Chapter I

Concept and Measurement of Development

 Development - inreasing people’s freedoms

- reducing poverty

 Economic Development - economic growth accompanied by the changes in output

distribution and economic structure.

 Economic Structure - describes the changing balance of output, trade, incomes and

employment drawn from different economic sectors-ranging from primary (farming, fishing,

mining) to secondary (manufacturing and construction industries) to tertiary and quaternary

sectors (tourism, banking and software)

 Economic Growth - increase in a country’s production and income per capita.

 Production - measured by Gross National Product (GNP) or Goss National Income (GNY)

an economy’s total output of goods and products.

 Per Capita Income/ Average Income - measures the average income earned per person in a

given area in a specified year.

Human Development Index (HDI) has three basic goals of development that can be

measured:

1. Long and Healthy Life - measure by life expectancy

2. Improved Education - measured by the adult literacy

3. Decent Standard of Living - measured by GDP per capita

 What the numbers mean?

- The UNDP classifies countries into three categories according to their HDI: High Human

Development (0.800 and above), Medium Human Development (0.55-0.800) and Low Human

Development (less than 0.55)

 How can the HDI information be used?

- can make conclusion about the country’s success in translating the benefits of national income

into achieving economic development.

 Ultimate Criteria for assessing the development of a country

- Uses of the HDI is to re-emphasize that people and capabilities should be the ultimate criteria

for assessing the development of a country, not the economic growth.

 Is the HDI sufficient?

- not the only indicator to effectively assess development

 Gender-Related Development Index (GDI) - examines the same indicators as the HDI but

takes into account the inequalities of these indicators for men and women. It is essentially

the HDI adjusted for inequality between men and woman.

 Gender Empowerment Measure (GEM) - measures the extent to which woman are able to

actively participate in economic and political life.

 Self-esteem - individual’s subjective evaluation off their own worth.

 Human Poverty Index (HPI) - looks a proportion of people who are deprived of the

opportunity to reach a basic level in each area. Expressed as percentage, with a higher

percentage indicating a greater level of deprivation and thus a higher level of poverty.

 Gender Progress Indicator (GPI) - attempts to measures whether a country’s growth has

actually led to an improvement in the welfare of the people.

The GPI attempts to make estimates of:

1. Environmental Costs

2. Air, water and noise pollution

3. Loss of farmland, wetlands and forests

4. Resource Depletion

5. Ozone Deletion

6. Pollution Abatement

Genuine Progress Indicator (GPI)

1. Social Costs

2. Family Breakdown

3. Crime

4. Personal Security

5. Loss of Leisure Time

Chapter II
 Theories of Economic Development

 Goals of Economic Development

1. Growth of Gross National Product

2. Quality of Life

3. Sustainable Development

4. The Millennium Development Goals

- Poverty and hunger

- Primary universal education

- Gender equality

- Child health

- Maternal health

- HIV/AIDS

- Environmental sustainability

- Global partnership

The evolution of Economic Development Thoughts

 Capitalism( Adam Smith )

 Communism ( Karl Marx)

 American Economist ( Walt Whitman Rostow )

 Arthur Lewis - who considered savings and investments to be the driving forces of economic

development but in the context of the less developed countries.

 Robert Solow - neoclassical growth model stresses the importance of three factors of output

of growth

1. Increases in labor quantity and quality through population growth and education;

2. Increases in capital through savings and investments; and

3. Improvements in technology.

Chapter III

Growth, Poverty and Inequality

 Inequality - the distribution of income within a country.

- give idea about relative poverty

 Functional Inequality - gives additional, more detailed information on inequality in a

country.

 Poverty - measurement

 Human PovertyIndez (introduced by UNDP) - want to broaden the usual “income

POverty” definition

Poverty, Inequality and Welfare

1. Economic Efficiency: Income inequality can lead to inefficiencies

2. Political and Social Stability

3. Moral and Fairness Objections to Inequality

Empirical Evidence
 Growth and inequality

 Growth and poverty

Who are the poor?

 Rural

 Women

 Ethnic minorities

 People in the poor countries

Policies

 Dollar and Kray - try different macro policy variables

 Human Capital - is a determinant of growth and good for reducing inequality

 Besley at al. - increasing school enrollment for girls

How to increase school enrollment?

- by increasing demand for education

What should work?

 Productivity enhancing technologies for small farmers

 Food crops research

 Extensions systems

 Risk reduction devices for small farmers

 Increasing non-farm employment

 Chapter IV

Human Capital and Development

 Capital - usable, productive resources, all forms of assets and capabilities that can be

harnessed for human development.

 Human Development - increasing human welfare, well-being and human capital

 Several forms of capital introduces by A. Smith: Land, Building, Machinery and HUman

Abilities

 Individuality - product of human mental development, of social organizations, institutions

and of a cultural sphere, imparting knowledge, skills and values, making available to each

member the cumulative advances of the collective and providing freedom and opportunity

for unique individual characteristics to develop.

 Altruism - example of a non-zero-sum-game(win-win game)

Chapter V

Migration and Urbanization

 Migration - geographic movement of people across a specified boundary for the purpose of

establishing a new permanent or semi-permanent residence.

 Circular migration - regular pattern of shirt tern migration.

 Migrant - a person who comes from one place to another especially in order to find work or

better living conditions.

Types of Migration:

 International Migration - moves between countries.

 Immigration - move into a new country.

 Immigrant - an international migrant who enters the area from a place outside the country.

 Emigration - move out of home country.

 Emigrant - an international migrant departing to another country by crossing the

international boundary.

Internal migration: Moves within a country

 In-Migration - movement into a new politically/ geographically/ administratively defined

area within the same country.

 In-Migrant - a person who moves into a new area within the same country.

 Out-Migration - movement out of a politically/ geographically/ administratively defined

area within the same country.

 Out-Migrant - a person who moves out of an area within the same country.

Types of Migration

1. Emigration and Immigration

2. Requires information

3. Duration
4. Choice/Constraint

5. Gross migration

6. Net migration

Push-Pull Theory

 Migrations as the response of the individual decision-makers.

Economic Approaches

 Labor Mobility - the primary issue behind migration

 Remittances - capital sent by workers working abroad to their family/relatives at home

Chapter VI

Agricultural Sector

 Agricultural Sectors - compromise establishments primarily engaged in growing crops,

raising animals and harvesting fish and others animals from a farm, ranch, or their natural

habitats.

 Agricultural Systems - useful to view agriculture in a systems framework; inputs, outputs

and linkages.

 Inputs - labor, fertilizers, seeds, land preparation, land quality and tenure.

 Outputs - production in form of mature crops and income earned and allocated

 Linkages - labor intensity > type of crop; land size > income earned and traditional system
 Agricultural Systems

 Physical - Ecosystem

 Behavioral - how ecosystem is perceived

 Operational - culture, values, class structures, institutions and traditions, political system,

technology level-farm management, land tenure-all influence and govern machinery of

production, consumption and exchange

 Agrarian Structure - refers to ways in which agricultural system is developed on the land

and includes land ownership, cropping system, and institutions

 Land tenure - owns or controls the land

 Communal tenure - land held by village where villagers enjoy usufruct (right to use profit)

 Estates - large estates where age laborers are employed by private sector firms, or

plantations held by public sector

 Freehold - outright ownership with land being transferred and divided equally among

 Tenancy - farmers pay owners for use of land either cash or kind

Forms of Agriculture

 Wet rice cultivation

 Plantation or Estate agriculture

 Sedentary dry farming

 Shifting agriculture

 Highland Market Gardens

Contraints on Rural Southeast Asian Agriculture

 Small size of farms limit productivity of labor

 Reduction in size of land parcels under inheritance tends to increase tenancy

 Weak local or regional markets

 Expensive inputs unless subsidized by government

 Farm to market transport often poor and may be seasonal - collapsing in the wet season

 Green Revolution - basically a worldwide attempt to revolutionize production of wheat and

rice in many Third World countries

 Hybrid Rice - responsive to fertilizers in conditions of adequate water supply and effective

management

Toward a New Strategy for Rural Development

1. Land Reforms

2. Supportive Policies

3. Integrated Development Objectives

Chapter VII

International Trade and Development

 International Trade - exchange of goods and services that is conducted beyond the political

boundaries of a country.
 Benefits of International Trade

1. Increases consumers’ satisfaction

2. Improves standard of living

3. Promotes product specialization

4. Accelerated economic development

5. Generates foreign exchange earnings

6. Simulates production

 Bases of International Trade

1. Technological differences

2. Price differences

3. Distribution of natural resources

Theory of Comparative Advantage

 Comparative advantage - refers to the ability of a party to produce a particular good or

service at a lower marginal and opportunity cost over another.

Forms of Trade Protection

1. Quotas - refer to a quantitative restriction in limiting imports of a particular product to a

specified number of units, or to a certain value in a given period of time.

2. Tariffs - refer to a tax imposed on imports as they enter a country.

3. State trading - governments, especially those with socialist and communist economies,

sometime grant monopoly importing rights to state enterprises.

4. Exchange controls - only those with permission from the Bangko Sentral ng Pilipinas to buy

foreign exchange have the ability to import.

5. Government regulations - these constitute a sort of protection for the domestic protection for

the domestic products.

Philippine Export - Import Policy Guidelines

Classification of Imports

 Freely importable

 Regulated commodities

 Prohibited or banned

 Letter of credit - is a letter from the bank guaranteeing that a buyer’s payment to a seller

will be received on time and for the correct amount.

 No Dollar Import - is a special privilege given by the government to returning residents and

other qualified individuals to bring motor vehicles into the country for personal use under

certain conditions.

 Basic Requirements
 - Importer

- Motor Vehicle

 Documentary Requirements

- For Philippine Passport Holders

- Methods of Payment in International Trade

 Foreign exchange - refers to the global market where currencies are traded virtually around-

the-clock. The term foreign exchange is usually abbreviated as forex.

GLOBALIZATION

 Core economic meaning - the increased openness of economies to international trade,

financial flows and foreign direct investments

The Importance of Exports to Different Developing Nations

 Importance of exports to developing nations

 Exports of LDCs are much less diversified than those of developed countries

Demand Elasticities and Export Earning Instability

 Low income elasticity of demand for primary products

 Low price elasticity of demand and supply

 Export earnings instability

The Critique of Traditional Free - Trade Theory in the Context of developing - Country

Experience

- The following assumptions of the Neoclassical model must be scrutinized:

 fixed resources, full employment and international factor immobility

 fixed, freely available technology and consumer sovereignty

 internal factor mobility and perfect competition

 governmental non-interference in trade

 balanced trade and international price adjustments

 trade gains accruing to nationals

Trade strategies for Development Export Promotion vs. Import Substitution

 Export promotion: looking outward and seeing trade barriers

 Expanding exports of manufactured goods: some successes

 Import substitutions: looking inward but still paying outward

 The IS industrialization strategy and results

 Tariff structure and effective protection

 Standard argument for tariff protection

 Must be applied selectively and wisely

 Foreign-exchange rates, exchange controls, and the devaluation decision

 Chronic payments deficits can be ameliorated

South-South Trade and Economic Integration: Looking Outward and Inward

 Economic Integration
 Regional trading blocs and the globalization of trade

Trade Policies of Developed Countries: Need for Reform

 Rich-nation economic and commercial policies matter for LDCs

 1995 Uruguay Round and WTO

 Despite 8 liberalizations rounds over 50 years trade barriers remain in place in agriculture

and textiles

 Doha Development Round 2001 has tilted the focus on the needs of the developing world.