Updated presentation on aspects of factors affecting economic growth including the middle income trap. Designed as a resource for A2 macro - unit 4 Development Economics
Globalization has led to both benefits and disadvantages for developing countries. It has encouraged specialization and deeper trade integration, however, it has also contributed to imbalances between and within countries. While globalization has helped lift many people out of extreme poverty, inequality has risen in some places. Overall, reducing inequality through progressive policies could boost aggregate demand and economic growth, but only if tax revenues are spent effectively and social mobility is high enough.
This document provides an overview of Paul Krugman's new trade theory, which focuses on intra-industry trade driven by increasing returns to scale and imperfect competition. It discusses how intra-industry trade has become a large part of trade between industrialized nations as technology and resources have become more similar. Economies of scale, both internal and external, can lead to imperfect competition and influence patterns of trade. The theory of monopolistic competition is introduced to model trade driven by differentiated products and economies of scale. Trade integration creates a larger world market, allowing for more production scale, lower prices, and greater product variety compared to autarky.
Poverty Reduction Policies in Low Income Countriestutor2u
This revision presentation covers some of the main causes of continued high levels of extreme poverty in low and middle income countries and considers a range of pro-poor government interventions designed to increase productivity and regular employment and waged income in formal labour markets.
Basic idea of what leads to the middle income trap - a theorized economic development situation in which a country’s growth slows after reaching middle income levels, and how innovation could help affected countries escape.
A2 Macroeconomics - Revision on the Balance of Paymentstutor2u
The balance of payments (BOP) records all financial transactions made between consumers, businesses and the government in one country with other nations.
The current account measures the difference between money and credit going in and out of an economy (through exports, imports and income paid on assets both home and abroad)
Globalization refers to the increased movement and exchange of people, goods, services, capital and information across borders. This increased interaction between regions can have both benefits and risks. Potential risks include intellectual property theft if products are manufactured overseas, corruption in some developing nations, social injustice and poor working conditions in multinational corporations. Globalization may also contribute to the spread of communicable diseases worldwide and increase environmental damage. Overall, globalization offers opportunities but also challenges to ensure fairness for all people.
AS Macro Revision Macroeconomic Equilibriumtutor2u
This document discusses macroeconomic equilibrium using aggregate demand (AD) and aggregate supply (AS) analysis. It provides diagrams showing:
1) How macroeconomic equilibrium is established at the point where AD intersects short-run aggregate supply (SRAS).
2) How an increase in AD leads to expansion of output and a higher equilibrium price level, while an increase in AS expands both AD and output.
3) It also shows how a decrease in either AD or AS results in a contraction of output and a lower equilibrium price level.
Unemployment occurs when able, available and willing workers cannot find jobs despite actively searching. Persistently high unemployment has damaging economic and social costs. In the UK, over 1 in 6 young people and nearly 40% of the long-term unemployed have been out of work for over a year. While UK unemployment has fallen recently, there are limits to how far it can drop without affecting other goals. Unemployment is measured in various ways including surveys and benefit claims.
Globalization has led to both benefits and disadvantages for developing countries. It has encouraged specialization and deeper trade integration, however, it has also contributed to imbalances between and within countries. While globalization has helped lift many people out of extreme poverty, inequality has risen in some places. Overall, reducing inequality through progressive policies could boost aggregate demand and economic growth, but only if tax revenues are spent effectively and social mobility is high enough.
This document provides an overview of Paul Krugman's new trade theory, which focuses on intra-industry trade driven by increasing returns to scale and imperfect competition. It discusses how intra-industry trade has become a large part of trade between industrialized nations as technology and resources have become more similar. Economies of scale, both internal and external, can lead to imperfect competition and influence patterns of trade. The theory of monopolistic competition is introduced to model trade driven by differentiated products and economies of scale. Trade integration creates a larger world market, allowing for more production scale, lower prices, and greater product variety compared to autarky.
Poverty Reduction Policies in Low Income Countriestutor2u
This revision presentation covers some of the main causes of continued high levels of extreme poverty in low and middle income countries and considers a range of pro-poor government interventions designed to increase productivity and regular employment and waged income in formal labour markets.
Basic idea of what leads to the middle income trap - a theorized economic development situation in which a country’s growth slows after reaching middle income levels, and how innovation could help affected countries escape.
A2 Macroeconomics - Revision on the Balance of Paymentstutor2u
The balance of payments (BOP) records all financial transactions made between consumers, businesses and the government in one country with other nations.
The current account measures the difference between money and credit going in and out of an economy (through exports, imports and income paid on assets both home and abroad)
Globalization refers to the increased movement and exchange of people, goods, services, capital and information across borders. This increased interaction between regions can have both benefits and risks. Potential risks include intellectual property theft if products are manufactured overseas, corruption in some developing nations, social injustice and poor working conditions in multinational corporations. Globalization may also contribute to the spread of communicable diseases worldwide and increase environmental damage. Overall, globalization offers opportunities but also challenges to ensure fairness for all people.
AS Macro Revision Macroeconomic Equilibriumtutor2u
This document discusses macroeconomic equilibrium using aggregate demand (AD) and aggregate supply (AS) analysis. It provides diagrams showing:
1) How macroeconomic equilibrium is established at the point where AD intersects short-run aggregate supply (SRAS).
2) How an increase in AD leads to expansion of output and a higher equilibrium price level, while an increase in AS expands both AD and output.
3) It also shows how a decrease in either AD or AS results in a contraction of output and a lower equilibrium price level.
Unemployment occurs when able, available and willing workers cannot find jobs despite actively searching. Persistently high unemployment has damaging economic and social costs. In the UK, over 1 in 6 young people and nearly 40% of the long-term unemployed have been out of work for over a year. While UK unemployment has fallen recently, there are limits to how far it can drop without affecting other goals. Unemployment is measured in various ways including surveys and benefit claims.
This document discusses protectionism and trade liberalization. It defines protectionism as policies that restrict trade between countries, usually through tariffs, quotas, and non-tariff barriers. Tariffs increase import prices while quotas restrict quantities. Non-tariff barriers make trade costly through regulations and standards. Protectionism aims to protect domestic industries, jobs, and culture. Trade liberalization seeks to reduce barriers and promote free trade based on comparative advantage. Major trade organizations like GATT and WTO negotiate liberalization through agreements but achieving worldwide agreements faces challenges.
Transnational corporations (TNCs) have grown due to factors like globalization, advances in transportation and communication technologies, and the ability to exploit differences in factors of production across countries. TNCs can benefit host countries through job creation, technology transfer, and economic growth. However, they can also negatively impact communities through practices like labor exploitation, environmental damage, and urbanization. Newly industrialized countries (NICs) have attracted manufacturing industries and become locations for TNC production facilities due to low costs and expanding markets. Many NICs are now also countries of origin for their own TNCs and make foreign investments.
Remittances and Household Welfare:
A Case Study of Pakistan
by
Vaqar Ahmed, Guntur Sugiyarto, and Shikha Jha
Sustainable Development Policy Institute
Asian Development Bank
The document discusses monetary policy in the UK. It explains that the Bank of England uses interest rates and quantitative easing to meet the government's 2% inflation target. Interest rates have been at historically low levels since the financial crisis, but are expected to rise gradually. The main tools of monetary policy are changes to interest rates, the money supply, and currency markets, which influence inflation, growth, and financial stability.
Fiscal policy involves the use of government spending, taxation, and borrowing to influence aggregate demand, output, and employment. It can also be used to alter income distribution and address market failures. Changes to fiscal policy impact both aggregate demand and aggregate supply. Key tools of fiscal policy include public spending on areas like infrastructure and welfare, as well as taxes which can be direct or indirect, progressive, proportional, or regressive. Fiscal policy aims to stabilize the economic cycle and promote competitiveness, and the appropriate use of budget deficits can support aggregate demand. However, high public debt levels may increase borrowing costs and future taxes.
Developing economies share some common characteristics while also exhibiting structural diversity:
1) They generally have low levels of living, productivity, and human development indicators like per capita income, GDP growth, HDI scores.
2) Population growth rates are higher in developing countries compared to developed nations, leading to larger youth and dependency burdens.
3) Many developing economies rely heavily on primary exports, agriculture, and raw materials with less emphasis on manufacturing, and are dependent on international trade and relations.
4) Imperfect markets, incomplete information, and lack of institutional and structural support also hinder development potential in these nations.
The document discusses exchange rate determination and the factors that influence exchange rates. It begins by explaining how exchange rates are measured in terms of currency appreciation and depreciation. It then discusses how the equilibrium exchange rate is determined by the demand and supply of currencies. Finally, it examines several factors that can affect the equilibrium exchange rate, including relative inflation rates, interest rates, income levels, government controls, expectations, and the interaction of trade and financial factors.
GATT & WTO : History and Prospective of Nepal.Regmi Milan
The document provides historical background on trade policies from the 1500s-1700s and the establishment of GATT at the Bretton Woods Conference in 1944. It discusses Nepal joining WTO in 2004 and both the benefits and challenges of its membership. The benefits include market access predictability and transit rights as a landlocked country. However, Nepal faces market access barriers like tariffs and non-tariff barriers. It also has supply-side constraints such as lack of infrastructure and human capital that limit its export competitiveness within the global trading system governed by WTO rules.
Meeting 3 - Rybczynski theorem (International Economics)Albina Gaisina
The document discusses several economic concepts:
1) The Rybczynski theorem explains that if a country's supply of one factor increases, it will produce more of the good that intensively uses that factor and less of the other good.
2) Dutch disease refers to an economic phenomenon where resource discovery leads to decline of other sectors through currency appreciation and a shift in economic activity.
3) The resource curse or paradox of plenty suggests that countries with an abundance of natural resources tend to have less economic growth and worse development outcomes than countries with fewer natural resources, due to issues like overdependence on commodity exports and weak institutions.
The document discusses macroeconomic policies used by governments to influence aggregate demand and supply. It explains that fiscal policy involves varying public expenditure and taxation to manage demand, while monetary policy changes interest rates and the money supply. Expansionary policies boost demand during recessions by cutting taxes or lowering interest rates. Contractionary policies reduce demand to curb inflation by raising taxes or interest rates. The document also discusses supply-side policies aimed at boosting productivity through incentives, education, deregulation, and other measures.
Early international trade dates back to Phoenician and Greek merchants before Christ. The Roman Empire facilitated trade through development of laws, markets, and communication infrastructure. In the 17th-18th centuries, European powers established trading companies and pursued mercantilism. The 1930 Smoot-Hawley Tariff Act raised US import duties and contributed to the worldwide Great Depression. Over the 20th century, two World Wars disrupted global trade but new institutions like the IMF, World Bank and GATT/WTO promoted trade liberalization and globalization.
Negative externalities occur when production or consumption impose costs on third parties not involved in the market transaction. This leads to market failure as prices do not reflect the full social costs. Examples include pollution from factories imposing health costs, and noise pollution from airlines imposing nuisance costs. Taxes or regulations can be used to internalize these external costs and improve economic efficiency by aligning private and social costs. However, determining the appropriate tax level can be difficult and taxes may impact consumer welfare.
AS Macro Revision - The Balance of Paymentstutor2u
This document discusses the balance of payments (BoP) and current account. It provides examples of countries that typically run trade surpluses and deficits. Causes of deficits include weak competitiveness and exchange rate issues. Policies to reduce deficits include demand management, exchange rate adjustments, and supply-side reforms. A currency depreciation can initially worsen the trade deficit due to lags but may eventually improve it if certain conditions are met. The UK often runs a trade deficit due to factors like import dependence and weaknesses exporting to growing markets.
Inflation can be caused by demand pull, cost push, and increases in the money supply. Demand pull inflation occurs when aggregate demand exceeds supply, like during the Celtic Tiger in Ireland when easy credit led to rising house prices. Cost push inflation is due to supply constraints increasing costs, such as the 1970s oil crisis raising energy prices. Increasing the money supply, such as through printing money, led to hyperinflation in Zimbabwe and Yugoslavia in the late 20th century. High inflation can cause problems like worsening the balance of payments, increasing shoe leather and menu costs, and redistributing income away from those on fixed incomes.
The document discusses various barriers to international trade, including transportation costs, policy barriers like tariffs and non-tariff barriers, and internal trade costs. It also examines the motivations for countries adopting protectionist policies, such as responding to dumping or trade deficits, protecting domestic employment, and protecting strategic industries. Finally, it outlines some arguments against protectionism, noting the risks of retaliation, market distortion effects like higher consumer prices and costs for exporters.
The document provides a timeline and overview of global and India's foreign trade trends. It discusses how world trade expanded from waterborne routes 3000 BCE to the establishment of trade organizations like the British East India Company in the 17th century. It outlines recent trends in world trade from 2008-2018 like rising trade in services and developing economies outperforming developed ones. For India, it outlines the timeline of trade from deficits post-independence to current surpluses in services offsetting merchandise deficits. The coronavirus is estimated to impact India's trade by $348 million through disruptions to Chinese manufacturing.
This document discusses revenues, costs, and profits in microeconomics. It explains that total revenue is equal to price times quantity and can increase if price is lowered, causing demand to increase. It also discusses how marginal revenue is positive if total revenue increases when price decreases. The optimal output and price are where marginal revenue equals marginal cost, which maximizes total profit. Loss-making businesses have average revenue below average cost, resulting in losses even at the profit-maximizing output level.
This document discusses alternatives to GDP as a measure of national well-being. It outlines the history and limitations of GDP, including that it does not account for sustainability, inequality, or non-monetary aspects of life. The OECD and others have begun measuring well-being more directly through metrics like the UN's Human Development Index, which considers health, education, and income levels together. While GDP remains important for policymaking, many experts argue that a dashboard of multiple indicators provides a more comprehensive view of national progress and citizen well-being over solely relying on GDP.
1. Transnational corporations (TNCs) operate across national borders through complex internal and external networks of relationships.
2. TNCs internationalize primarily for market access and to obtain resources like natural resources, labor, and knowledge. They enter foreign markets through exports, foreign direct investment, licensing, franchising, and management contracts.
3. As networks within networks, TNCs organize their internal operations and configure their external relationships based on industry forces, their own history and culture, and their home country influences. Their geographical embeddedness impacts how they operate globally.
The Harrod-Domar model theorizes that a country's economic growth rate is defined by its savings level and capital output ratio. It was developed in the 1930s-40s by British economist Roy Harrod and Russian economist Evsey Domar. The model shows that increased savings leads to increased investment, production, and capital, fueling economic growth. However, it makes unrealistic assumptions and does not account for factors like development versus just growth. The Solow-Swan model later improved on it by including capital intensity variations.
The Harrod-Domar growth model uses 3 key variables to determine the growth rate:
1. The saving rate, which determines how much can be invested.
2. Capital productivity, or how much output increases with each unit of new capital.
3. The depreciation rate, which accounts for aging of the existing capital stock.
The model's formula is: Growth Rate = Saving Rate x Capital Productivity - Depreciation Rate. It provides a simple framework for analyzing how changes to these variables impact long-term economic growth.
This document discusses protectionism and trade liberalization. It defines protectionism as policies that restrict trade between countries, usually through tariffs, quotas, and non-tariff barriers. Tariffs increase import prices while quotas restrict quantities. Non-tariff barriers make trade costly through regulations and standards. Protectionism aims to protect domestic industries, jobs, and culture. Trade liberalization seeks to reduce barriers and promote free trade based on comparative advantage. Major trade organizations like GATT and WTO negotiate liberalization through agreements but achieving worldwide agreements faces challenges.
Transnational corporations (TNCs) have grown due to factors like globalization, advances in transportation and communication technologies, and the ability to exploit differences in factors of production across countries. TNCs can benefit host countries through job creation, technology transfer, and economic growth. However, they can also negatively impact communities through practices like labor exploitation, environmental damage, and urbanization. Newly industrialized countries (NICs) have attracted manufacturing industries and become locations for TNC production facilities due to low costs and expanding markets. Many NICs are now also countries of origin for their own TNCs and make foreign investments.
Remittances and Household Welfare:
A Case Study of Pakistan
by
Vaqar Ahmed, Guntur Sugiyarto, and Shikha Jha
Sustainable Development Policy Institute
Asian Development Bank
The document discusses monetary policy in the UK. It explains that the Bank of England uses interest rates and quantitative easing to meet the government's 2% inflation target. Interest rates have been at historically low levels since the financial crisis, but are expected to rise gradually. The main tools of monetary policy are changes to interest rates, the money supply, and currency markets, which influence inflation, growth, and financial stability.
Fiscal policy involves the use of government spending, taxation, and borrowing to influence aggregate demand, output, and employment. It can also be used to alter income distribution and address market failures. Changes to fiscal policy impact both aggregate demand and aggregate supply. Key tools of fiscal policy include public spending on areas like infrastructure and welfare, as well as taxes which can be direct or indirect, progressive, proportional, or regressive. Fiscal policy aims to stabilize the economic cycle and promote competitiveness, and the appropriate use of budget deficits can support aggregate demand. However, high public debt levels may increase borrowing costs and future taxes.
Developing economies share some common characteristics while also exhibiting structural diversity:
1) They generally have low levels of living, productivity, and human development indicators like per capita income, GDP growth, HDI scores.
2) Population growth rates are higher in developing countries compared to developed nations, leading to larger youth and dependency burdens.
3) Many developing economies rely heavily on primary exports, agriculture, and raw materials with less emphasis on manufacturing, and are dependent on international trade and relations.
4) Imperfect markets, incomplete information, and lack of institutional and structural support also hinder development potential in these nations.
The document discusses exchange rate determination and the factors that influence exchange rates. It begins by explaining how exchange rates are measured in terms of currency appreciation and depreciation. It then discusses how the equilibrium exchange rate is determined by the demand and supply of currencies. Finally, it examines several factors that can affect the equilibrium exchange rate, including relative inflation rates, interest rates, income levels, government controls, expectations, and the interaction of trade and financial factors.
GATT & WTO : History and Prospective of Nepal.Regmi Milan
The document provides historical background on trade policies from the 1500s-1700s and the establishment of GATT at the Bretton Woods Conference in 1944. It discusses Nepal joining WTO in 2004 and both the benefits and challenges of its membership. The benefits include market access predictability and transit rights as a landlocked country. However, Nepal faces market access barriers like tariffs and non-tariff barriers. It also has supply-side constraints such as lack of infrastructure and human capital that limit its export competitiveness within the global trading system governed by WTO rules.
Meeting 3 - Rybczynski theorem (International Economics)Albina Gaisina
The document discusses several economic concepts:
1) The Rybczynski theorem explains that if a country's supply of one factor increases, it will produce more of the good that intensively uses that factor and less of the other good.
2) Dutch disease refers to an economic phenomenon where resource discovery leads to decline of other sectors through currency appreciation and a shift in economic activity.
3) The resource curse or paradox of plenty suggests that countries with an abundance of natural resources tend to have less economic growth and worse development outcomes than countries with fewer natural resources, due to issues like overdependence on commodity exports and weak institutions.
The document discusses macroeconomic policies used by governments to influence aggregate demand and supply. It explains that fiscal policy involves varying public expenditure and taxation to manage demand, while monetary policy changes interest rates and the money supply. Expansionary policies boost demand during recessions by cutting taxes or lowering interest rates. Contractionary policies reduce demand to curb inflation by raising taxes or interest rates. The document also discusses supply-side policies aimed at boosting productivity through incentives, education, deregulation, and other measures.
Early international trade dates back to Phoenician and Greek merchants before Christ. The Roman Empire facilitated trade through development of laws, markets, and communication infrastructure. In the 17th-18th centuries, European powers established trading companies and pursued mercantilism. The 1930 Smoot-Hawley Tariff Act raised US import duties and contributed to the worldwide Great Depression. Over the 20th century, two World Wars disrupted global trade but new institutions like the IMF, World Bank and GATT/WTO promoted trade liberalization and globalization.
Negative externalities occur when production or consumption impose costs on third parties not involved in the market transaction. This leads to market failure as prices do not reflect the full social costs. Examples include pollution from factories imposing health costs, and noise pollution from airlines imposing nuisance costs. Taxes or regulations can be used to internalize these external costs and improve economic efficiency by aligning private and social costs. However, determining the appropriate tax level can be difficult and taxes may impact consumer welfare.
AS Macro Revision - The Balance of Paymentstutor2u
This document discusses the balance of payments (BoP) and current account. It provides examples of countries that typically run trade surpluses and deficits. Causes of deficits include weak competitiveness and exchange rate issues. Policies to reduce deficits include demand management, exchange rate adjustments, and supply-side reforms. A currency depreciation can initially worsen the trade deficit due to lags but may eventually improve it if certain conditions are met. The UK often runs a trade deficit due to factors like import dependence and weaknesses exporting to growing markets.
Inflation can be caused by demand pull, cost push, and increases in the money supply. Demand pull inflation occurs when aggregate demand exceeds supply, like during the Celtic Tiger in Ireland when easy credit led to rising house prices. Cost push inflation is due to supply constraints increasing costs, such as the 1970s oil crisis raising energy prices. Increasing the money supply, such as through printing money, led to hyperinflation in Zimbabwe and Yugoslavia in the late 20th century. High inflation can cause problems like worsening the balance of payments, increasing shoe leather and menu costs, and redistributing income away from those on fixed incomes.
The document discusses various barriers to international trade, including transportation costs, policy barriers like tariffs and non-tariff barriers, and internal trade costs. It also examines the motivations for countries adopting protectionist policies, such as responding to dumping or trade deficits, protecting domestic employment, and protecting strategic industries. Finally, it outlines some arguments against protectionism, noting the risks of retaliation, market distortion effects like higher consumer prices and costs for exporters.
The document provides a timeline and overview of global and India's foreign trade trends. It discusses how world trade expanded from waterborne routes 3000 BCE to the establishment of trade organizations like the British East India Company in the 17th century. It outlines recent trends in world trade from 2008-2018 like rising trade in services and developing economies outperforming developed ones. For India, it outlines the timeline of trade from deficits post-independence to current surpluses in services offsetting merchandise deficits. The coronavirus is estimated to impact India's trade by $348 million through disruptions to Chinese manufacturing.
This document discusses revenues, costs, and profits in microeconomics. It explains that total revenue is equal to price times quantity and can increase if price is lowered, causing demand to increase. It also discusses how marginal revenue is positive if total revenue increases when price decreases. The optimal output and price are where marginal revenue equals marginal cost, which maximizes total profit. Loss-making businesses have average revenue below average cost, resulting in losses even at the profit-maximizing output level.
This document discusses alternatives to GDP as a measure of national well-being. It outlines the history and limitations of GDP, including that it does not account for sustainability, inequality, or non-monetary aspects of life. The OECD and others have begun measuring well-being more directly through metrics like the UN's Human Development Index, which considers health, education, and income levels together. While GDP remains important for policymaking, many experts argue that a dashboard of multiple indicators provides a more comprehensive view of national progress and citizen well-being over solely relying on GDP.
1. Transnational corporations (TNCs) operate across national borders through complex internal and external networks of relationships.
2. TNCs internationalize primarily for market access and to obtain resources like natural resources, labor, and knowledge. They enter foreign markets through exports, foreign direct investment, licensing, franchising, and management contracts.
3. As networks within networks, TNCs organize their internal operations and configure their external relationships based on industry forces, their own history and culture, and their home country influences. Their geographical embeddedness impacts how they operate globally.
The Harrod-Domar model theorizes that a country's economic growth rate is defined by its savings level and capital output ratio. It was developed in the 1930s-40s by British economist Roy Harrod and Russian economist Evsey Domar. The model shows that increased savings leads to increased investment, production, and capital, fueling economic growth. However, it makes unrealistic assumptions and does not account for factors like development versus just growth. The Solow-Swan model later improved on it by including capital intensity variations.
The Harrod-Domar growth model uses 3 key variables to determine the growth rate:
1. The saving rate, which determines how much can be invested.
2. Capital productivity, or how much output increases with each unit of new capital.
3. The depreciation rate, which accounts for aging of the existing capital stock.
The model's formula is: Growth Rate = Saving Rate x Capital Productivity - Depreciation Rate. It provides a simple framework for analyzing how changes to these variables impact long-term economic growth.
Domar's growth model from 1946 analyzes how a capitalist economy can grow at a constant rate after reaching full employment. It assumes aggregate supply equals aggregate demand during steady growth. The model shows that for steady growth, the rates of investment, capital stock growth, output growth, and employment growth must all be equal. It derives the equation that the growth rate equals the savings ratio multiplied by the incremental output-capital ratio. Investment has dual effects of increasing both aggregate demand and productive capacity in the long-run.
The document summarizes key aspects of the Human Development Index (HDI) and provides related data. The HDI measures development by combining indicators of life expectancy, education, and income. It discusses the components of the HDI - health (life expectancy), education (mean years of schooling and expected years), and standard of living (GNI per capita). Tables then rank countries by their HDI values and provide country-level data on the components. Other tables analyze inequality-adjusted HDI values and gender inequality.
Lewis proposed a model of economic development where a developing economy consists of two sectors: a subsistence agricultural sector and a capitalist industrial sector. Workers move from the agricultural sector with zero marginal productivity to the industrial sector with higher productivity. This increases profits in the industrial sector, fueling expansion and absorbing more agricultural workers. Eventually, wages rise in the agricultural sector as well. However, capitalist profits may not be reinvested as assumed, and other assumptions like constant wages are questionable. Overall, Lewis sought to explain how economies develop by transforming their economic structure and increasing savings and investment rates.
Models of Development propose ways to understand how countries develop economically. One approach is Rostow's Stages of Growth model, which places countries into five categories of development: 1) Traditional Society, 2) Preconditions for Take-Off, 3) Take-Off, 4) Drive to Maturity, and 5) High Mass Consumption. The stages involve shifts from agriculture to industry and increasing technological advancement and investment. Understanding models of development can help identify strategies to promote economic growth in countries.
This document summarizes Harrod's growth model, which argues that steady economic growth is inherently unstable due to entrepreneurs' inability to accurately predict the warranted rate of growth. It outlines Harrod's key assumptions and shows how the actual growth rate diverging from the warranted rate leads to boom/bust cycles. The model concludes that full employment steady growth is impossible to achieve due to exogenous factors like savings, technology, and population growth being rigid over time.
Asian economies can avoid middle-income traps by pursuing sustainable economic development. Sustainable development has three pillars: economic, social, and environmental sustainability. Rapid industrialization without regard for these pillars can lead countries to experience unsustainable growth that results in a middle-income trap. This occurs when rapid industrialization destroys agricultural land and forests, causing rural-to-urban migration that urban areas cannot support through job creation. This leads to large income gaps and social imbalances that undermine continued economic growth.
Every society must answer three basic economic questions: what to produce, how to produce it, and who gets what is produced. The document discusses different types of economic systems - traditional, command, and market - and notes that today most countries have mixed economies. It provides examples of how countries in the Middle East specialize and trade to benefit their economies.
The document discusses economic growth and development models. It provides an overview of Rostow's stages of growth model which outlines five stages that countries progress through: traditional society, preconditions for take-off, take-off, drive to maturity, and high mass consumption. Key factors that influence economic development are also examined, including natural resources, human resources, capital formation, technology, and socio-cultural factors. The application of Keynesian economic theory to developing countries is also considered.
The document discusses economic growth in several countries and regions. It provides data showing some of the fastest growing countries in 2015, with Papua New Guinea having the highest growth rate at 19.33%. It also discusses factors that have contributed to rapid economic growth in many African countries in recent years, such as rising commodity prices and increasing foreign direct investment. The document analyzes sources of economic growth in China, finding that over 60% has come from increasing capital and labor inputs, while 30-40% has come from rising productivity.
Speaking to a crowd of more than 1,000 students and other members of the University of Texas at Austin community, Dean Tom Gilligan used colorful charts and detailed graphs to explore trends in prosperity and poverty around the world. He explained how gross domestic product (GDP) is used as a measurement tool, how “real GDP” and “GDP per capita” are calculated, and how these figures are used to compare economies across regions, across populations and across the world.
This document analyzes income inequality in Vietnam from 2000 to 2010. It finds that income inequality remained high and the income gap between urban and rural areas increased significantly. The poorest 20% of the population received only 5-6% of total income while the richest 20% received nearly 50%. Inequality was also high between Vietnam's eight regions. The document attributes income inequality to Vietnam's transition to a market economy and uneven development. It recommends economic solutions like poverty-targeted credit programs, redistribution policies like income taxes, and poverty reduction strategies such as land distribution and improving infrastructure in poor areas.
This presentation exhibits the journey of Pakistan economy. The historical performance is exhibited and explained through contemporary theories of economics
The document analyzes the effects of savings and investments on economic growth in Turkey from 1975-2010. It finds that in the long run, savings and investments are statistically correlated with economic growth based on cointegration and error correction modeling. However, in the short run neither savings nor investments significantly impact economic growth as expected, according to Wald test results. The study uses various econometric methods like unit root testing, lag length determination, Johansen cointegration testing, and Granger causality testing to analyze the relationships between GDP, savings, and investments.
New growth theory emphasizes that economic growth results from increasing returns associated with new knowledge, rather than diminishing returns to capital and labor. It views technological progress as endogenous and driven by economic forces like investment in research and development, rather than external factors. This challenged previous neoclassical growth models that treated technology as outside the economic system. New growth theory sparked renewed interest in explaining the sources of long-term economic growth.
Marxist criticism is based on the political and economic theories of Karl Marx. It views economic structures as the main driving force behind social conditions and historical changes. Marxist critics see literature as representing the ideology of its time and explore how society and economic forces influence literary works. They analyze works to understand the class structure and class conflicts portrayed.
The document discusses economic growth and its key drivers. It defines economic growth as a long-term expansion of a country's productive potential. The main drivers of growth include increasing capital stock, labor supply, productivity, and innovation. However, growth also faces limitations such as infrastructure gaps, export dependency, human capital problems, and rising inequality within countries. Rapid growth can increase a nation's income but also widen inequality, posing challenges for maintaining balanced and sustainable development.
UNDERSTANDING ECONOMIC POVERTY AND EQUALITY.pptxJAMESFRANCISGOSE
The document discusses economic growth and development. It begins by explaining the difference between economic growth, defined as an increase in production, and economic development, which includes improvements in living standards and human welfare. Several factors that influence economic growth are then examined, including capital investment, technology, trade, and institutions. The document reviews growth experiences across different countries and regions, finding varying rates of growth and convergence. It also discusses poverty, inequality, and the relationship between growth, development, and human welfare.
The document discusses recent global economic and political events. It notes that the US government shutdown hurt business confidence and economic growth. However, the US economy is recovering with rising employment, improving housing and retail sectors. It also discusses the impacts of fracking in increasing US oil and gas production. The document analyzes economic conditions and outlooks in various countries and regions including Europe, China, Japan, emerging markets, South Africa and the UK. It provides investment ideas focused on sectors benefiting from global growth trends.
Keynote Speech III: Chinese Economic Slowdown and New Sources of Economic Dev...ssuserd649a2
- China has transitioned through different stages of economic development, moving from a factor-driven to investment-driven economy and now focusing on innovation-driven growth.
- Current main sources of economic growth in China include investment, consumption, and trade surplus, but these sources face challenges in being sustainable long term.
- To develop new sources of growth, China is focusing on raising productivity through investments in human capital, R&D, and reforms to encourage more productive investment and increase household consumption. Attracting overseas talent and addressing skill mismatches are also priorities.
- While a sudden economic hard landing is unlikely in the near future due to China's financial resilience, slower productivity growth poses a long term risk to maintaining
Wolfgang Essentials 2016 - Constantin Gurdgiev - The Online EconomyWolfgang Digital
On June 10th 2016, Wolfgang Digital held their annual marketing event in The Foundry, at Google in Dublin. One of the speakers was the renowned economist Constantin Gurdgiev, who spoke on a couple of different topics relating to The Online Economy during part one of the event. These are his slides.
The document discusses the economic ascendancy of Brazil and outlines several key points:
1) Brazil has experienced strong and sustainable growth in recent years while other regions have seen lower growth rates.
2) Brazil possesses many opportunities for continued growth such as a growing middle class, large untapped oil reserves, ample agricultural land, and upcoming global sporting events.
3) Key indicators show Brazil's economy growing steadily, with declining debt, inflation, and unemployment over the next several years according to forecasts.
This document discusses economic growth and development. It begins by explaining the difference between economic growth and economic development, and how growth is related to increases in GDP per capita. It then provides an overview of theories of economic growth and development, including the industrial revolution, Rostow's stages of growth, and structural reforms. The document also examines country experiences with growth, factors that influence development outcomes, definitions and measurements of poverty, and approaches to human development.
This document provides an overview of economic growth and development. It begins by explaining the difference between economic growth and economic development. It then discusses factors that influence economic growth, such as the industrial revolution, investments in infrastructure and education, and trade. The document also examines differences in growth rates and incomes between various countries. It analyzes factors that affect poverty and development, such as GDP growth, government policies, and access to education and healthcare.
Global Growth Opportunities To 2030 Mark BeliczkyMark Beliczky
The document summarizes a presentation given by Mark Beliczky on global growth opportunities between 2008 and 2030. Some of the key points discussed include:
- Globalization will continue expanding and more non-Western nations like China and India will drive growth.
- The global population and middle class will increase significantly, fueling a boom in global consumption.
- China's economy will surpass the US to become the largest in the world and India will see very strong growth as well.
- However, poverty and income inequality are expected to rise substantially in parts of Africa and the developing world.
Ten Years After the Early Signs of the Financial Signs of the Financial Crisi...SDGsPlus
This document provides a summary of the state of the global economy and lessons learned from economists in the decade since the 2008 financial crisis. It discusses the key events and policies that led to the crisis. It then analyzes shifts that have occurred in the global economy since, such as rising inequality, public debt, protectionism, and the slowing of trade growth. New challenges are emerging from trends like climate change, urbanization, and technology disruption. The document argues this presents an opportunity for transformation to more sustainable and inclusive economic models. It concludes with recommendations to address global challenges through approaches like job creation, infrastructure investment, and economic diversification.
This document discusses factors that affect economic growth and competitiveness. It provides data on the fastest growing countries in 2015 according to GDP growth rates from the IMF. Papua New Guinea had the highest growth rate at 19.33%. It also discusses factors that influence short-run and long-run economic growth such as interest rates, fiscal policy, investment and productivity. Countries with the best competitiveness in 2015-2016 according to the Global Competitiveness Index are led by Switzerland, Singapore and the United States. Key factors that affect competitiveness include macroeconomic stability, infrastructure, human capital, innovation and technology readiness.
http://pwc.to/11CB1Xq
Dans son étude « Working Capital Survey 2013 », PwC montre que la performance BFR (Besoin en Fonds de Roulement, soit la trésorerie mobilisée par l’activité) des entreprises mondiales s'est dégradée de 2 % par rapport à l'année dernière. Seule exception, les sociétés européennes ont amélioré leur situation, démontrant une corrélation entre PIB et niveaux de BFR.
This is a presentation on Worldwide Financial Crisis made by Vinod Thomas, Director-General & Senior Vice President at the Independent Evaluation Group, World Bank. In the presentation, Mr. Thomas describes the reasons for the recent financial crisis, highlights the extent of damages, and discusses policy responses to the crisis.
1. The document discusses globalization and its impact on the UK economy. It describes how national economies have become increasingly integrated through rising international trade, financial flows, and foreign direct investment.
2. Both benefits and disadvantages of globalization are outlined. Potential benefits include increased economic growth and specialization, while risks involve greater economic imbalances and instability within and between countries.
3. Data about recent economic indicators for the UK such as GDP growth, inflation, and debt levels is provided for background context on how globalization influences the British economy.
Brazil and the world economy. By the year 2050, the E7, the world´s seven emerging economies – China, India, Russia, Brazil, Indonesia, Mexico and Turkey – will overtake the economies of the G7 – US, Japan, Germany, UK, France, Italy and Canada. This will create exciting business and investment opportunities across multiple markets, including consumer, agricultural, industrial, banking and logistics. Brazil faces challenges but offers business opportunities
DFID aims to promote economic growth in developing countries through international development in order to reduce poverty and aid dependence. This will create new markets and trading partners that benefit both developing countries and UK businesses. DFID works to improve macroeconomic management, trade and investment climates, and business environments in partner countries by addressing issues like institutions, infrastructure, finance and skills. As countries transition from low to middle income, they become major drivers of global economic growth and important export markets and investment opportunities for UK companies.
World economy charts case study presented by a Big 4
World economy charts case study presented by a Big 4
World economy charts case
World economy charts case study presented by a Big 4
World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4
World economy charts case study presented by a Big 4
World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4World economy charts case study presented by a Big 4study presented by a Big 4
Based on our scuttlebutt and feedback from industry sources and ground views of experts regarding the current state of affairs in India due to Coronavirus lockdown, We shall now present our thoughts on investment strategy for post lock down period.
Global business attorney Vinita Bahri-Mehra, in partnership with Ohio Development Services Agency, presented "Growing through China: A Comprehensive Look at Market Opportunities" as a panel discussion on Wednesday, September 17. The panel, which brought together local industry professionals to share best practices for conducting business in China, discussed how the world's second-largest economy is increasingly playing an important and influential role in the global economy.
The document outlines ways to challenge and enrich ambitious economics students. It recommends encouraging students to think counter-intuitively, write in more depth, and explore the work of interesting economists. Suggested activities include student reading groups, an online magazine, investor challenges, economics societies, entrepreneurship competitions, external essay competitions, and external enrichment lectures and summer schools. The goal is for students to be ambitious, questioning, develop context awareness, and build a portfolio of economics and finance experiences.
In this revision presentation we look at recent trends in UK trade union membership, consider how trade unions can affect both pay and employment and challenge the textbook view that union-negotiated pay increases inevitably have negative consequences for employment.
In this revision presentation we cover key examples of pure and quasi public goods and consider the arguments for and against an increase in government spending on public goods.
You don’t need to produce a lot of evidence in your macroeconomics exams but knowing some basic and key facts and figures can make your answers stand out from the crowd! Here is a quickfire journey through twenty important economic numbers that won’t change before the exam – use them to support your answer and impress the examiner!
Quantitative easing (QE) involves central banks creating new money to buy financial assets, lowering interest rates and increasing the money supply. The Bank of England has purchased £445 billion in assets through QE as of 2019.
Advantages of QE include giving central banks an additional monetary policy tool beyond interest rates, helping to prevent deflation, boosting business confidence and exports. Disadvantages include potentially worsening wealth inequality, risking inflation, distorting capital allocation, and reducing pension incomes. The impact of QE on the real economy has uncertain time lags and effectiveness.
This document discusses the advantages and disadvantages of countries joining the eurozone and adopting the euro as their single currency. The key advantages include eliminating currency conversion costs to boost trade, attracting more investment, increasing price transparency for consumers, and providing a more stable currency. However, joining also means losing independent monetary policy tools and interest rates being set by the ECB for the entire bloc rather than individual countries. Sharing a currency also means the risks of economic downturns in trading partners are increased. Recent data on unemployment, inflation, debt levels, and Germany's economic slowdown are also presented.
Supply-side policies aim to increase potential economic growth through microeconomic reforms that improve market efficiency. Examples discussed include privatizing industries like Royal Mail; reducing business regulations; lowering taxes on individuals and corporations; welfare reforms to incentivize work; education reforms; increasing wages; changing migration policies; investing in infrastructure for transport, energy, and housing; and establishing regional enterprise zones with tax breaks.
Microeconomics - Great Applied Examples for Examstutor2u
In this presentation, I have chosen loads of current examples that you might want to use as context in your microeconomics exams. We look at examples from different market structures, recent mergers and takeovers, the world's most valuable companies, the largest employer, unicorn business, de-mergers, the biggest initial public offerings (IPOs) and much else. Hopefully a useful video to go through to add some super examples into your revision notes.
This revision presentation considers the variety of stakeholders impacted by business activity. How will a change in objectives, such as a move from profit maximisation to revenue maximisation have an effect on different stakeholders?
This revision presentation looks at profit satisficing as an alternative objective for businesses. Why might firms satisfice? What are some of the possible consequences for economic welfare and efficiency?
There are different types and sizes of firms in the UK economy. Types include public limited companies, privately-owned firms, start-ups, state-owned businesses, social enterprises, co-operatives, and partnerships. In terms of size, micro businesses have 0-9 employees, small to medium sized businesses (SMEs) have 10-250 employees, and large businesses employ over 250 people. The document also discusses business births and deaths in the UK economy.
In this short revision video, we look at the substantial productivity gap between the UK and many of the UK’s major competitor countries.
Paul Krugman, the Nobel Prize-winning economist said twenty fives years ago that “Productivity isn’t everything, but in the long run it is almost everything,”
In this presentation we consider the theory of wage-setting with a monopsony employer and the possible impact that a trade union might have on wages and employment. We also look at efficiency wage theory and mutual gains from pay bargaining between stakeholders.
This document discusses various types of labour market failures including skills gaps, geographical immobility, economic inactivity, inequality, discrimination, and monopsony power. It provides examples and analysis of each failure using diagrams. Potential policy remedies are outlined for each failure, such as increasing apprenticeships, improving housing affordability, raising the minimum wage, and enhancing workers' rights. The impact of minimum wages on monopsony employers is analyzed using a diagram showing how a minimum wage can increase employment levels and wages by counteracting monopsony power.
This document discusses behavioral economics concepts and policy interventions. It summarizes key concepts like loss aversion, default choices, and herd behavior. It then examines several policies using behavioral insights, including the UK sugar levy, auto-enrollment pensions, and presumed consent for organ donation. It evaluates whether nudges can significantly impact behaviors at scale and addresses potential unintended consequences and limitations of behavioral policies.
A market is where buyers and sellers interact to transact, which can occur in-person or digitally. The forces of supply and demand determine market prices and equilibrium. A market can be divided into sub-markets that cater to different consumer groups. For example, the car market contains sub-markets for electric, hybrid and gas-powered vehicles, while the housing market has sub-markets for residential and commercial property. Pharmaceutical companies view sales in country-level sub-markets.
how to sell pi coins effectively (from 50 - 100k pi)DOT TECH
Anywhere in the world, including Africa, America, and Europe, you can sell Pi Network Coins online and receive cash through online payment options.
Pi has not yet been launched on any exchange because we are currently using the confined Mainnet. The planned launch date for Pi is June 28, 2026.
Reselling to investors who want to hold until the mainnet launch in 2026 is currently the sole way to sell.
Consequently, right now. All you need to do is select the right pi network provider.
Who is a pi merchant?
An individual who buys coins from miners on the pi network and resells them to investors hoping to hang onto them until the mainnet is launched is known as a pi merchant.
debuts.
I'll provide you the what'sapp number.
+12349014282
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
Financial Assets: Debit vs Equity Securities.pptxWrito-Finance
financial assets represent claim for future benefit or cash. Financial assets are formed by establishing contracts between participants. These financial assets are used for collection of huge amounts of money for business purposes.
Two major Types: Debt Securities and Equity Securities.
Debt Securities are Also known as fixed-income securities or instruments. The type of assets is formed by establishing contracts between investor and issuer of the asset.
• The first type of Debit securities is BONDS. Bonds are issued by corporations and government (both local and national government).
• The second important type of Debit security is NOTES. Apart from similarities associated with notes and bonds, notes have shorter term maturity.
• The 3rd important type of Debit security is TRESURY BILLS. These securities have short-term ranging from three months, six months, and one year. Issuer of such securities are governments.
• Above discussed debit securities are mostly issued by governments and corporations. CERTIFICATE OF DEPOSITS CDs are issued by Banks and Financial Institutions. Risk factor associated with CDs gets reduced when issued by reputable institutions or Banks.
Following are the risk attached with debt securities: Credit risk, interest rate risk and currency risk
There are no fixed maturity dates in such securities, and asset’s value is determined by company’s performance. There are two major types of equity securities: common stock and preferred stock.
Common Stock: These are simple equity securities and bear no complexities which the preferred stock bears. Holders of such securities or instrument have the voting rights when it comes to select the company’s board of director or the business decisions to be made.
Preferred Stock: Preferred stocks are sometime referred to as hybrid securities, because it contains elements of both debit security and equity security. Preferred stock confers ownership rights to security holder that is why it is equity instrument
<a href="https://www.writofinance.com/equity-securities-features-types-risk/" >Equity securities </a> as a whole is used for capital funding for companies. Companies have multiple expenses to cover. Potential growth of company is required in competitive market. So, these securities are used for capital generation, and then uses it for company’s growth.
Concluding remarks
Both are employed in business. Businesses are often established through debit securities, then what is the need for equity securities. Companies have to cover multiple expenses and expansion of business. They can also use equity instruments for repayment of debits. So, there are multiple uses for securities. As an investor, you need tools for analysis. Investment decisions are made by carefully analyzing the market. For better analysis of the stock market, investors often employ financial analysis of companies.
What price will pi network be listed on exchangesDOT TECH
The rate at which pi will be listed is practically unknown. But due to speculations surrounding it the predicted rate is tends to be from 30$ — 50$.
So if you are interested in selling your pi network coins at a high rate tho. Or you can't wait till the mainnet launch in 2026. You can easily trade your pi coins with a merchant.
A merchant is someone who buys pi coins from miners and resell them to Investors looking forward to hold massive quantities till mainnet launch.
I will leave the what's app number of my personal pi vendor to trade with.
+12349014282
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
5 Tips for Creating Standard Financial ReportsEasyReports
Well-crafted financial reports serve as vital tools for decision-making and transparency within an organization. By following the undermentioned tips, you can create standardized financial reports that effectively communicate your company's financial health and performance to stakeholders.
Yes of course, you can easily start mining pi network coin today and sell to legit pi vendors in the United States.
Here the what'sapp contact of my personal vendor.
+12349014282
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5. Global GDP: A Changing World
3:10:24 PM
2005 2006 2007 2008 2009 2010 2011
Emerging
markets
31.1 33.9 36.4 39.7 42.4 43.4 46.0
of which
China 9.8 11.1 12.7 15.2 18.3 17.7 19.9
Other EM 21.3 22.8 23.7 24.5 24.1 25.7 26.1
Western
world
68.9 66.1 63.6 60.3 57.6 56.6 54.0
of which
US 23.8 22.9 21.2 18.9 19.8 19.2 18.0
Japan 13.1 11.6 10.3 10.3 10.3 11.0 10.2
Rest of
world
32.0 31.6 32.1 31.1 27.5 26.4 25.8
Source: private data made available by IHS Global Insight; UN statistical service; other data from charts
in “The New Industrial Revolution: Consumers, Globalization and the End of Mass Production”, Peter
Marsh, Yale University Press, 2012.
7. Harrod-Domar Growth Model
• Model stresses the importance of savings and investment
• Rate of growth depends on:
– Level of national saving (S)
– Productivity of capital investment (capital-output ratio)
• The Capital-Output Ratio (COR)
– For example, if £100 worth of capital equipment
produces each £10 of annual output, a capital-output
ratio of 10 to 1 exists.
– When the quality of capital resources is high, then the
capital output ratio will be lower
• Rate of growth of GDP = Savings ratio / capital output ratio
3:10:24 PM
9. Importance of Investment as a Growth Driver
Injection of demand for
capital goods industries
Multiplier effects
through supply chains
3:10:24 PM
10. Importance of Investment as a Growth Driver
Lift rural productivity / incomes
Economies of scale &
competitiveness in fledgling sectors
3:10:24 PM
11. Importance of Investment as a Growth Driver
Investment to cope with
rural-urban migration
Investment to sustain
export-led growth
3:10:24 PM
12. Importance of Investment as a Growth Driver
Injection of demand for capital
goods industries
Multiplier effects through supply
chains
Bigger capital stock can lift rural
productivity / incomes
Economies of scale &
competitiveness in fledgling
sectors
Investment to cope with rural-
urban migration
Investment to sustain export-led
growth
3:10:24 PM
13. Investment and Saving as % of GDP
Gross capital formation Gross savings
% of GDP % of GDP
2000 2011 2000 2011
Mongolia 29 63 23 31
China 35 48 37 53
Qatar 20 39
India 24 35 25 31
Vietnam 30 35 31 33
Nepal 24 33 22 34
South Korea 31 29 33 32
Australia 26 27 21 25
Sub-Saharan Africa 17 21 16 17
Brazil 18 20 14 17
Germany 22 18 20 24
Greece 25 16 14 5
United Kingdom 18 15 14 13
United States 21 15 18 12
Ireland 24 10 24 12
3:10:24 PM
15. China’s Investment Driven Growth
“Economic commentators
have often expressed
concerns that economic
growth in China is
unbalanced, with an
investment-driven model
that is not sustainable in
the future unless it is
shifted toward a more
consumption-driven
model.” (FT, Sept 2013)
• As economies develop, they typically need higher capital investment
• Is China over-investing?
• An IMF report in 2012 argued that “investment in China may currently be around 10 per cent
of GDP higher than suggested by fundamentals.”
3:10:24 PM
16. Linda Yueh – China’s Growth
• Real GDP growth - 9.6% pa since 1979
• 60-70% has come from increasing
capital and labour inputs (input
accumulation)
• 30-40% has come from rising total
factor productivity growth (increasing
efficiency)
• Inputs: 50% of growth from adding capital,
10-20% from adding workers
• Increases in per capita output
(productivity)
• 11-15% gains in human capital
• 8-15% improving allocative efficiency
(moving from state-owned to private +
rural to urban)
• 16-17% from the effects of innovation
3:10:24 PM
18. Harrod-Domar Model - Constraints
Persistent savings gap in some
countries
Small scale financial
institutions
Weaknesses in human capital
to adapt to investment
Risks from unbalanced growth
(C v I)
Investment and natural
resource depletion
3:10:24 PM
19. Harrod-Domar Model - Constraints
Persistent savings gap
in some countries
In many smaller low-income
countries, high levels of
extreme poverty make it
almost impossible to
generate sufficient savings
to provide the funds needed
to fund investment projects.
This increases reliance on
tied aid
Some countries borrow
heavily to fund capital
investment projects – this
can lead to a high level of
external debt
3:10:24 PM
20. Harrod-Domar Model - Constraints
Small scale financial
institutions
Financial markets help to
channel domestic savings into
funding for investment projects
Many of the least developed
countries have limited financial
markets such as banking,
money and credit systems,
insurance markets and stock
markets
3:10:24 PM
21. Harrod-Domar Model - Constraints
Weaknesses in human capital
to adapt to investment
Investment increases the size
of the capital stock and helps
to achieve “capital
deepening” (capital per
worker) but the skills and
experience to make best use
of new technology
In many countries there are
acute shortages of human
capital
Some countries lose some of
its limited skilled workforce to
other countries through a
brain drain
3:10:24 PM
22. Harrod-Domar Model - Constraints
Risks from unbalanced
growth (C v I)
1. High levels of capital investment
might un-balance the economy
2. Depressing short-term living
standards
3. Low quality investment projects
given the go-ahead
4. Risks of investment bubbles e.g.
in new house-building
3:10:24 PM
23. Unbalanced growth in China
Both China and Japan have adopted the so-called “Asian growth model”.
This involves generating breakneck economic growth with very high levels
of investment and export expansion. Manufacturers are subsidised with
cheap capital, while exports are boosted by an artificially depressed
exchange rate. National savings are encouraged, at the expense of
domestic consumption. Low interest rates reduce the return on
household savings, while a cheap currency makes imports more
expensive.
This set of mercantilist policies delivers economic miracles during the
boom years, but it tends to culminate in excess investment, lacklustre
domestic demand, credit and real estate bubbles, and the widespread
misallocation of capital. The macroeconomic imbalances produced by
China are on an epic scale. Household consumption, at an astonishingly
low 35 per cent of GDP, is just over half the global average.
Source: Edward Chancellor, FT, August 2013
3:10:24 PM
24. Harrod-Domar Model - Constraints
Investment and natural
resource depletion
• Natural resources provide a source
of wealth for many lower-income
countries
• When world prices are high, there
is an incentive to increase
investment and extraction rates to
boost short-term export earnings
• This can damage growth potential
3:10:24 PM
25. Ideas, Institutions and Innovation
The growth that lifts a country from being lower-income to
middle income is not necessarily the same type of growth
needed to move from middle to higher income status.
Input driven growth can only take countries so far along
development paths
3:10:24 PM
26. The Middle Income Trap
“The concept
defines the fast-
growing economies
that face a possible
dilemma of being
caught between
poverty and
prosperity”
Source: World Bank
Development Blog
3:10:24 PM
27. The Middle Income Trap
According to the
OECD, only 17
countries have
joined ranks of rich
nations in the post
war period by
breaking out of the
middle income trap
- this includes
Greece and
Portugal!
3:10:24 PM
28. Causes of the Middle-Income Trap
Rising wages / unit labour costs
Productivity slowdown
Challenges of moving up the
product value chain
Institutional Weaknesses
Challenge of maintaining macro-
economic stability
2:32:17 PM
29. Causes of the Middle-Income Trap
Rising wages / unit labour costs
Productivity slowdown
Challenges of moving up the
product value chain
Institutional Weaknesses
Challenge of maintaining macro-
economic stability
2:32:17 PM
Rapid wage inflation in
China
30. Causes of the Middle-Income Trap
Rising wages / unit labour costs
Productivity slowdown
Challenges of moving up the
product value chain
Institutional Weaknesses
Challenge of maintaining macro-
economic stability
2:32:17 PM
Rapid wage inflation in
China
Requires better capital
and more innovation
31. Causes of the Middle-Income Trap
Rising wages / unit labour costs
Productivity slowdown
Challenges of moving up the
product value chain
Institutional Weaknesses
Challenge of maintaining macro-
economic stability
2:32:17 PM
Rapid wage inflation in
China
Requires better capital
and more innovation
Moving away from low
value manufacturing
32. Causes of the Middle-Income Trap
Rising wages / unit labour costs
Productivity slowdown
Challenges of moving up the
product value chain
Institutional Weaknesses
Challenge of maintaining macro-
economic stability
2:32:17 PM
Rapid wage inflation in
China
Requires better capital
and more innovation
Moving away from low
value manufacturing
Underdeveloped finance
& legal markets
33. Causes of the Middle-Income Trap
Rising wages / unit labour costs
Productivity slowdown
Challenges of moving up the
product value chain
Institutional Weaknesses
Challenge of maintaining macro-
economic stability
2:32:17 PM
Rapid wage inflation in
China
Requires better capital
and more innovation
Moving away from low
value manufacturing
Underdeveloped finance
& legal markets
Threat of high inflation
and trade deficits
34. Avoiding a Middle Income Trap
Rising domestic consumption
Human capital investment
Investment in critical infrastructure
Regional Trade Integration and New Trade Routes
Diversification of industrial base and export industries
Encouraging private sector development
Measures to support inclusive growth
2:32:17 PM
35. Avoiding a Middle Income Trap
Rising domestic consumption
Human capital investment
Investment in critical infrastructure
Regional Trade Integration and New Trade Routes
Diversification of industrial base and export industries
Encouraging private sector development
Measures to support inclusive growth
2:32:17 PM
36. Avoiding a Middle Income Trap
Rising domestic consumption
Human capital investment
Investment in critical infrastructure
Regional Trade Integration and New Trade Routes
Diversification of industrial base and export industries
Encouraging private sector development
Measures to support inclusive growth
2:32:17 PM
37. Avoiding a Middle Income Trap
Rising domestic consumption
Human capital investment
Investment in critical infrastructure
Regional Trade Integration and New Trade Routes
Diversification of industrial base and export industries
Encouraging private sector development
Measures to support inclusive growth
2:32:17 PM
38. Avoiding a Middle Income Trap
Rising domestic consumption
Human capital investment
Investment in critical infrastructure
Regional Trade Integration and New Trade Routes
Diversification of industrial base and export industries
Encouraging private sector development
Measures to support inclusive growth
2:32:17 PM
39. Avoiding a Middle Income Trap
Rising domestic consumption
Human capital investment
Investment in critical infrastructure
Regional Trade Integration and New Trade Routes
Diversification of industrial base and export industries
Encouraging private sector development
Measures to support inclusive growth
2:32:17 PM
40. Avoiding a Middle Income Trap
Rising domestic consumption
Human capital investment
Investment in critical infrastructure
Regional Trade Integration and New Trade Routes
Diversification of industrial base and export industries
Encouraging private sector development
Measures to support inclusive growth
2:32:17 PM
41. Middle Income Trap
3:10:24 PM
Danny Quah
The proposition that fast-growing
economies will slow eventually is
called “neoclassical convergence” —
when capital-deepening has run its
course and any further advance in
prosperity can come only from
technological progress, whether
through indigenous innovation or
through importing techniques from
any economies still running on
ahead. But neoclassical convergence
is an old idea.
42. What else matters for growth?
3:10:25 PM
Trust Trade Institutions
Dynamic Private
Sector
Sound Macro Policies Equity / Fairness
43. What else matters for growth?
3:10:25 PM
Trust Trade Institutions
Dynamic Private
Sector
Sound Macro Policies Equity / Fairness
44. What else matters for growth?
3:10:25 PM
Trust Trade Institutions
Dynamic Private
Sector
Sound Macro Policies Equity / Fairness
45. What else matters for growth?
3:10:25 PM
Trust Trade Institutions
Dynamic Private
Sector
Sound Macro Policies Equity / Fairness
46. What else matters for growth?
3:10:25 PM
Trust Trade Institutions
Dynamic Private
Sector
Sound Macro Policies Equity / Fairness
47. What else matters for growth?
3:10:25 PM
Trust Trade Institutions
Dynamic Private
Sector
Sound Macro Policies Equity / Fairness
48. Upgrading an economy
3:10:25 PM
Policies to support diversification and productive upgrading can help a country
escape the middle-income trap. For example, South Korea has grown it’s
capacity to benefit from trade-led growth in high connectivity and higher value-
added sectors
49. Upgrading an economy
3:10:25 PM
Policies to support diversification and productive upgrading can help a country
escape the middle-income trap. For example, South Korea has grown it’s
capacity to benefit from trade-led growth in high connectivity and higher value-
added sectors
50. Threats to Growth
3:10:25 PM
Many factors can throw a country off their projected long run growth path. Many of
the world’s least developed countries are highly vulnerable
Changes in the real exchange rate affecting competitiveness
Financial instability e.g. unsustainable credit boom and fall in savings
Volatility in world prices for essential imports and key exports
Political instability / military conflicts
Natural disasters and other external supply shocks
Disruptive technologies that threaten existing trade advantages
51. Get help from fellow
students, teachers and
tutor2u on Twitter:
#econ4
@tutor2u_econ
3:10:25 PM