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Domestic Factors and Economic Development
Transcript of Domestic Factors and Economic Development
More efficient work force
Higher ability to read and communicate Income distribution When legal system do not function well, there is no way to create or uphold property rights. Property rights = "basket" of legal rights The basket includes:
the right to own assets
the right to establish the use of our assets
the right to benefit from our assets
the right to sell our assets
the right to exclude others from using/taking our assets This basket includes:
The right to own assets
The right to establish the use of our assets
The right to benefit from our assets
The right to sell our assets
The right to exclude others from using/taking our assets Legal system An honest and fully functioning legal system is required if development is to be achieved Property rights allow people to own and benefit from private property, as long as the legal system can support and protect these right Development will not be possible if
a person cannot guarantee their ownership of a property --> no incentive to improve it ==> lost investment
If there are no enforceable property right, then investment and growth will be very much reduced and economic growth will be limited. Financial markets are the institutions where lending and borrowing is carried out Most developing countries have a dual financial market
The "official" financial markets
The "unofficial" markets Saving is necessary to make funds available for investments and investment is necessary for economic growth.
Saving is difficult in countries with high levels of poverty, but harder when there is no where safe to save it. Barriers to economic growth and development associated with savings and borrowing money:
Hard to find traditional banking and financing systems
Great interest rates for borrowing
There is a type of financial service that is for the poor: Micro-finance -- provision of financial services (micro-credit) m Micro-credit- the provision of small loans to individuals who have no access to traditional sources
They began in developing countries- the first scheme began in the mid-1970s with different projects (ex: Opportunity International (1972), ACCION International (1973), etc.) Micro-credit loans used to start up small scale business are called micro-enterprises
Women tend to be the main recipient pf micro-credits as they are said to be more likely to pay back. Tax revenue provides governments with the means to finance necessary public service Problems with tax revenue:
Difficulties to collect it
It is estimated that less than 3% of the population in developing countries pay income tax, unlike the 60%-80% payed in developed countries
Corporate tax revenues can be low
Main sources of tax in developing nations are exports, imports and customs duties
Problems with the admin of tax system -> inefficiency, lack of information, pure competition Size of informal market Appropriate technology is technology that is appropriate for use with existing factor endowments for both production and consumption Production: the nut sheller
Consumption: the cooker thr hello Improving welfare of women through greater education and improved social standing leads to economic development among women Externalities that occur when women are empowered
well being of family
education of children
quality of workforce
control of population High income inequality can be a barrier to growth and development Low levels of saving
Domination in politics and
economy -- pro-poor growth
Movement of funds
Unequal consumption Questions: Using examples from different regions of the world, examine how domestic factors can impede the level of economic development.
Explain why a more equal distribution of income will contribute to economic development. Works Cited: Economic growth is the increase in national income whereas; economic development is the improvement in welfare. Introduction Domestic Factors and Economic Development improvement of the role of women in the society leads to improved levels of health “In 2015 children everywhere will be able to complete a full course of primary schooling” Challenges
Levels of education funds are higher in Urban Areas compare to the funds in the Rural Areas.
Some children may have to work at home or be sent somewhere else to work as “Child laborers.” Strong correlation between health care and the life expectancy. A progress made by developing countries. They have started training doctors and nurses, they have improved the access to safe water, and sanitation and widespread the availability of immunizations "The essential facilities and services as roads airports, sewage treatment, water systems, railways, telephones and other utilities that are necessary for economic activity."
Better roads-easier for kids to go to school, for adults to go to work.
It is easier to go to shops - more potential buyers.
Better radios or television network - link up the people.
The availability of gas and electricity -enable the household to cook or watch TV. Countries with better political stability attract more Foreign Direct Investment and aid. Political instability causes uncertainty and can even be the cause of an economic breakdown. Like in case of a civil war, the country faces very poor economic performance -> high levels of poverty and low level of standards of living for the majority of the population and this will prevent the country to receive foreign investment or aid.
Corruption: The dishonest exploitation of power for personal gain. It causes challenges for both the growth and the development.
Electoral corruption, the wishes of people are not heeded. In this case the governments don’t adopt the policies which was voted for by the majority and which would benefit the individuals.
Corruption can cause illegal activities if people can buy their way out of trouble.
It leads to an unfair allocation of resources. Because the highest bidder receives the resource as opposed to the most efficient producer.
It reduces and damages the trust to the economy. This will make it harder to attract foreign investment.
Officials can ignore some of the regulations regarding the construction or the environment and this will damage the country as a whole.
The constant briberies will reduce the economic conditions of an ordinary citizens. Blink, Jocelyn, and Ian Dorton. Economics: course companion. Oxford: Oxford University Press, 2007. Print.
"Development Economics." Moodle. N.p., n.d. Web. 18 Oct. 2012. <https://moodle.canacad.ac.jp/tnguyen/develop>.
Michael P. Todaro, Economic Development 7th Edition, Addison, Wesley Longman, 2000