Chat with us, powered by LiveChat Library Assignment: all students must use the FNU Library as a graded activity, cite at least 3 peer review articles about Elasticity of Supply and Demand, and write 2 para - EssayAbode

Library Assignment: all students must use the FNU Library as a graded activity, cite at least 3 peer review articles about Elasticity of Supply and Demand, and write 2 para

 Library Assignment: all students must use the FNU Library as a graded activity, cite at least 3 peer review articles about Elasticity of Supply and Demand, and write 2 paragraphs about what you learned in each article, in total 6paragraphs, using APA format.  

McEachern11e_Ch21.pptx

21

Economic Development

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Prepared by: V. Andreea Chiritescu, Eastern Illinois University

Reviewed by: William A. McEachern, University of Connecticut

McEachern,  Macroeconomics 11e, Ch. 21

How might programs that send subsidized food and used clothing to poor countries have the unintended consequence of retarding economic development there?

Why are some countries so poor while others are so rich?

What determines the wealth of nations?

Why do families in low-income countries have more children than those in higher-income countries?

Why have abundant natural resources such as oil or diamonds turned out to be a curse for some countries?

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern, Macroeconomics 11e, Ch. 21

Worlds Apart

Standard of living

Output per capita

Gross national income (GNI)

PPP adjusted

Three major groups

High-income economies

Middle-income economies

Low-income economies

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Exhibit 1

Share of World Population and World Output From High-, Middle-, and Low-Income Economies as of 2014

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Developing and Industrial Economies

Developing countries

Low- and middle-income economies

Emerging market economies

Higher illiteracy rate, higher unemployment

Faster population growth

Exports of primary products

Agricultural products

Raw materials

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Developing and Industrial Economies

Developing countries

Half of the labor force works in agriculture

Farm productivity is low

2014: 82% of the world’s population, produce 48% of the world’s output

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Developing and Industrial Economies

Industrial market countries

High-income economies

Economically advanced capitalist countries of

Western Europe, North America,

Australia, New Zealand, and Japan

Developed countries

3% of the labor force works in agriculture

2014, 18% of world population, produce 52% of world output

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Exhibit 2

Per Capita Income for Selected Countries in 2014

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Health and Nutrition

Developing countries

Poor health

Malnutrition

Disease: epidemics, malaria, HIV/AIDS

Lower life expectancy at birth

Greater child mortality rate

Higher infant mortality

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Health and Nutrition

Malnutrition

Poorest countries: consume only half the calories of those in high-income countries

The biggest single threat to the world’s public health, World Health Organization

Primary or contributing factor in more than half of the deaths of children under 5

In low-income countries

About a billion people on Earth don’t have enough to eat

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Health and Nutrition

Malnutrition

Diseases that are well controlled in industrial countries

Malaria, whooping cough, polio, dysentery, typhoid, and cholera

Can become epidemics in poor countries

Infant mortality rates

Much greater in low-income countries than in high-income countries

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Exhibit 3

Infant Mortality Rates per 1,000 Live Births as of 2014

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

High Birth Rates

High fertility rates in developing countries

Larger families

Source of farm labor

No social security system

Declining standard of living

Population growth rates > growth rate in total production

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Exhibit 4

Average Number of Births During a Woman’s Lifetime as of 2014

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Women in Developing Countries

Poverty rate

Higher for women than men, particularly women who head households

Women

Work in home and in labor market

Less educated than men

Fewer employment opportunities

Lower wages than men

Less access to other resources

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Productivity: Key to Development

Labor productivity

Output per worker

Labor productivity depends on

The quality of labor

The amount of capital, natural resources, and other inputs that combine with labor

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Productivity: Key to Development

To increase labor productivity

Invest in human and physical capital

Domestic savings

Foreign funds

Poorest countries

Low income per capita

Low investment in human and physical capital

Poorly run businesses

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Productivity: Key to Development

Technology and education

Better use for available resources

More receptive to new ideas

Inefficient use of labor

Unemployment

Can’t find jobs

Underemployment

Employed in lower-skill jobs

Work part-time

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Productivity: Key to Development

The cycle of poverty

Low productivity results in low income

Low income can affect worker productivity

Less saving

Less investment in human and physical capital

Poor nutrition and insufficient health care

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Productivity: Key to Development

Natural resources

Abundant natural resource (oil)

Not enough to create industrial economy

Financial institutions

Low savings

High inflation

Small investment

Fewer credits provided by banks

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Productivity: Key to Development

Capital infrastructure

Transport

Communication

Sanitation

Electricity

Developing countries

Serious deficiencies in their physical infrastructures

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Exhibit 5

Mobile Phone Lines per 100 People for 2013

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Exhibit 6

Internet Users as Percent of Population for 2013

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Productivity: Key to Development

Entrepreneurship

Entrepreneurs who are able to bring together resources and take the risk of profit or loss

Sources of entrepreneurial experience in developing countries

McDonald’s

Other international franchises

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Productivity: Key to Development

Rules of the game

Formal and informal institutions

Laws, customs, conventions

Stable political environment

Well-define property rights

Social capital

Shared values and trust

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Productivity: Key to Development

Rules of the game, capitalism

Private ownership of most resources

Coordination of economic activity

Price signals generated by market forces

What, how, and for whom to produce it

Privatization

The process of turning government enterprises into private enterprises

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Productivity: Key to Development

Rules of the game, central planning

Government ownership of most resources

Allocation of resources

Central plans

Limited personal freedom

Social capital

The shared values and trust that promote cooperation in the economy

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Exhibit 7

GDP per Capita for Transitional Economies in 2014

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

The Poorest Billion

The world

One-sixth rich

Two-thirds not rich but improving

One-sixth poor

Most developing economies

A rising standard of living

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

The Poorest Billion

Extremely poor economies, “trapped”

Stagnant or getting worse

1 billion people

45 countries

30 countries in sub-Saharan Africa

Cambodia, Haiti, Laos, Myanmar, North Korea, and Yemen

750 million people – civil war

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

The Poorest Billion

Poverty traps

Civil war

High proportion of young, uneducated men, with few job prospects

Imbalance between ethnic groups

Supply of natural resources: incentive to rebel

Misuse of natural resource wealth

300 million people

Dysfunctional or corrupt government

750 million people

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Income Distribution Within Countries

Among 12 nations in chapter’s exhibits

Poorest fifth of population received

7.7% of income in high-income countries

5.8% of income in middle-income countries

7.2% of income in low-income countries

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

International Trade and Development

Trade problems for developing countries

Exports: primary products

Face wild price fluctuation

Imports: manufactured goods

Trade deficits

Restrict imports of capital goods

Face trade restrictions

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

International Trade and Development

Migration and the brain drain

Migrants: $440 billion sent home in 2014

Brain drain

Import substitution

Domestic manufacturing of products that were imported

Problems

Erased gains from specialization

Inefficiency, Retaliation

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

International Trade and Development

Export promotion

Produce for the export market

Emphasis on specialization

Efficiency

Less government intervention

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

International Trade and Development

Trade liberalization and special interests

Difficulty pursuing policies conducive to development

Gains from economic development are widespread

Beneficiaries (consumers) do not recognize their potential gains

Losers tend to be concentrated

Producers: fight reforms that might harm their livelihood

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Foreign Aid and Economic Development

Foreign aid

International transfer made on especially favorable terms

For the purpose of promoting economic development

Grants and loans

Money, capital goods, technical assistance, food

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Foreign Aid and Economic Development

Bilateral assistance

Country-to-country

Multilateral assistance

World Bank

IMF

United States, last four decades

$400 billion in aid to the developing world

U.S. Agency for International Development (USAID)

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Foreign Aid and Economic Development

Additional purchasing power

Possibility of increased investment, capital imports, and consumption

Unclear

Supplements domestic savings

Increasing investment

Or substitutes for domestic savings

Increasing consumption

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Foreign Aid and Economic Development

Source of discretionary funds

That benefit not the poor but their leaders

90% of the funds distributed by USAID

To governments – whose leaders assume responsibility for distributing these funds

Bilateral funding

Tied to purchases of goods and services from the donor nation

Unintended consequences

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Foreign Aid and Economic Development

1950s, U.S., Food for Peace program

Sell U.S. farm products abroad

Some recipient governments

Sold that food to finance poorly conceived projects

Low-priced food from abroad

Drove down farm prices in the developing countries

Hurting poor farmers there

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Foreign Aid and Economic Development

Used clothing

Donated to thrift shops and charitable organizations in industrialized countries

Wind up for sale in Africa

Low price discourages local textile production

Foreign aid

Raised the standard of living in some developing countries

But it didn’t increased their ability to become self-supporting at that higher standard of living

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Foreign Aid and Economic Development

Foreign aid

Insulated government officials

From their own incompetence

From the fundamental troubles of their own economies

Has helped corrupt governments stay in power

More than half of foreign aid now flows through private channels

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Do Economies Converge?

Convergence theory

Predicts that the standard of living in economies around the world

Will grow more similar over time

With poorer countries eventually catching up with richer ones

Developing countries can grow faster than advanced ones

It is easier to copy existing technology than to develop new ones

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Do Economies Converge?

Evidence on convergence

Some poor countries have begun to catch up with richer ones

The newly industrialized Asian economies

Hong Kong, Singapore, South Korea, and Taiwan (Asian Tigers)

Adopted the latest technology

Invested in human resources

Closed the gap with the world leaders

Are industrial market economies

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Do Economies Converge?

Evidence on convergence

Appear to be evidence of convergence in manufacturing productivity

Across a large group of developed and developing countries

1993 – 2012, growth in real GDP

5.4% for developing countries, more than double the average for industrial countries

1990 – 2010, living on less than $1 a day

Dropped from 43% to 21% of population

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

McEachern,  Macroeconomics 11e, Ch. 33

Do Economies Converge?

Convergence has not begun for the poorest economies

Birthrates there are double those in richer countries

Poor economies must produce still more just to keep up with a growing population

Lack the human capital needed to identify and absorb new technology

Low education levels and

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