Profile%20of%20Developing%20Countries_rev10

Profile%20of%20Developing%20Countries_rev10 - Profile of...

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Profile of Developing Countries INSTITUTIONS Weak or non-inclusive political institutionalization Political control in LDCs tend to be held by a relatively small elite group (political leaders, traditional royalty, high ranking military officers, senior civil servants & administrators, and executives in corporations, large landowners, major businessmen & leading professionals) Authoritarian leaders need some degree of consensus among the influential elite unless they are willing and prepared to use police or military repression, perhaps with support of a strong foreign power. Government is over-sized relative to size of economy. Too many levels of government and bureaucracy exist. What small percentage of the adult population is able to read and write are employed within the public sector. A general lack of market-enabling institutions, or existing institutions are under-developed and ineffective. Legal System Commercial Law, Company Law, Patent Laws, Property Rights Law, Bankruptcy Laws, etc. not clearly defined, developed – or, not secure or enforced. Tax code: May be underdeveloped or too complex & punitive. Financial Markets Stock exchange Banking system Other Lending institutions
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Judicial System Judges are untrained or incapable of interpreting and applying the law correctly or impartially Media and Information Networks Usually controlled by government & information is filtered or censored Regulatory Oversight of Infrastructure, Industry & Competition Utilities usually owned & heavily regulated by government. Or, if owned by private firms, these firms will tend to have strong ties to the ruling class or party. Contracts are awarded on the basis of personal connections to members of the ruling party or to the party itself. Infrastructure is highly regulated (labor force employed, output & price), creating inefficiencies that lead to outages and/ or insufficient infrastructure to service poor rural communities. Lack of Rule of Law (or Ineffective Law Enforcement) Rule of law: Tends to be weak or non-existent. Judicial system is under-developed. Not enough judges; or judges lack the training needed to correctly interpret and apply the law; and/or may be influenced by bribes and loyalty to one of the stakeholders involved in the case. Once a penalty is assessed, or sentence is passed, it is difficult to implement. Law are so complex, rigid and punitive, that finding ways around the legal red tape becomes routine. Without Rule of Law, corruption flourishes.
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Extensive Bureaucracy and Red Tape A major objective of government is to keep the unemployment rate as low as possible – especially among literate adults. One popular way of reducing unemployment is to “grow the size of government” so that more people may be employed. To justify employing more people within the public sector,
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This note was uploaded on 11/10/2011 for the course ECON 4310 taught by Professor Staff during the Fall '08 term at Kennesaw.

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Profile%20of%20Developing%20Countries_rev10 - Profile of...

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