Module 1b - Principles and Concepts

Life expectancy

Indicators of Health​ ____ is the average number of years newborn children would live if subjected to the mortality risks prevailing for their cohort at the time of their birth.

Undernourishment

Indicators of Health​ ____ means consuming too little food to maintain normal levels of activity; it is what is often called the problem of hunger. ​

GNI per capita

It is calculated as the total domestic and foreign value added claimed by a country's residents without making deductions for depreciation (or wearing out) of the domestic capital stock. ​

dependency ratio

the number of people who are too young or too old to work, compared to the number of people in their productive years

Purchasing Power Parity (PPP)

A monetary measurement of development that takes into account what money buys in different countries.

incomes per capita

Adverse Geography Clearly, geography is not destiny; high-income Singapore lies almost directly on the equator, and parts of southern India have exhibited enormous economic dynamism in recent years. ​ Prior to colonization, some tropical and subtropical regions had higher ____ than Europe. ​ However, the presence of common and often adverse geographic features in comparison to temperate zone countries means it is beneficial to study tropical and subtropical developing countries together for some purposes. ​ Redoubled efforts are now under way to extend the benefits of the green revolution and tropical disease control to sub- Saharan Africa.

geography Land-locked, coastal

Adverse Geography Many analysts argue that ____ must play some role in problems of agriculture, public health, and comparative development more generally. ​ Land-locked/coastal economies, common in Africa, often have lower incomes than land-locked/coastal economies.​ It can be observed on the map on the inside cover, developing countries are primarily tropical or subtropical, and this has meant that they suffer more from tropical pests and parasites, endemic diseases such as malaria, water resource constraints, and extremes of heat.

resource endowment curse of natural resources

Adverse Geography The extreme case of favorable physical ____ is the oil- rich Persian Gulf states. ​ At the other extreme are countries like Chad, Yemen, Haiti, and Bangladesh, where endowments of raw materials and minerals and even fertile land are relatively minimal. ​ However, as the case of the DRC shows vividly, high mineral wealth is no guarantee of development success. ​ Conflict over the profits from these industries has often led to a focus on the distribution of wealth rather than its creation and to social strife, undemocratic governance, high inequality, and even armed conflict, in what is called the "____."

real income per capita, health, educational attainment

Basic Indicators of Development 1. ____ adjusted for purchasing power 2. ____ as measured by life expectancy, undernourishment and child mortality 3. ____ as measured by literacy and schooling

literacy, schooling

Basic Indicators of Development educational attainment as measured by ____ and ____

life expectancy, undernourishment and child mortality

Basic Indicators of Development health as measured by ____, ____, and ____

purchasing power

Basic Indicators of Development real income per capita adjusted for ____

1. real income per capita adjusted for purchasing power 2. health as measured by life expectancy, undernourishment and child mortality 3. educational attainments as measured by literacy and schooling

Basic Indicators of Development and how they are measured

diversity integration conflict, cooperation

Greater Social Fractionalization​ Ethnic and religious ____ need not necessarily lead to inequality, turmoil, or instability, and unqualified statements about their impact cannot be made. ​ There have been numerous instances of successful economic and social ____ of minority or indigenous ethnic populations in countries as diverse as Malaysia and Mauritius. ​ And in the United States, diversity is often cited as a source of creativity and innovation. ​ The broader point is that the ethnic and religious composition of a developing nation and whether or not that diversity leads to ____ or ____ can be important determinants of the success or failure of development effort.

fractionalization political accommodations, national consolidation ethnic fragmentation

Greater Social Fractionalization​ Low-income countries often have ethnic, linguistic, and other forms of social divisions, sometimes known as ____. ​ This is sometimes associated with civil strife and even violent conflict, which can lead developing societies to divert considerable energies to working for ____ if not ____. ​ It is one of a variety of governance challenges many developing nations face.​ There is some evidence that many of the factors associated with poor economic growth performance in sub-Saharan Africa, such as low schooling, political instability, underdeveloped financial systems, and insufficient infrastructure, can be statistically explained by high ____.

human capital, exclusion $1.25

Higher Levels of Inequality and Absolute Poverty​ Corresponding to their low average income levels, a large majority of the extreme poor live in the low-income developing countries of sub-Saharan Africa and South Asia. ​ Extreme poverty is due in part to low ____ but also to social and political ____ and other deprivations. Great progress has already been made in reducing the fraction of the developing world's population living on less than ____ per day and raising the incomes of those still below that level, but much remains to be done.​

1.5 immense

Higher Levels of Inequality and Absolute Poverty​ Globally, the poorest 20% of people receive just ____ percent of world income. ​ The lowest 20% now roughly corresponds to the approximately 1.2 billion people living in extreme poverty on less than $1.25 per day at purchasing power parity. ​ Bringing the incomes of those living on less than $1.25 per day up to this minimal poverty line would require less than 2% of the incomes of the world's wealthiest 10%.​ Thus, the scale of global inequality is also ____.

rising Asia averages

Higher Levels of Inequality and Absolute Poverty​ Inequality has been rising/falling in developed countries. But inequality varies greatly among developing countries, with generally much lower inequality in ____. ​ Consequently, we cannot confine our attention to ____; we must look within nations at how income is distributed to ask who benefits from economic development and why.

birth rate

Indicators of Health​ High fertility can be both a cause and a consequence of underdevelopment, so the ____ is reported as another basic indicator. ​

within middle-income African resource-rich

Higher Levels of Inequality and Absolute Poverty​ The enormous gap in per capita incomes between rich and poor nations is not the only manifestation of the huge global economic disparities. ​ To appreciate the breadth and depth of deprivation in developing countries, it is also necessary to look at the gap between rich and poor ____ individual developing countries. ​ Very high levels of inequality—extremes in the relative incomes of higher- and lower-income citizens—are found in many ____ countries, partly because Latin American countries historically tend to be both middle-income and highly unequal. ​ Several ____ countries have among the highest levels of inequality in the world.​ Inequality is particularly high in many ____ developing countries, notably in the Middle East and sub-Saharan Africa.

population growth, dependency burdens deterrent

Higher Population Growth Rates We may conclude, therefore, that not only are developing countries characterized by higher rates of ____, but they must also contend with greater ____ than rich nations, though with a wide gulf between low- and middle-income developing countries. ​ The circumstances and conditions under which population growth becomes a ____ to economic development is a critical issue.

children developed dependency burden

Higher Population Growth Rates​ A major implication of high birth rates is that the active labor force has to support proportionally almost twice as many ____ as it does in richer countries. ​ By contrast, the proportion of people over the age of 65 is much greater in the ____ nations. ​ Both older people and children are often referred to as an economic ____ in the sense that they must be supported financially by the country's labor force (usually defined as citizens between the ages of 15 and 64).

replacement, high

Higher Population Growth Rates​ Compared with the developed countries, which often have birth rates near or even below ____ (zero population growth) levels, the low-income developing countries have very ____ birth rates. ​

savings, pensions limited magnified

Higher Population Growth Rates​ In contrast, low-income countries have just 6 people over 65 per 100 working-age adults, compared with 10 in middle-income countries and 23 in high-income countries. ​ Thus, the total dependency ratio is 72 per 100 in low-income countries and 49 per 100 in high-income countries. ​ But in rich countries, older citizens are supported by their lifetime ____ and by public and private ____. ​ In contrast, in developing countries, public support for children is very ____. ​ So dependency has a further ____ in developing countries.

0, 1

Holistic Measures of Living Levels and Capabilities ​ The New HDI, like its predecessor, ranks each country on a scale of ____ (lowest human development) to ____ (highest human development) based on three goals or end products of development. ​

relatively, absolutely

Holistic Measures of Living Levels and Capabilities ​ By combining social and economic data, the NHDI allows nations to take a broader measure of their development performance, both ____ and ____. ​

Human Development Index

Holistic Measures of Living Levels and Capabilities ​ Indicator of level of development for each country, constructed by United Nations, combining income, literacy, education, and life expectancy

development

Holistic Measures of Living Levels and Capabilities ​ The Human Development Index, in its Traditional as well as New forms, has made a major contribution to improving our understanding of what constitutes ____, which countries are succeeding (as reflected by rises in their NHDI over time), and how different groups and regions within countries are faring.​

Purchasing Power Parity

In a simple version, ____ is defined as the number of units of a foreign country's currency required to purchase the identical quantity of goods and services in the local developing country market as $1 would buy in the United States. ​

living standards

In practice, adjustments are made for differing relative prices across countries so that ____ may be measured more accurately.​

Gross National Income (GNI)

In the World Bank's classification system, 213 economies with a population of at least 30,000 are ranked by their levels of ____. ​These economies are then classified as low-income countries (LICs), lower-middle-income countries (LMCs), upper- middle-income countries (UMCs), high-income OECD countries, and other high-income countries. (Often, LMCs and UMCs are informally grouped as the middle-income countries.) ​

Literacy, lower

Indicators of Education ____ is the fraction of adult males and females reported or estimated to have basic abilities to read and write; functional [ ] is generally ____ than the reported numbers.

agriculture, manufacturing, services rural, urban population shift

Larger Rural Populations but Rapid Rural-to-Urban Migration ​One of the hallmarks of economic development is a shift from ____ to ____ and ____. ​ In developing countries, a much higher share of the population lives in rural/urban areas, and correspondingly fewer in rural/urban areas.​ Although modernizing in many regions, rural areas are poorer and tend to suffer from missing markets, limited information, and social stratification. ​ A massive ____ is also under way as hundreds of millions of people are moving from rural to urban areas, fueling rapid urbanization, with its own attendant problems.

property rights, elites, opportunities poor institutions

Lingering Colonial Impacts and Unequal International Relations Both domestically and internationally, developing countries have more often lacked institutions and formal organizations of the type that have benefited the developed world: Domestically, on average, ____ have been less secure, constraints on ____ have been weak, and a smaller segment of society has been able to gain access to and take advantage of economic ____. ​ Problems with governance and public administration, as well as poorly performing markets, often stem from ____.

domination diversity

Lingering Colonial Impacts and Unequal International Relations To a widely varying degree, newly independent nations continued to experience foreign ____ by former colonial powers and the United States, and in a number of countries by the Soviet Union, particularly during the Cold War.​ The ____ of colonial experiences is one of the important factors that help explain the wide spectrum of development outcomes in today's world.

extractors, creators

Lingering Colonial Impacts and Unequal International Relations ​Most developing countries were once colonies of Europe or otherwise dominated by European or other foreign powers, and institutions created during the colonial period often had pernicious effects on development that in many cases have persisted to the present day. ​ Despite important variations that proved consequential, colonial era institutions often favored ____ of wealth rather than ____ of wealth, harming development then and now.

functional literacy, teacher truancy

Lower Levels of Human Capital Enrollments have strongly improved in recent years, but student attendance and completion, along with attainment of basic skills such as ____, remain problems. ​ Indeed, ____ remains a serious problem in South Asia and sub-Saharan Africa.

synergies

Lower Levels of Human Capital Moreover, there are strong ____ between progress in health and education. ​ For example, under-5 mortality rates improve as mothers' education levels rise.​ The well-performing developing countries are much closer to the developed world in health and education standards than they are to the lowest-income countries.

Human capital nutrition, education under-five

Lower Levels of Human Capital ____—health, education, and skills—is vital to economic growth and human development. ​ Compared with developed countries, much of the developing world has lagged in its average levels of ____ (as measured, for example, by life expectancy or undernourishment), and ____ (measured by literacy).​ The ____ mortality is 17 times higher in low-income countries than in high-income countries, although great progress has been made since 1990.

primary exports agricultural, mineral middle diversify

Lower Levels of Industrialization and Manufactured Exports Along with lower industrialization, developing nations tended to have a higher dependence on ____. ​ Most developing countries have diversified away from ____ and ____ exports to some degree. ​ The ____- income countries are rapidly catching up with the developed world in the share of manufactured goods in their exports, even if these goods are typically less advanced in their skill and technology content. ​ However, the low-income countries, particularly those in Africa, remain highly dependent on a relatively small number of agricultural and mineral exports. ​ Africa will need to continue its efforts to ____ its exports.

industrial countries Industrialization Asia

Lower Levels of Industrialization and Manufactured Exports One of the most widely used terminologies for the original Group of Seven (G7) countries and other advanced economies such as smaller European countries and Australia is the "____."​ ____ is associated with high productivity and incomes and has been a hallmark of modernization and national economic power. ​ It is no accident that most developing-country governments have made industrialization a high national priority, with a number of prominent success stories in ____.

investment poverty trap, circular & cumulative causation development challenges

Lower Levels of Living and Productivity At very low income levels, in fact, a vicious circle may set in, whereby low income leads to low ____ in education and health as well as plant and equipment and infrastructure, which in turn leads to low productivity and economic stagnation.​ This is known as a ____ or what Nobel laureate Gunnar Myrdal called "____."​ However, it is important to stress that there are ways to escape from low income. The low-income countries are themselves a very diverse group with greatly differing ____.

self-sufficient, economic inertia correlation

Lower Levels of Living and Productivity One common misperception is that low incomes result from a country's being too small to be ____ or too large to overcome ____. ​ However, there is no necessary ____ between country size in population or area and economic development (in part because each has different advantages and disadvantages that can offset each other).

advanced, wide range high income output per worker

Lower Levels of Living and Productivity There is a vast gulf in productivity between ____ economies such as the United States and developing nations, including India and the DRC, but also a ____ among these and other developing countries. ​ All countries with averages below what is defined as ____ are considered developing in most taxonomies (and some in the high-income range as defined by the World Bank are still considered developing). ​ Though resulting from a number of deeper causes, the wide disparity in income largely corresponds to the large gaps in ____ between developing and developed countries.

A long and healthy life, knowledge, A decent standard of living

The End products of development​ ____ as measured by life expectancy at birth.​ ____ as measured by a combination of average schooling attained by adults. Expected years of schooling for school-age children.​ ____ as measured by real per capita gross domestic product adjusted for the differing purchasing power parity of each country's currency to reflect cost of living and for the assumption of diminishing marginal utility of income.

per capita income

The average amount of money earned by each person in a political unit

per capita income

The most common way to define the developing world is by ____.

per capita income

The total national income divided by the number of people in the nation

Gross National Income (GNI)

The value of the output of goods and services produced in a country in a year, including money that leaves and enters the country

Gross National Income (GNI), Gross Domestic Product (GDP)

Thus, GDP/GNI comprises GDP/GNI plus the difference between the income residents receive from abroad for factor services (labor and capital) less payments made to nonresidents who contribute to the domestic economy. ​

markets, information legal, institutional

Underdeveloped Markets Imperfect ____ and incomplete ____ are far more prevalent in developing countries, with the result that domestic markets, notably but not only financial markets, have worked less efficiently. ​ In many developing countries, ____ and ____ foundations for markets are extremely weak. ​

imperfect misallocated externalities

Underdeveloped Markets Or individuals not doing the producing or consuming in production and consumption, and poorly regulated common property resources (e.g., fisheries, grazing lands, water holes) mean that markets are often highly ____. ​ Moreover, information is limited and costly to obtain, thereby often causing goods, finances, and resources to be ____. ​ And we have come to understand that small ____ can interact in ways that add up to very large distortions in an economy and present the real possibility

legal system currency infrastructure banking, insurance market information business relationships

Underdeveloped Markets Some aspects of market underdevelopment are that they often lack (1) a ____ that enforces contracts and validates property rights​ (2) a stable and trustworthy ____ (3) an ____ of roads and utilities that results in low transport and communication costs so as to facilitate interregional trade​ (4) a well-developed and efficiently regulated system of ____ and ____, with broad access and with formal credit markets that select projects and allocate loanable funds on the basis of relative economic profit- ability and enforce rules of repayment​ (5) substantial ____ for consumers and producers about prices, quantities, and qualities of products and resources as well as the creditworthiness of potential borrowers​ (6) social norms that facilitate successful long-term ____. These six factors, along with the existence of economies of scale in major sectors of the economy, thin markets for many products due to limited demand and few sellers, widespread externalities (costs or benefits that accrue to companies.​

government

Underdeveloped Markets The extent to which these imperfect markets and incomplete information systems justify a more active role for ____ (which is also subject to similar problems of incomplete and imperfect information) is an issue that we will be dealing with in later chapters.​ But their existence remains a common characteristic of many developing nations and an important contributing factor to their state of underdevelopment.

Purchasing Power Parity

____ is calculated using a common set of international prices for all goods and services. ​

Gross Domestic Product (GDP)

____ measures the total value for final use of output produced by an economy, by both residents and nonresidents. ​

GNI per capita

____, is often used as a summary index of the relative economic well-being of people in different nations. ​

externalities

economic side effects or by-products that affect an uninvolved third party; can be negative or positive

1. Lower levels of living and productivity​ 2. Lower levels of human capital​ 3. Higher levels of inequality and absolute poverty​ 4. Higher population growth rates​ 5. Greater social fractionalization 6. Larger rural populations but rapid rural to urban migration​ 7. Lower levels of industrialization and manufactured exports​ 8. Adverse geography​ 9. Underdeveloped markets​ 10. Lingering colonial impacts and unequal international relation

​10 characteristics of the developing world: diversity within commonality