Chapter 39W: The Economics of Developing Countries
Classifications Industrially advanced countries High income nations Well-developed market economies Per capita income $37,665 in 2008 Developing countries Middle income nations Low income nations Wide variation in income per capita
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The Economics of Developing CountriesMcGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.ClassificationsIndustrially advanced countriesHigh income nationsWell-developed market economiesPer capita income $37,665 in 2008Developing countriesMiddle income nations Low income nationsWide variation in income per capitaLO139W-*Classifications39W-*ComparisonsU.S. GDP $14.6 trillionCombined GDP of DVCs $15.6 trillionU.S. has 4.5% of population but produces 25.1% of world’s outputU.S. per capita GDP is 150 times that of Sierra LeoneWalmart’s annual revenue is greater than all but 23 nations’ GDPLO139W-*Growth, Decline and Income GapsSome developing countries have grown considerablyChina, Malaysia, Chile, ThailandSome developing countries have become high-incomeSingapore, Greece, Hong KongIncome gap has widenedDeveloping countries must grow faster to reduce the gapLO139W-*Human Realities of PovertyLO2Selected Socioeconomic Indicators of Development39W-*The path to economic developmentUse existing resources more efficientlyExpand available supplies of resourcesSimple generalizations are not possibleLO2Obstacles to Development39W-*Obstacles to DevelopmentNatural ResourcesShortage of land, resources, powerTropical climates hinder labor, lead to diseaseDifficult to solveLO239W-*Obstacles to DevelopmentHuman resourcesLarge populations Reduced standard of living Less saving and investment Lower productivity Overuse of land resources Urban problems QualificationsUnemployment and underemployment LO239W-*Obstacles to DevelopmentCapital accumulationThis is key for economic developmentDomestic capital formationSavings potentialCapital flightInvestment obstaclesLack of infrastructureLO239W-*Technological advanceBorrowed technologySocio-cultural obstaclesInstitutional obstaclesLand reformObstacles to DevelopmentLO239W-*The Vicious Circle of PovertyRAPID POPULATION GROWTHLOW LEVELOF DEMANDLOWPRODUCTIVITYLOW LEVELS OFINVESTMENT INPHYSICAL ANDHUMAN CAPITALLOWPER CAPITA INCOMELO3LOW LEVELOF SAVING39W-*Role of GovernmentA positive roleEstablishing the rule of lawBuilding infrastructureEmbracing globalizationBuilding human capitalPromoting entrepreneurshipDeveloping credit systemsControlling population growthMaking peace with neighborsLO439W-*Role of GovernmentPublic sector problemsMisadministrationBriberyCorruptionLO439W-*Role of GovernmentLO439W-*Expanding tradeAdmitting temporary workersDiscouraging arms salesForeign aidDirect aidThe World Bank groupLO5Role of Advanced Nations39W-*
