SUNY at Buffalo Sweden Economics of Developing Country Case Study this is an econ study case, all the requirements are in the document. more than 2 pages C
SUNY at Buffalo Sweden Economics of Developing Country Case Study this is an econ study case, all the requirements are in the document. more than 2 pages Chapter 2
Comparative
Economic
Development
Common characteristics of developing
countries
These features in common are on average and with great
diversity, in comparison with developed countries:
Lower levels of living and productivity
Lower levels of human capital
Higher levels of inequality and absolute poverty
Higher population growth rates
Greater social fractionalization
Larger rural population – rapid migration to cities
Lower levels of industrialization and manufactured exports
Adverse geography
Underdeveloped financial and other markets
Colonial Legacies – poor institutions etc.
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2.1 Defining the Developing World
World Bank Scheme- ranks countries on
GNI/capita
LIC, LMC, UMC, OECD (see Table 2.1 and Figure
2.1)
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Table 2.1 Classification of Economies by
Region and Income, 2013
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Table 2.1 Classification of Economies by Region and
Income, 2013 (continued)
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Table 2.1 Classification of Economies by Region and
Income, 2013 (continued)
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2.2 Basic Indicators of Development: Real
Income, Health, and Education
Gross National Income (GNI)
Gross Domestic Product (GDP)
PPP method instead of exchange rates as
conversion factors (see Figure 2.2)
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Figure 2.1 Nations of the World,
Classified by GNI Per Capita
Source: Data from Atlas of Global Development, 4th ed., pp. 16-17: World Bank and Collins. 2013. ATLAS OF GLOBAL DEVELOPMENT: A VISUAL GUIDE TO THE WORLDS GREATEST CHALLENGES, FOURTH
EDITION. Washington, DC and Glasgow: World Bank and Collins. doi: 10.1596/978-0-8213-9757-2. License: Creative Commons Attribution CC BY 3.0
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Figure 2.2 Income Per Capita in Selected
Countries, 2011
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Table 2.2 A Comparison of
Per Capita GNI in Selected
Developing Countries, the
United Kingdom, and the
United States, Using Official
Exchange-Rate and
Purchasing Power Parity
Conversions, 2011
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Table 2.3
Commonality and
Diversity: Some
Basic Indicators
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2.3 Holistic Measures of Living Levels
and Capabilities
Health
Life Expectancy
Education
HDI as a holistic measure of living levels
HDI can be calculated for groups and regions in a country
HDI varies among groups within countries
HDI varies across regions in a country
HDI varies between rural and urban areas
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2.3 Holistic Measures of Living Levels
and Capabilities
The New Human Development Index
Introduced by UNDP in November 2010
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What is new in the New HDI?
1. Calculating with a geometric mean
Probably most consequential: The index is now computed
with a geometric mean, instead of an arithmetic mean
A geometric mean is also used to build up the overall
education index from its two components
Traditional HDI added the three components and divided by 3
New HDI takes the cube root of the product of the three
component indexes
The traditional HDI calculation assumed one component
traded off against another as perfect substitutes, a strong
assumption
The reformulation now allows for imperfect substitutability
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What is new in the New HDI?
2. Other key changes:
Gross national income per capita replaces gross domestic
product per capita
Revised education components: now using the average actual
educational attainment of the whole population, and the
expected attainment of todays children
The maximum values in each dimension have been increased
to the observed maximum rather than given a predefined
cutoff
The lower goalpost for income has been reduced due to new
evidence on lower possible income levels
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Table 2.4 2013 New Human Development
Index and its Components for Selected Countries
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2.4 Characteristics of the Developing
World: Diversity within Commonality
1. Lower levels of living and productivity
2. Lower levels of human capital (health,
education, skills)
3. Higher Levels of Inequality and Absolute
Poverty
Absolute Poverty
World Poverty
4. Higher Population Growth Rates
Crude Birth rates
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2.4 Characteristics of the Developing
World: Diversity within Commonality
5. Greater Social Fractionalization
6. Larger Rural Populations but Rapid Ruralto-Urban Migration
7. Lower Levels of Industrialization and
Manufactured Exports
8. Adverse Geography
Resource endowments
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2.4 Characteristics of the Developing
World: Diversity within Commonality
9.
Underdeveloped Financial and Other
markets
Imperfect markets
Incomplete information
10. Colonial Legacy and External Dependence
Institutions
Private property
Personal taxation
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Figure 2.3a Shares of Global Income, 2008. (b)
Developing regions lag far behind the developed
world in productivity measured as output per worker.
Source: Figure 2.3a, Data from World Bank, World Development Indicators 2013 (Washington, D. C.: World Bank, 2013), p.24.
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Figure 2.3b Developing
regions lag far behind the
developed world in
productivity measured as
output per worker.
Source: Figure 2.3b, United Nations, Millenium Development Goals Report 2012, p.9.
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Table 2.5 The 12 Most and Least Populated
Countries and Their Per Capita Income, 2008
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Figure 2.4 Under-5 Mortality Rates,
1990 and 2012
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Table 2.6 Primary School Enrollment and
Pupil-Teacher Ratios, 2010
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Figure 2.5 Correlation between Under-5
Mortality and Mothers Education
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Table 2.8 The Urban Population in Developed
Countries and Developing Regions
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Table 2.9 Share of the Population Employed in the
Agricultural, Industrial, and Service Sectors in Selected
Countries, 20042008 (%)
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Table 2.10 Share of the Population Employed in the
Agricultural, Industrial, and Service Sectors in Selected
Countries, 199092 and 20082011 (%)
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2.5 How Low-Income Countries Today
Differ from Developed Countries in Their
Earlier Stages
Eight differences
Physical and human resource endowments
Per capita incomes and levels of GDP in relation to the rest
of the world
Climate
Population size, distribution, and growth
Historic role of international migration
International trade benefits
Basic scientific/technological research and development
capabilities
Efficacy of domestic institutions
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2.6 Are Living Standards of Developing and
Devolved Nations Converging?
Evidence of unconditional convergence is
hard to find
But there is increasing evidence of per
capita income convergence, weighting
changes in per capita income by population
size
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Figure 2.7 Relative Country Convergence:
World, Developing Countries, and OECD
(continued)
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Figure 2.7 Relative Country Convergence:
World, Developing Countries, and OECD
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Figure 2.8 Growth Convergence versus
Absolute Income Convergence
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Figure 2.9 Country Size, Initial Income
Level, and Economic Growth
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2.7 Long-Run Causes of Comparative
Development
Schematic Representation
Geography
Institutional quality- colonial and post-colonial
Colonial legacy- pre colonial comparative
advantage
Evolution and timing of European development
Inequality- human capital
Type of colonial regime
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Nature and Role of Economic
Institutions
Institutions provide rules of the game of economic life
Provide underpinning of a market economy
Include property rights; contract enforcement
Can work for improving coordination,
Restricting coercive, fraudulent and anti-competitive behavior
Providing access to opportunities for the broad populationConstraining the power of elites, and managing conflict
Provision of social insurance
Provision of predictable macroeconomic stability
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Role of Institutions
Acemoglu, Johnson, and Robinsons
reversal of fortune and extractive
institutions
Bannerjee and Iyer, property rights
institutions. Landlords versus cultivators
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Figure 2.10
Schematic
Representation of
Leading Theories of
Comparative
Development
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Concepts for Review
Absolute poverty
Brain drain
Capital stock
Convergence
Crude birth rate
Dependency burden
Depreciation (of the capital
stock)
Diminishing Marginal Utility
Divergence
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Economic Institutions
Fractionalization
Free trade
Gross domestic product
(GDP)
Gross national income
(GNI)
Human capital
Human Development Index
(HDI)
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Concepts for Review (contd)
Imperfect market
Incomplete information
Infrastructure
Least developed countries
Low-income countries
(LICs)
Middle-income countries
Newly industrializing
countries (NICs)
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Purchasing power parity
(PPP)
Research and development
(R&D)
Resource endowment
Terms of trade
Value added
World Bank
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E CON 314 E CONOMICS OF D EVELOPING C OUNTRIES
Summer 2020
Instructor: Danqing Lan
C ASE S TUDY
Due Date: No later than 11:59 PM-E.T. on Sunday August 2, 2020
Important Notes:
Please make sure that you include (1) your full name, (2) course number, and
(3) assignment number or title at the top of your completed assignment paper as
well as in the file name when you submit your work electronically.
Please clearly type, write down or mark your answers to avoid any ambiguity and
to facilitate grading.
Please UPLOAD your completed assignment (in PDF or JPEG) to the course site
on Blackboard in MyCourse. Double check if it is legible, prints completely and
displays normally as you intended on Blackboard after your submission.
See the syllabus for policies regarding any missed assignment.
Guidelines for the case study assignment:
Select a developing country that interests you.
Introduce the country you selected, provide and analyze basic indicators of development
such as GDP, GNI, NHDI and the component of NHDI.
Use what you have learned in this class to analyze at least 2 challenges this country
faces during the development. (For inspiration, see ten key similarities of developing
countries in chapter 2.)
Provide a logical and descriptive assessment report of your findings. References must
be included in your submission. Case studies after each chapter of the textbook are
good examples to refer to.
This case study is required to be done individually. Submission should be minimum of
two pages (reference not counted) with single space and font size no larger than 12pt .
Please submit the pdf file of your assignment no later than 11:59 PM-T.T. on Sunday
August 2, 2020.
Chapter 3
Classic Theories
of Economic
Growth and
Development
3.1 Classic Theories of Economic
Development: Four Approaches
Linear stages of growth model
Theories and Patterns of structural change
International-dependence revolution
Neoclassical, free market counterrevolution
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3.2 Development as Growth and
Linear-Stages Theories
A Classic Statement: Rostows Stages of
Growth
Harrod-Domar Growth Model (sometimes
referred to as the AK model)
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The Harrod-Domar Model Simplified Version
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The Harrod-Domar Model Simplified Version
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3-5
The Harrod-Domar Model
Incorporating Capital Depreciation
Equation 3.7 is also often expressed in terms of
gross savings, in which case the growth rate is
given by
(3.7)
where ? is the rate of capital depreciation
But there is now growing evidence of per capita
income convergence, weighting changes in per
capita income by population size
(Also, in chapter 3, we return to examine the
concept of conditional convergence when we study
the Solow model)
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Criticisms of the Stages Model
Necessary versus sufficient conditions
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3.3 Structural-Change Models
The Lewis two-sector model
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Figure 3.1 The
Lewis Model of
Modern-Sector
Growth in a
Two-Sector
Surplus-Labor
Economy
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Criticisms of the Lewis Model
Rate of labor transfer and employment
creation may not be proportional to rate of
modern-sector capital accumulation
Surplus labor in rural areas and full
employment in urban?
Institutional factors?
Assumption of diminishing returns in
modern industrial sector
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Figure 3.2 The Lewis Model Modified by
Laborsaving Capital Accumulation: Employment
Implications
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Empirical Patterns of
Development – Examples
Switch from agriculture to industry (and
services)
Rural-urban migration and urbanization
Steady accumulation of physical and human
capital
Population growth first increasing and then
decreasing with decline in family size
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3.4 The InternationalDependence Revolution
The neocolonial dependence model
Legacy of colonialism, Unequal power, Core-periphery
The false-paradigm model
Pitfalls of using expert foreign advisors who misapply
developed-country models
The dualistic-development thesis
Superior and inferior elements can coexist; PrebischSinger Hypothesis
Criticisms and limitations
Does little to show how to achieve development in a
positive sense; accumulating counterexamples
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3.5 The Neoclassical Counterrevolution:
Market Fundamentalism
Challenging the Statist Model: Free Markets, Public
Choice, and Market-Friendly Approaches
Free market approach
Public choice approach
Market-friendly approach
Main Arguments
Denies efficiency of intervention
Points up state owned enterprise failures
Stresses government failures
Traditional neoclassical growth theory – with diminishing
returns, cannot sustain growth by capital accumulation
alone
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3.6 Classic Theories of Development:
Reconciling the Differences
Governments do fail, but so do markets; a balance is
needed
Must attend to institutional and political realities in
developing world
Development economics has no universally accepted
paradigm
Insights and understandings are continually evolving
Each theory has some strengths and some weaknesses
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3-15
Concepts for Review
Autarky
Average product
Capital-labor ratio
Capital-output ratio
Center
Closed economy
Comprador groups
Dependence
Dominance
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Dualism
False-paradigm model
Free market
Free-market analysis
Harrod-Domar growth
model
Lewis two-sector model
Marginal product
Market failure
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Concepts for Review (contd)
Market-friendly approach
Necessary condition
Neoclassical
counterrevolution
Neocolonial dependence
model
Net savings ratio
New political economy
approach
Open economy
Patterns-of-development
analysis
Periphery
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Production function
Public-choice theory
Self-sustaining growth
Solow neoclassical growth
model
Stages-of-growth model of
development
Structural-change theory
Structural transformation
Sufficient condition
Surplus labor
Underdevelopment
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Appendix 3.1: Components of
Economic Growth
Capital Accumulation, investments in
physical and human capital
Increase capital stock
Growth in population and labor force
Technological progress
Neutral, labor/capital-saving, labor/capital
augmenting
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Figure A3.1.1 Effect of Increases in Physical and Human
Resources on the Production Possibility Frontier
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Figure A3.1.2 Effect of Growth of Capital Stock
and Land on the Production Possibility Frontier
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Figure A3.1.3 Effect of Technological Change
in the Agricultural Sector on the Production
Possibility Frontier
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Figure A3.1.4 Effect of Technological Change
in the Industrial Sector on the Production
Possibility Frontier
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3-22
Appendix 3.2 The Solow
Neoclassical Growth Model
Y L = f (K L ,1) or y = f (k )
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Appendix 3.2 The Solow
Neoclassical Growth Model
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Appendix 3.2 The Solow
Neoclassical Growth Model
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Figure A3.2.1 Equilibrium in the
Solow Growth Model
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Figure A3.2.2 The Long-Run Effect of
Chang…
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