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Benedetta Piva                                                                          Economic Development              ...
List and briefly describe the principal causes of high population growth in less developed countries and the majorconseque...
What is the relationship between the age structure of population and its dependency burden? Is the dependency burdenhigher...
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Economic development


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Economic development

  1. 1. Benedetta Piva Economic Development Fall Semester 2011Over the past twenty-five years, China has experienced the highest growth rate I the world and also the most dramaticreductions in poverty. The headcount of the poor in China fell from 634 million in 1981 to 128 million in 2004. Indiahas enjoyed similar success in growing their economy and reducing the headcount of the poor. The high growth rates ofChina and India is attributed in large part to increasing globalization. Therefore, globalization is lifting hundreds ofmillions of people out of poverty. Yet, there is growing opposition in many developed countries to globalization.Discuss. China is a great example of how a country can take advantage of globalization to grow andreduce national poverty. Adoption of new rule of law, of commitment to competition, of widespreaduse of English, of foreign education, and of many foreign laws and institutions are not just updatingChinese institutions but transforming Chinese civilization. All of China’s economic successes canbe associated with liberalization and globalization, and each aspect of globalization has broughtChina further successes. Never in world history have so many workers improved their standards ofliving so rapidly. China’s globalization successes has strongly influenced other countries. India has learned fromChina the advantages of a more open economy. India used to have extremely protectionist tradepolicies, an unwillingness toward foreign direct investment, and a remarkable network of domesticsocialist economic controls, combined with strong foreign economic and political ties to the oldSoviet Union. The China’s success showed to India that abandoning the old hostility toglobalization do not lead to prosperity. While India started later than China and moved moreslowly, India’s economic growth rates have doubled. The number of people in absolute poverty hasdeclined rapidly. Exports have boomed and foreign exchange reserves are ample now. China’s globalization has numerous impacts on many developed countries. First of all, productsthat China exports all over the world are most of the time a lot more cheaper than domestic product.The pricing policy Chinese manufacturers adopt is often considered dumping: products they exportto other countries have a price a lot below the price charged in their home market. This cannot beexplained through normal market competition. Dumping can force established domestic producersout of a market and can lead to Chinese monopolistic position. This leads to loss of jobs and, thus,unemployment in developed countries because developed countries-based companies cannot becompetitive in their markets and they often have to reorganize their production structure goingoutside their country to regain competitiveness. Moreover, China and other countries that are taking advantage of globalization take, often withno rights, technological innovations from well-advantage developed countries and exploit them toproduce and sell in international markets products that have the same technological level of theothers but at a lower price. They can do this because they do not concentrate their efforts on quality,they are only focused on selling the cheapest products on the market. Considering the currentinternational recession, it is hard for developed countries-based companies to compete in theirmarket offering products that have the same technological standards at a higher price, even thoughwith better quality. Another tool countries like China use to success in international markets is currencymanipulation: China manipulates the value of its currency to enhance its internationalcompetitiveness. Currency manipulation is one of the most important tools China is using to give itsexporters an upper hand. Doing so, Chinese products result even more competitive in internationalmarkets and developed countries-based companies cannot keep up with them. This leads to a hugeloss of competitiveness of developed countries-based companies.
  2. 2. List and briefly describe the principal causes of high population growth in less developed countries and the majorconsequences. Explain why fertility rates are falling in some developing countries and not in others. There are many causes of population growth in less developed countries. One of the mostrelevant is education of women: in less developed countries women are less educated and tend tohave more children. This is because in these countries most of the time women are in charge andallowed only of taking care of the family and children. They also have inferior roles and low status:they are not allowed to study, thus they are not specialized in any kind of job. Women’s main taskdoes not include involving in activities done out of the extended family network. Therefore, they donot feel the opportunity cost of doing something different from child-rearing activities. If womenare more educated they will have the change to work and to gain money. If so, they will have lesstime to spend rearing children. The time they will spend outside the family will be valuable and,together with wages they will gain, it will lessen the importance of having a large family. Accordingto this argument, population growth is a natural outcome of women’s lack of economic opportunity.If women’s health, education, and economic well-being are improved along with their role andstatus in both the family and the community, this empowerment of women will inevitably lead tosmaller families and lower population growth. Another cause of high population growth is the set ofreligious believe and traditional value that is often particularly strong in less developed country.Having a large family is seen as desirable: it is a value that every family has to achieve. Moreover,no birth control is another relevant causes of population growth. In less developed countries there isno or not much access to birth control and birth prevention. This is manifested in high fertility. There are several consequences of high population growth. First of all, rapid population growthlowers per capita income growth in most less developed countries, especially those that are alreadypoor, dependent on agriculture, and experiencing pressures on land and natural resources. Highpopulation growth also worsens inequality because it falls most heavily on the poor. Poor are theones who are made landless, suffer first from cuts in government health and education programs,bear the brunt of environmental damage, and are the main victims of job cuts due to the slowergrowth of economy. Moreover, large family size and low incomes restrict the opportunities ofparents to educate all their children. At the national level, rapid growth rate causes thinly-spreadeducational expenditures, lowering quality for the sake of quantity. Therefore, the stock of humancapital and its quality is reduced. This effects economic growth in less developed countries. Indeed,high fertility harms the health of mothers and children. It increases the health risks of pregnancyand child mortality rates. High population growth also boosts food, water, facilities, and services(like health care) requirements in less developed countries. Another consequence of thisphenomenon can be seen in an environment perspective. High population growth contributes toenvironmental degradation in the form of forest encroachment, deforestation, declining fish andanimal stocks, inadequate and unsafe water, air pollution, and urban congestion. Rapid populationgrowth can also play a role in the international migration. International migration, both legal andillegal, is caused by excess of job seekers, caused by rapid population growth, over jobopportunities in less developed countries. In developing countries like Brazil, Russia, India and China fertility rates are falling becausesocial, socio-cultural and economic conditions in these countries are changing and are approachingto conditions in developed countries faster than in other developing countries. People, especiallywomen, start to see education as more valuable, thus families spend more to educate their children.Discrimination against women is getting lower in those developing countries: women’s status androle within the family is better than before. Therefore women can study and start their careersoutside the extended family network. This raises the opportunity cost of doing different activitiesfrom the traditional child-rearing activities: having a large family with many children is getting lessvaluable than job career and success. Indeed, urbanization and mobility of people toward citieslower the importance of the family network and ties, traditional value and religious believes. Allthese factors contribute to lowering fertility rates in those developing countries.
  3. 3. What is the relationship between the age structure of population and its dependency burden? Is the dependency burdenhigher or lower in developing countries? Why? The dependency burden is the proportion of the total population aged 0 to 15 and 65+, which isconsidered economically unproductive and, therefore, not counted in the labor force. The youngestthe population is, the lower the dependency burden is because there are more people consideredeconomically productive which can support and take care about the economically unproductiveones. The dependency burden varies over time and among populations in ways that have importanteconomic and social consequences. The distribution of population by age is influenced by fertilityand mortality rates. Changes in mortality generally affect the age structure of population much lessthan changes in fertility because mortality declines typically affect all ages, while fertility declinesaffect the number of new entrants into the population. The developing world is currently going through a period of very rapid demographic change.Birth rates have dropped rapidly in recent years as people, and especially women, are moreeducated and have smaller families. Life expectancy in developing countries is rising thanks tobetter environmental and work condition, better health care, better social and economic conditions,and better life style in general. The population growth we can see in developing countries is causedprimarily by a sustained reduction in mortality. Improved living standards, better nutrition, cleanwater supplies, expanded access to health services as immunization cause very rapid mortalityreductions. The young age structure of population in developing countries is also the result of highfertility and rapid population growth in recent years. With a large proportion of the populationunder age 30, we can assume a further growth over the next years because these young people willproduce more births than deaths because they will build families and will grow old (thanks to higherlife expectancy), even if their fertility is decreasing. Since these countries have a young structure ofpopulation their dependency burden is lower than in developed countries. In next decades we can expect that dependency burden in these countries will become more andmore higher as in developed countries, where birth rate is near zero, life expectancy is at the highestlevel, and, therefore, there is a higher percentage of total population that is economicallyunproductive, mostly composed by older people.