Lecture_Microeconomics_Chapter20

Lecture_Microeconomics_Chapter20 - Economic Growth in...

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20 Economic Growth in Developing and Transitional Economies
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ECONOMIC GROWTH IN DEVELOPING AND TRANSITIONAL ECONOMIES The economic problems facing the developing countries are often quite different from those confronting industrialized nations. The policy options available to governments may also differ. Nonetheless, the tools of economic analysis are as useful in understanding the economies of less developed countries as in understanding the U.S. economy.
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LIFE IN THE DEVELOPING NATIONS: POPULATION AND POVERTY TABLE 20.1 Indicators of Economic Development COUNTRY GROUP POPULATION, 2004 GROSS NATIONAL INCOME PER CAPITA, 2004 (DOLLARS) ANNUAL HEALTH EXPENDITURES PER CAPITA 2004 (DOLLARS) INFANT MORTALITY, 2003 (DEATHS BEFORE AGE 5 PER 1,000 BIRTHS) URBAN POPULATION (PERCENTAGE OF TOTAL), 2002 Low-income 2.3 billion 510 29 122.0 30 Lower middle-income 2.4 billion 1,580 75 42.0 47 Upper middle-income 575.9 million 4,770 243 29.7 72 High-income 1.0 billion 32,040 2,977 7.0 76 Source: World Bank, www.worldbank.org While the developed nations account for only about one-quarter of the world’s population, they are estimated to consume three-quarters of the world’s output. This leaves the developing countries with about three-fourths of the world’s people, but only one-fourth of the world’s income. The simple result is that most of our planet’s population is poor.
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ECONOMIC DEVELOPMENT: SOURCES AND STRATEGIES Poverty alone cannot explain capital shortages, and poverty is not necessarily self-perpetuating. THE SOURCES OF ECONOMIC DEVELOPMENT Capital Formation vicious-circle-of-poverty hypothesis Suggests that poverty is self-perpetuating because poor nations are unable to save and invest enough to accumulate the capital stock that would help them grow. capital flight The tendency for both human capital and financial capital to leave developing countries in search of higher rates of return elsewhere.
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ECONOMIC DEVELOPMENT: SOURCES AND STRATEGIES Development cannot proceed without human resources capable of initiating and managing economic activity. Human Resources and Entrepreneurial Ability brain drain The tendency for talented people from developing countries to become educated in a developed country and remain there after graduation.
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SOURCES AND STRATEGIES The governments of developing countries can do important and useful things to encourage development, but many of their efforts must be concentrated in areas that the private sector would never touch. If government action in these realms is not forthcoming, economic development may be curtailed by a lack of social overhead capital. Social Overhead Capital
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Lecture_Microeconomics_Chapter20 - Economic Growth in...

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