This presentation covers some aspects of topical issues in trade and economic development. Designed for A2 economics students - links to some Financial Times videos with special reference to the work of Hidalgo and Hausmann and their index of economic complexity
In economics, the theory of the second best concerns the situation when one or more optimality conditions cannot be satisfied.
The economists Richard Lipsey and Kelvin Lancaster showed in 1956, that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal.
Politically, the theory implies that if it is infeasible to remove a particular market distortion, introducing a second (or more) market distortion may partially counteract the first, and lead to a more efficient outcome.
Trade policies in developing countries have been central to the analysis of international development economists over the past decades. The desire for rapid economic growth in developing countries has raised many questions about the relationship between trade and growth. This PPT examines the fact that the policies adopted in many developing countries have often been very different from those emanating from rational allocation models and have provided researchers/ students with a wide scope for analyzing their effects.
The theory of Technical dualism is one of the theories of dualism. Professor Higgins has developed the theory of Technological Dualism. By this, he means: "The use of different production functions in the advance sector and in the traditional sectors of UDCs".
In economics, the theory of the second best concerns the situation when one or more optimality conditions cannot be satisfied.
The economists Richard Lipsey and Kelvin Lancaster showed in 1956, that if one optimality condition in an economic model cannot be satisfied, it is possible that the next-best solution involves changing other variables away from the values that would otherwise be optimal.
Politically, the theory implies that if it is infeasible to remove a particular market distortion, introducing a second (or more) market distortion may partially counteract the first, and lead to a more efficient outcome.
Trade policies in developing countries have been central to the analysis of international development economists over the past decades. The desire for rapid economic growth in developing countries has raised many questions about the relationship between trade and growth. This PPT examines the fact that the policies adopted in many developing countries have often been very different from those emanating from rational allocation models and have provided researchers/ students with a wide scope for analyzing their effects.
The theory of Technical dualism is one of the theories of dualism. Professor Higgins has developed the theory of Technological Dualism. By this, he means: "The use of different production functions in the advance sector and in the traditional sectors of UDCs".
Which goods and services are best left to the market? And which are more efficiently and fairly provided as collective consumption goods by the state? This is at the heart of your revision of public goods. Central to your revision will be to understand why public goods may not be provided by the market. You can work this out by distinguishing between public and private goods and focusing on the ideas of rivalry and excludability in consumption. Students should understand the free rider and valuation problems – there are big debates in economics about the optimum size of the state. Rapid changes in technology are also changing the nature of what is and what is not a public good.
Chapter 5 How Managers Use Balance of Payments Data – p.213Do.docxrobertad6
Chapter 5: How Managers Use Balance of Payments Data – p.213
Do some research on the items in the table below and see if you see a pattern with the various country’s economies:
1. What is the G7?
2. What is the E7?
G7 Countries
Continent where the country lies
GDP
Ease of Doing Business
1.
2.
3.
4.
5.
6.
7.
NOTE: When you find the GDP (Gross National Product) note the year – you may not have 2018 statistics. That is okay –find the latest data available. You may need to search for the Ranking of Ease of Doing Business – and then find the countries that make up the G7 or the E7.
NEXT PAGE!
E7 Countries
Continent where the country lies
GDP
Ease of Doing Business
1.
2.
3.
4.
5.
6.
7.
A. Compare the 2 groups of countries – explain your findings.
Globalization Effects on Country Institutions, People and Business
Chapter 3
Key Points for the Chapter
Economic development comprises positive economic growth and entails changes in a country’s political, economic, and cultural institutions, as well as in individual values, attitudes, and behaviors.
Economic development requires resources from public and private sectors, both internal and external.
Technology transfers by international corporations comprise manufacturing technologies, management organizations, and marketing know-how.
Intro: The Economic Development Process
Economic development is the progress countries make in living standards as they experience positive economic growth and the changes occurring in societal and cultural institutions and values as nations move toward more advanced stages of industrialization.
Economic progress demonstrates human progress, and more pragmatically, it keeps politicians in power, companies busy, and consumers (and voters) optimistic about the future.
Technology Transfers
International trade, investments, and global media have opened world markets up to a variety of modernizing influences.
In general terms, technology transfers occur as corporations enter new markets with products, technologies, lifestyles, and business methods developed in their home and other international markets.
Technology transfers first affect urban segments of developing countries where there are developed infrastructures and pocket of economically significant customers.
As media become commercialization and distribution channels are built into rural areas, greater proportions of developing-country populations come into contact with modernization influences.
4
Positive Effects
Positive effects occur as societies are exposed to broad varieties of products that make lives easier.
Convenience products such as packaged foods, and consumer durables such as refrigerators, radios, televisions, and stoves have positive effects on consumer lifestyles.
New technologies in manufacturing and distribution make products cheaper and more widely available. They provide employment opportunities for lo.
Introduction of Globalization, Trends in Globalization, What Are the Benefits of Globalization, Benefits of Globalization and Challenges of Globalization and its effects,
What Is Global Economy and Its Importance.pdfAiblogtech
What Is Global Economy and Its Importance? A Quick Overview
The term "global economy" is frequently used in discussions, news reports, and political speeches. But what exactly is the global economy, and why is it so crucial to our lives? In this article, we will delve into the global economy's nuts and bolts in simple and understandable language, exploring its various facets and emphasizing its profound significance.
Understanding the Global Economy
Defining the Global Economy
The global economy, at its core, refers to the complex web of interconnected economic activities that take place around the world. It includes the global production, exchange, and consumption of goods and services. Everything from your smartphone to the coffee you drink in the morning has a global footprint. The global economy is analogous to a massive puzzle, with each piece representing a different country or region and all intricately interconnected.
The Building Blocks of the Global Economy
To understand the significance of the global economy, we must first break it down into its basic components:
1. International Trade: The exchange of goods and services between different countries is known as international trade. It provides nations with access to products that they cannot produce locally, promoting economic growth and diversity.
2. Global Finance: The flow of money, investments, and capital across borders is referred to as global finance. It helps businesses, governments, and individuals achieve their economic objectives.
3. Multinational Corporations: These are large corporations that have operations in several countries. They are important players in the global economy because they manufacture products in one country, sell them in another, and invest in various locations around the world.
4. Currency Exchange: Each country has its own currency. Exchange rates have an impact on international trade and financial transactions.
5. International Organizations: Organizations such as the World Trade Organization (WTO) and the International Monetary Fund (IMF) play an important role in regulating and facilitating global economic interactions.
6. Global Supply Chains: Products frequently go through a number of manufacturing and distribution stages in different countries. This linked network is known as a global supply chain.
Let's look at the global economy's significance now that we've dissected it.
The Significance of the Global Economy
Economic Growth and Prosperity
Economic growth is one of the most obvious benefits of a thriving global economy. Countries that engage in international trade have access to a larger consumer base. This leads to increased sales, higher profits, and a more prosperous economy in the long run. A strong global economy promotes job creation, higher living standards, and a higher quality of life for people all over the world.
Access to Diverse Goods and Services
Consider a world in which each country only produced what it required.
Globalization refers to the changes in the world where we are moving away from self-contained countries and toward a more integrated world. Globalization of business is the change in a business from a company associated with a single country to one that operates in multiple countries.
Human Capital Development Towards Industralisation by Adesola Eghagha Quramo Conferences
The Quramo Conference Series is a platform dedicated to influencing, improving and vending knowledge towards change and development.
This April, the conference theme was People Power and focused on human capital development and the investment in people which can lead to industralisation in Africa.
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.
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.
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!
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?
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.
For many economists, the labour market is the most important market of all to study, analyse and evaluate. Like product markets for goods and services, labour markets can also fail. The main types of labour market failure are labour immobility including skills gaps, inequality, disincentives to be economically active, labour market discrimination and the effects of monopsony power of employers.
Updated revision presentation on aspects of behavioural economics and topical issues where behavioural nudges are being used to change the choices of consumers and businesses.
3. Coverage
•
•
•
•
•
•
•
Know the conventional wisdom but challenge it!
Revisiting Gains from Trade and the assumption
Improving Competitiveness
Primary Product Dependency
Escaping the Middle-Income Trap
Export Complexity and Development
Different views on the Foreign Aid Debate
4. A2 Unit 4 Macro: Challenging The
Conventional Wisdom
8. Development Economics is Changing!
Networks & Social Learning
Capabilities and Capacities
Resilience / Adaptability
Randomised Control Trials
9. Development Economics is Changing!
Networks & Social Learning
Business networks - collaboration
Capabilities and Capacities
Social networks
Importance to developing economies of their
Resilience
diaspora (remittances) / Adaptability
New trade networks – e.g. Deepening intraregional trade in Sub-Saharan Africa Trials
Randomised Control
10. Development Economics is Changing!
Networks & Social Learning
Capabilities and Capacities
Diversifying the capabilities of economy
Resilience / Adaptability
Investment to achieve capital deepening
Randomised Control Trials
11. Development Economics is Changing!
Resilience to external shocks such as:
Networks & Social Learning
Financial instability
Effects of climate change
Capabilities and Capacities
Geo-political uncertainty
Resilience / Adaptability
Randomised Control Trials
12. Development Economics is Changing!
Banerjee and Duflo
Networks & Social Learning
The two authors have used randomized
control trials across five continents to test
the impactCapabilities and Capacities
of policies aimed at beating
poverty, from the provision of free antimalaria bed-nets to education subsidies
Resilience / Adaptability
Randomised Control Trials
13. Conventional Gains from Trade
Help to reduce scale
of extreme poverty
Increased market
contestability
Better access to
new technologies
Inflows of specialist
knowledge
Exploiting
economies of scale
Better use of our
scarce resources
14. Evaluation: Awareness of Assumptions
Constant
returns to scale
Mobility of
factor inputs
Insignificant
externalities
Trade finance is
available
Barriers to
trade are small
15. Evaluation: Awareness of Assumptions
Constant
returns to scale
Mobility of
factor inputs
Insignificant
externalities
Trade finance is
available
Barriers to
trade are small
Increasing returns?
16. Evaluation: Awareness of Assumptions
Constant
returns to scale
Mobility of
factor inputs
Insignificant
externalities
Trade finance is
available
Barriers to
trade are small
Increasing returns?
Geographical and occupational
immobility of labour
17. Evaluation: Awareness of Assumptions
Constant
returns to scale
Mobility of
factor inputs
Insignificant
externalities
Trade finance is
available
Barriers to
trade are small
Increasing returns?
Geographical and occupational
immobility of labour
External costs of production and
consumption
18. Evaluation: Awareness of Assumptions
Constant
returns to scale
Mobility of
factor inputs
Insignificant
externalities
Trade finance is
available
Barriers to
trade are small
Increasing returns?
Geographical and occupational
immobility of labour
External costs of production and
consumption
Credit crunch / banking crisis has
affected finance for exporters
19. Evaluation: Awareness of Assumptions
Constant
returns to scale
Mobility of
factor inputs
Insignificant
externalities
Trade finance is
available
Barriers to
trade are small
Increasing returns?
Geographical and occupational
immobility of labour
External costs of production and
consumption
Credit crunch / banking crisis has
affected finance for exporters
Rise of regional trade blocs and
bi-lateral trade agreements
20. Drivers of Competitive Advantage
Unit labour costs
Exchange rate
Innovation
Economies of scale
Sustainability
Human capital
21. The Importance of Human Capital
Technology spill-overs
Precision Engineering
Universities
Science Parks
Capital Projects
Rise of Creative
Industries
22. Selected Competitiveness Rankings for 2013
Competitiveness Indicators
1. Institutions and
Infrastructure
2. Macroeconomic stability
3. Health/education systems
4. Financial markets (including
strength/stability of banks)
5. Technological readiness
6. Market size (linked to
population size and per
capita incomes)
7. Business sophistication
(quality of supply chains,
industrial clusters) and rate
of innovation
23. Selected Competitiveness Rankings for 2013
1:
Switzerland
4: Germany
2: Singapore
5: United
States
3: Finland
10: UK
Competitiveness Indicators
1. Institutions and
Infrastructure
2. Macroeconomic stability
3. Health/education systems
4. Financial markets (including
strength/stability of banks)
5. Technological readiness
6. Market size (linked to
population size and per
capita incomes)
7. Business sophistication
(quality of supply chains,
industrial clusters) and rate
of innovation
25. Prebisch-Singer Hypothesis
Suggests that over the long run the prices of primary goods such
as coal, coffee and cocoa decline in proportion to the prices of
manufactured goods such as cars and washing machines
Raul Prebisch
Hans Singer
27. Prebisch-Singer Hypothesis
Basic idea……………….
Long term decline in
real commodity
prices
Worsens terms of
trade for primary
exporters
Better off focusing
on import
substitution policies
Labour intensive manufactured goods are now
cheaper because of globalisation
Modern reality
Strong rise in global commodity prices
Many commodity exporters have seen their
terms of trade rise .. A big opportunity
29. Key A2 Concept: Terms of Trade
• Sub Saharan Africa is
now getting 30% better
terms of trade than in
2004
• i.e. a bigger “return” for
each unit of export sold
to the world
• But it could still be
higher in the long run!
• If they can increase the
value added from their
export sectors
33. Complexity matters for growth and
development
“Traditionally, economic development has been
measured through a host of aggregated variables,
mainly GDP, adjusted for PPP.
As the human body develops, cells differentiate into
neurons, muscles, bones and other cell types.
Similarly, as nations develop, different industries and
products are born. Assessing the health of a nation
solely based on its wealth is like assessing the health of
a child solely based on its weight.” Ricardo Hausmann
36. Building More Complexity
The wealth of nations is driven by
productive knowledge - Knowledge is
embedded in brains and human networks
Chunks of knowledge can be aggregated
by connecting people through
organizations and markets
Development is driven by networks –
standard development theory finds it
hard to model this
37. Building More Complexity
The wealth of nations is driven by
productive knowledge - Knowledge is
embedded in brains and human networks
Chunks of knowledge can be aggregated
by connecting people through
organizations and markets
Development is driven by networks –
standard development theory finds it
hard to model this
38. Building More Complexity
The wealth of nations is driven by
productive knowledge - Knowledge is
embedded in brains and human networks
Chunks of knowledge can be aggregated
by connecting people through
organizations and markets
Development is driven by networks –
standard development theory finds it
hard to model this
39. A2 Macro Support
Get help from fellow
students, teachers and
tutor2u on Twitter:
#econ4
@tutor2u_econ
40. The Middle Income Trap
“The concept
defines the fastgrowing economies
that face a possible
dilemma of being
caught between
poverty and
prosperity”
Source: World Bank
Development Blog
41. 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!
42. Middle Income Trap
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.
43. 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 macroeconomic stability
44. Strategies for Overcoming the 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
45. Upgrading an economy
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 valueadded sectors
8:37:01 PM
47. Foreign Aid Debate
Foreign (overseas) development aid
Remittances from migrants
Foreign direct investment (FDI)
Portfolio capital investment
Loans from international institutions
48. Different types of aid
• Bi-lateral aid: From one country to another
• Multi-lateral aid: Channelled through international
bodies
• Project aid: Direct financing of projects for a donor
country
• Technical assistance: Funding of expertise of various
types
• Humanitarian aid: Emergency disaster relief, food
aid, refugee relief and disaster preparedness
• Soft loans: A loan made to a country on a
concessionary basis
• Tied aid: i.e. projects tied to suppliers in donor
country
• Debt relief – e.g.
cancellation, rescheduling, refinancing of a country’s
external debts
UK Bi-Lateral Aid
Review 2011
1. Aid stopped to
China and Russia
2. No new financial
grant aid to India
3. UK will end direct
financial support to
South Africa by
2015
4. Part of the bilateral
aid to Rwanda,
Uganda and Malawi
has been
suspended.
49. Case For Aid
Helps to overcome the
savings gap + aid can play a
key role in stabilising postconflict environments and in
disaster recovery
Project aid can fast forward
investment in critical
infrastructure projects –
capital deepening effects
+higher productivity
Building a Case
for Overseas Aid
Long term aid for health and
education projects - builds
human capital and stronger
social institutions. Aid
projects for enterprise
Well targeted aid might add
around 0.5% to growth rate
of poorest countries - this
benefits donor countries too
as trade grows
50. Case Against Aid
Poor governance - aid can be
expropriated and leaves
recipient country - aid can
finance corruption / strengths /
locks-in ruling elites
Lack of transparency –
hundreds of $m spent on aid
consultants and developed
country NGOs
Some arguments
against overseas
aid
Dependency culture – one aid
paradox is that aid tends to be
most effective where it is
needed least – it may stunt
entrepreneurial culture
Aid may lead to a distortion of
market forces and a loss of
economic efficiency and risks of
inflation
51. Paul Collier on Aid
“There is mounting cynicism about aid—
some of it amply justified by past donor
practices. Yet few realise just how smart
and highly geared modern British aid can
be. Perhaps the most sensational recent
economic development in Africa has been
the explosive growth of “branchless”
telephone banking in Kenya. DfID thought
up the idea, spent money successfully
piloting it, and demonstrated to the private
sector that there was a market
opportunity. British aid was smart, and
thereby catalytic.”
Source: Prospect Magazine, 2010
52. Moyo’s Tough Love Approach
“In five years, all aid to Africa
must stop. In its place,
African nations will need to
implement new policies
including micro-loans,
improved remittances and
formalised domestic savings
schemes, as well as,
internationally, improving
foreign direct investment,
borrowing responsibly and
securing more equitable
trading arrangements with
the west.”
Source: Dambisa Moyo, Dead
Aid
53. Duflo and Banerjee – Poor Economics
• Duflo and Banerjee – Economists at
the Poverty Action Lab
• Have pioneered use of randomised
controlled trials to find out what
works in development
• Test efficacy of projects /
interventions within a population –
2 or more groups (inc control)
• “Top-down” aid projects afflicted by
– Ideology (prejudices, beliefs)
– Ignorance (info gaps about local
conditions)
– Inertia (failure to change when
project does not work)
“Precisely because
[the poor] have so
little, we often find
them putting much
careful thought into
their choices: They
have to be
sophisticated
economists just to
survive.”
54. Angus Deaton on Aid
• When the conditions for
development are present,
aid is not required. When
they do not exist, aid is
not useful and probably
damaging
• Foreign aid is
antidemocratic because it
frees local leaders from
having to obtain the
consent of the governed
55. Breaking out of an aid cycle
Africans living
abroad send
more money
home to their
families than
official
development
assistance by
western aid
donors. In 2010
the African
diaspora
remitted
$51.8bn; in the
same year ODA
to Africa was
$43bn.
Source: FT, Oct
2013
Sovereign
Wealth
Funds
Formalised
domestic
savings
Remittances
from
Diaspora
MicroFinance
More
equitable
trade flows
56. A2 Macro Support
Get help from fellow
students, teachers and
tutor2u on Twitter:
#econ4
@tutor2u_econ