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Econ 171 Economic Development

Econ 171 Economic Development. Atanu Dey MTWTh 2:00 PM – 3:30 PM 3 Le Cont. Review. Discussions of the assignment Questions. Economic Policies .

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Econ 171 Economic Development

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  1. Econ 171 Economic Development Atanu Dey MTWTh 2:00 PM – 3:30 PM 3 Le Cont

  2. Review • Discussions of the assignment • Questions Meeting 2 / N171 / Atanu Dey

  3. Economic Policies • “Economic history is overwhelmingly a story of economies that failed to produce a set of economic rules of the game (with enforcement) that induce sustained economic growth.” -- Douglass North, Nobel Laureate • Policies matter  Politics matter Meeting 2 / N171 / Atanu Dey

  4. Extremes of the Global Economy • Gunnar Myrdal  Swedish Nobel Laureate economist said 50 years ago that Asia will be mired in poverty • Asia was already taking off. • 50 years of successes in East Asia • China is the A-class students of American economics • In just 15 years, more than 450 million Chinese got out of poverty between 1990 and 2005 • Africa population with less than $1.25 per day went from <300 to 388 million in 2005 • MDG of poverty reduction will not be achieved Meeting 2 / N171 / Atanu Dey

  5. What’s the Secret • What accounts for the successful? • Botswana is very successful cases. Why? • Data exists in huge piles. But making right inferences is hard. • Growth is necessary but not sufficient for long term poverty reduction • US median income 2009 is lower than it was in 1997. • GDP has increased, GDP per capita has increased • People in the middle and bottom are not doing well. Meeting 2 / N171 / Atanu Dey

  6. Growth & Development • They are distinct • Growth is necessary but not sufficient for poverty reduction • How to get growth • How are the benefits of growth to be shared • 50 years ago it was shortage of capital for poor countries – The World Bank • The WB failed to make the promised difference • The focus was to change to policies Meeting 2 / N171 / Atanu Dey

  7. Economic Diversity • Output per US worker 10 times that of a worker in India, and 50 times that of a worker in Congo • Real income per capita • US: $48k, India: $3K, Congo: $280 • World Bank defines • Low-income countries < $975 (2008 $) • Lower-middle > $976 < $3855 • Upper-middle > $3856 < $11,906 • High-income > $11,907 Meeting 2 / N171 / Atanu Dey

  8. Is Saudi Arabia a Developing Country? • What is a developing country? • Emerging markets? • Newly industrialized countries Meeting 2 / N171 / Atanu Dey

  9. Development Indicators • Real income: per capita adjusted for purchasing power (Measure of the standard of living) • Health: life expectancy at birth, child mortality and undernourishment • Education by literacy and years of schooling • Human Development Index of the UNDP • See the Human Development Reports • http://hdr.undp.org/en/statistics/ • Play around here http://hdr.undp.org/en/data/trends/ to see the trends Meeting 2 / N171 / Atanu Dey

  10. Developing World Characteristics • Lower levels of productivity and living • Lower levels of human capital (health, education, skills) • Higher levels of inequality and absolute poverty • 20% of the poorest people globally receive on 1.5% of the world income (1.4 billion people) • Living on less than $1.25 income per day • What would it require to bring everyone above this poverty line? Meeting 2 / N171 / Atanu Dey

  11. Extremes of income & wealth • About 2% of the income of the richest 10% • Scale of global inequality is unfathomable • Even within countries, there are extremes of wealth Meeting 2 / N171 / Atanu Dey

  12. Developing World Characteristics (contd) • Higher population growth rates • 1800 CE: < 1 billion • 1900 CE: 1.65 billion • 2000 CE: 6 billion • Late 2011: 7 billion • Large rural populations and rapid rural-urban migration • Lower levels of industrialization and manufactured exports • Adverse geography • Tropical or semi-tropical Meeting 2 / N171 / Atanu Dey

  13. Developing World Characteristics (contd) • Underdeveloped markets • Lingering colonial impacts • Extractive and exploitative policies • Not development oriented Meeting 2 / N171 / Atanu Dey

  14. Differences between low-income today and in the past • Physical and Human Resource Endowments • Relative Levels of Per Capita Income and GDP • Climatic differences • Population size, distribution and growth • The role of International Migration • 60 million migrated to the Americas between 1850 and 1914 (world population was a fourth of today’s) • Brain drain? • Free trade Meeting 2 / N171 / Atanu Dey

  15. Convergence? • Next time Meeting 2 / N171 / Atanu Dey

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