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Econ Dev 3 - ECON 314 Sept 15 Common characteristics of...

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ECON 314 Sept. 15 Common characteristics of developing countries These features in common are on average and with great diversity, in comparison with developed countries: – Lower levels of living and productivity : how can we project future standards of living-> quantifiable, project and forecast things, statistical estimations based on a countries data Lower levels of human capital: (relative terms) relative to a group of “advanced countries” Higher levels of inequality and absolute poverty: more microeconomic subjects -> Brazil, Chile, Argentina (but Latin America is improving – Higher population growth rates: India – Greater social fractionalization: Brazil , (but inequality is more in terms of income level) Nigeria, India -> strongly ingrained tendencies for social fractionalization based on religious and ethnic lines-> can result from income divisions but mostly deals with social fractionalization due to ethnic and religious lives ->> harder to reverse the trends (in comparison to income differences – Larger rural population - rapid migration to cities: China, a huge problem in China, rapidly growing hubs of industrialization along the coastlines. – Lower levels of industrialization and manufactured exports: more for developing countries, not N.I.C.s - > Newly industrialized countries – Adverse geography: land locked with bad neighbors, Africa-> small countries are land locked with not great connections with bordering countries i.e. are not able to use neighbors ports = often a huge impediment to trade > Tropical climate= tropical diseases > Mountains-> conducive to droughts (Ethiopia, higher altitude) Government never succeeded to make storage facilities work-> government is never prepared for droughts despite knowing that droughts occur frequently
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– Underdeveloped financial and other markets: – Colonial Legacies - poor institutions etc. Defining the Developing World •World Bank Scheme- ranks countries on GNP/capita –LIC, LMC, UMC, OECD (see Table 2.1 and Figure 2.1) Several social and economic indicators according to which we classify countries ex: National income per capita, Institutions classify countries via levels per capita income- >collect data > We can use data and do cross country analysis and extract information Basic Indicators of Development: Real Income Level of income: National income: GDP: confined by what is made within the country, — : total value added produced by residents and non-residents of an economy
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