2.2 – A Comparison of Per Capita GNI, 2005 3
Indicators of Health and Education o Reflective of core capabilities Life expectancy The rate of undernourishment

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