Poverty Trap II

Poverty Trap II - Gaith Kalai Poverty Cycle Part II Page...

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Gaith Kalai Poverty Cycle Part II –Page 438 3. a) importance of infrastructure to growth and development. Infrastructure provides services that support economic growth by increasing the productivity of labor and capital thereby reducing the costs of production and raising profits, production, income and employment. b) Contributions of infrastructure fallen short of expectations in developing countries. Expectations in developing countries follow that fast progress needs to be made in a short amount of time. Because of the time lags that are associated with building and establishing infrastructure, it is often not perceived as something that will not offer short term benefits to the people it is servicing while overlooking the fact that in the long term, it would greatly facilitate economic activity. 4. Some factors that make taxation systems relatively ineffective in developing countries In developed countries governments finance their expenditures through taxation, borrowing, grants and the creation of new money. In developed countries, the bulk of government revenues are raised through taxation. In some developing countries however, the taxation system is not well developed, therefore non- tax revenue may be the primary source of government finance. Non-tax revenue comprises fees levied by
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This document was uploaded on 10/26/2011 for the course PLIR 2050 at UVA.

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Poverty Trap II - Gaith Kalai Poverty Cycle Part II Page...

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