BEE 221

MODULE 1

ECONOMIC
DEVELOPMENT

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-1
 BEE 221: Module 1
Introduction to the Basic Concept of Economic
Development
Days Topic Learning Outcomes Activities
 
Day 1 General discussion of course specification, course guides and study schedules and
modules and setting of expectations.
    Engage: The students will be asked about their
Day 2,3,4,5 Understand the principles and economic standing of their families and their take on
concepts of economic growth and what factors bring about their economic standing.
development
Explore: The students and the faculty will then
 
discuss the economic goals that they hoped to be
accomplished for themselves and their families.
Explain: The faculty will then discuss the concepts
of economic development, its goals, core values,
measurements and indicators.
Elaborate: The faculty will expound of the actual
situations/ characteristics of developing of poor
countries and will relate these to the earlier
characterizations that students made about their
economic standing. The characteristics will be
elucidated with economic data from reliable
institutions like Philippine Statistics Authority (PSA)
and the World Bank (WB)
Evaluate: A quiz will be given to allow the students
to also cite the characteristics of their locality as an
economy.
Day 6 Do Graded Quiz
Copyright © 2012 Pearson Addison-Wesley. All rights reserved.
1-2
Chapter 1

Introducing
Economic
Development:
A Global
Perspective

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1.1 How the Other Half Live

When one is poor, she has no say in public, she feels inferior. She has
no food, so there is famine in her house; no clothing, and no progress
in her family.
—A poor woman from Uganda

For a poor person everything is terrible—illness, humiliation, shame.

We are cripples; we are afraid of everything; we depend on everyone.
No one needs us. We are like garbage that everyone wants to get rid
of.
—A blind woman from Tiraspol, Moldova

Life in the area is so precarious that the youth and every able person
have to migrate to the towns or join the army at the war front in
order to escape the hazards of hunger escalating over here.
—Participant in a discussion group in rural Ethiopia

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-4
1.1 How the Other Half Live
• When food was in abundance, relatives used to share it. These days of
hunger, however not even relatives would help you by giving you some
food. —Young man in Nichimishi, Zambia

• We have to line up for hours before it is our turn to draw water.

—Mbwadzulu Village (Mangochi), Malawi

• [Poverty is] . . . low salaries and lack of jobs. And it’s also not having
medicine, food, and clothes. – Discussion group, Brazil

• Don’t ask me what poverty is because you have met it outside my house.
Look at the house and count the number of holes. Look at the utensils and
the clothes I am wearing. Look at everything and write what you see. What
you see is poverty. —Poor man in Kenya

• A universal theme reflected in these seven quotes is that

poverty is more than lack of income – it is inherently
multidimensional, as is economic development.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-5
1.1 How the Other Half Lives

Absolute poverty - A situation of being unable

to meet the minimum levels of income, food,
clothing, health care, shelter, and other
essentials

Subsistence economy - An economy in which

production is mainly for personal consumption
and the standard of living yields little more than
basic necessities of life—food, shelter, and
clothing.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-6
1.2 Economics and Development Studies
•The study of economic development is one of
the newest, most exciting, and most
challenging branches of the broader
disciplines of economics and political
economy.
•It is a field of study that is rapidly evolving its
own distinctive analytical and methodological
identity.
•Development - The process of improving the
quality of all human lives and capabilities by
raising people’s levels of living, self-esteem,
and freedom.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-7
1.2 Economics and Development Studies

Although one could claim that Adam Smith

was the first “development economist” and that
his Wealth of Nations, published in 1776, was
the first treatise on economic development, the
systematic study of the problems and processes
of economic development in Africa, Asia, and
Latin America has emerged only over the past
five decades or so.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-8
1.2 Economics and Development Studies

Developing countries cannot be analyzed realistically

without also considering the role of economically developed
nations in directly or indirectly promoting or retarding that
development.

Developing countries - countries of Asia, Africa, the Middle

East, Latin America, eastern Europe, and the former Soviet
Union that are presently characterized by low levels of living
and other development deficits. Used in the development
literature as a synonym for less developed countries.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-9
1.2 Economics and Development Studies

The Nature of Development Economics

Greater scope than traditional neoclassical economics and political
economy.
Development economics has an even greater scope. It must also deal with
the economic, social, political, and institutional mechanisms, both public
and private, necessary to bring about rapid (at least by historical standards)
and large-scale improvements.
Traditional neoclassical economics
an approach to economics that emphasizes utility, profit maximization,
market efficiency, and determination of equilibrium.
deals with an advanced capitalist world of perfect markets; consumer
sovereignty; automatic price adjustments; decisions made on the basis of
marginal, private-profit, and utility calculations; and equilibrium outcomes
in all product and resource markets.
it assumes economic “rationality” and a purely materialistic,
individualistic, self-interested orientation toward economic decision
making.
Copyright © 2012 Pearson Addison-Wesley. All rights reserved.
1-10
1.2 Economics and Development Studies

Political economy
-The attempt to merge economic analysis with practical politics— to view
economic activity in its political context.
-It goes beyond traditional economics to study, among other things, the
social and institutional processes through which certain groups of
economic and political elites influence the allocation of scarce productive
resources now and in the future, either for their own benefit exclusively or
for that of the larger population as well.
-It is concerned with the relationship between politics and economics, with
a special emphasis on the role of power in economic decision making.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-11
1.2 Economics and Development Studies

Development economics The study of how economies are

transformed from stagnation to growth and from low income
to high-income status, and overcome problems of absolute
poverty.

More developed countries (MDCs) The now economically

advanced capitalist countries of western Europe, North
America, Australia, New Zealand, and Japan.

Less developed countries A synonym for developing

countries.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-12
1.2 Economics and Development Studies

– Why Study Development Economics? Some

Critical Questions (see page 11)

– Questions illustrate the kinds of issues faced by almost

every developing nation and, indeed, every development
economist.

– Globalization - The increasing integration of

national economies into expanding
international markets

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-13
1.2 Economics and Development Studies

The Important Role of Values in

Development Economics

–It is concerned with human beings and the social systems by

which they organize their activities to satisfy basic material needs
(e.g., food, shelter, clothing) and nonmaterial wants (e.g.,
education, knowledge, spiritual fulfillment).

–Concepts or goals such as economic and social equality, the elimination of

poverty, universal education, rising levels of living, national independence,
modernization of institutions, rule of law and due process, access to opportunity,
political and economic participation, grassroots democracy, self-reliance, and
personal fulfillment all derive from subjective value judgments about what is good
and desirable and what is not.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-14
Figure 1.1 World Income Distribution

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-15
1.2 Economics and Development Studies

• Economies as Social Systems: The Need to

Go Beyond Simple Economics

• Social Systems
– Interdependent relationships between economic and non-
economic factors
– The organizational and institutional structure of a society,
including its values, attitudes, power structure, and traditions.

• Success or failure of development policy

– Importance of taking account of institutional and structural
variables along with more traditional economic variables

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-16
1.2 Economics and Development Studies

Although the main focus of this text is on development economics and

its usefulness in understanding problems of economic and social
progress in poor nations, we will try always to be mindful of the crucial
roles that values, attitudes, and institutions, both domestic and
international, play in the overall development process.

•Values - Principles, standards, or qualities that a society or groups within it considers

worthwhile or desirable.
•Attitudes - The states of mind or feelings of an individual, group, or society regarding
issues such as material gain, hard work, saving for the future, and sharing wealth.
•Institutions - Norms, rules of conduct, and generally accepted ways of doing things.
Economic institutions are humanly devised constraints that shape human interactions,
including both informal and formal “rules of the game” of economic life in the widely
used framework of Douglass North.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-17
1.3 What Do We Mean by Development?

• Traditional Economic Measures

– Gross domestic product (GDP) The total final output of goods and services
produced by the country’s economy, within the country’s territory, by
residents and nonresidents, regardless of its allocation between domestic
and foreign claims.

– Gross national income (GNI) The total domestic and foreign output
claimed by residents of a country. It comprises gross domestic product
(GDP) plus factor incomes accruing to residents from abroad, less the
income earned in the domestic economy accruing to persons abroad.

– Income per capita Total gross national income of a country divided by its
total population.

– Utility of that income?

• The New Economic View of Development

– Leads to improvement in wellbeing, more broadly understood

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-18
1.3 What Do We Mean by Development?

• Amartya Sen’s “Capability” Approach

– Functionings as an achievement. What people do or can do with

the commodities of given characteristics that they come to
possess or control.
– Capabilities as freedoms enjoyed in terms of functionings, given
their personal features and their command over commodities

– Development and happiness -Clearly, happiness is part of human

well-being, and greater happiness may in itself expand an
individual’s capability to function. As Amartya Sen has argued, a
person may well regard happiness as an important functioning for
her well-being.

– Well being in terms of being well and having freedoms of choice

– “Beings and Doings”:

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-19
Some Key “Capabilities”

• Some Important “Beings” and “Doings” in Capability to

Function:
– Being able to live long
– Being well-nourished
– Being healthy
– Being literate
– Being well-clothed
– Being mobile
– Being able to take part in the life of the community
– Being happy – as a state of being - may be valued as a
functioning

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-20
1.3 What Do We Mean by Development?
(cont’d)

• Three Core Values of Development

– Sustenance: The Ability to Meet Basic Needs
– Self-Esteem: To Be a Person. The feeling of
worthiness that a society enjoys when its
social, political, and economic systems and
institutions promote human values such as
respect, dignity, integrity, and self-
determination.
– Freedom from Servitude: To Be Able to
Choose.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-21
Figure 1.2 Income and Happiness:
Comparing Countries

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-22
1.3 What Do We Mean by Development?
(cont’d)

• The Central Role of Women

– To make the biggest impact on development,
societies must empower and invest in women
• The Three Objectives of Development
– Increase availability of life-sustaining goods
– Raise levels of living
– Expand range of economic and social choices

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-23
1.4 The Millennium Development Goals

• Millennium Development goals (MDGs)

– Eight goals adopted by the United Nations in
2000
• Eradicate extreme poverty and hunger
• Achieve universal primary education
• Promote gender equality and empower women
• Reduce child mortality
• Improve maternal health
• Combat HIV/AIDS, malaria, and other diseases
• Ensure environmental sustainability
• Develop a global partnership for development

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-24
Table 1.1 Millennium Development Goals and
Targets for 2015

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-25
Table 1.1 Millennium Development Goals and
Targets for 2015 (cont’d)

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-26
1.5 Conclusions

• The importance of Development Economics

• Inclusion of non-economic variables in
designing development strategies
• Achieving the Millennium Development
Goals
• “…One future-or none at all”

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-27
Concepts for Review

• Absolute Poverty • Gross national income

• Attitudes (GNI)
• Capabilities • Income per capita
• Developing countries • Institutions
• Development • Less developed countries
• Development economics (LDCs)
• Millennium Development
• Freedom Goals (MDGs)
• Functionings • More developed countries
• Globalization (MDCs)
• Gross domestic product • Political economy

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-28
Concepts for Review (cont’d)

• Self-esteem
• Social system
• Subsistence economy
• Sustenance
• Traditional economics
• Values

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-29
Chapter 2

Comparative
Economic
Development

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

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 as reflected by
having more families at the poverty line and employment in
seasonal and low-skilled jobs
– Lower levels of human capital as reflected by low
completion rate (even basic education only), high drop out
rate, low rate of women studying
– Higher levels of inequality and absolute poverty as
reflected by the GINI coefficient and poverty measures in
Module 4
– Higher population growth rates
– Greater social fractionalization as reflected in different
cultures and dialects

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-31
 -

-Large rural population and large rural to urban migration

due to higher employment and income opportunities in
urban areas
- Lower levels of industrialization and manufactured
exports as reflected by low infrastructure development and
high exports of agricultural products
- Adverse geography reflected by islands and islets,
rugged topography
- Underdeveloped financial and other markets reflected
by traditional savings and investment mechanisms, localized
markets, middlemen controlled agricultural product prices
- Colonial legacies reflected in the institutions, laws,
systems, programs, activities, actions and practices that
are established based on the country’s colonizers

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-32
2.1 Defining the Developing World

• World Bank Scheme- ranks countries on

GNP/capita
– LIC, LMC, UMC, OECD (see Table 2.1 and
Figure 2.1)
 Note that now the comparison is by Gross National Income per
capita. ( GNI / the population)
 Note also that the comparison can use the current prices or
the constant prices (where prices of goods are valued at a base
year price)
 Note also that latest data can be taken from
[Link]/economicaccountsofcountries or
[Link]/classificationofeconomiesbyregion-income

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-33
Table 2.1 Classification of Economies by Region and
Income, 2010

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-34
Table 2.1 Classification of Economies by Region and Income,
2010 (continued)

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-35
Table 2.1 Classification of Economies by Region and Income,
2010 (continued)

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-36
Figure 2.1 Nations of the World, Classified by
GNI Per Capita

Source: Data from Atlas of Global Development, 2nd ed., pp. 10–11. © Collins Bartholomew
Ltd., 2010.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-37
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)

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-38
Figure 2.2 Income Per Capita in Selected Countries
(2008)

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-39
Table 2.2 A Comparison of Per Capita GNI, 2008

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-40
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

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-41
Table 2.3 Commonality and Diversity: Some
Basic Indicators

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-42
Figure 2.3 Human Development Disparities within
Selected Countries

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-43
Figure 2.3 Human Development Disparities within
Selected Countries (continued)

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-44
Table 2.4 2009 Human Development Index
for 24 Selected Countries (2007 Data)

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-45
Table 2.5 2009 Human Development Index
Variations for Similar Incomes (2007 Data)

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-46
2.3 Holistic Measures of Living Levels and
Capabilities

• The New Human Development Index

• Introduced by UNDP in November 2010
• Note that the latest information (year can
be specified) as to the index and its
components are found in
[Link]/humandevelopmentreport

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-47
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

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-48
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 today’s 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

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-49
Table 2.6
The 2010
New Human
Development
Index
(NHDI), 2008
Data

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-50
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
 These characteristics are common among the developing
countries but the countries are in no way similar in terms
of these characteristics. Some countries are more
populated than others, poorer than others, have more
health problems than others, have more uneducated
people than others.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-51
Figure 2.4 Shares of Global Income, 2008

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-52
Table 2.7 The 12 Most and Least Populated Countries
and Their Per Capita Income, 2008

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-53
Figure 2.5 Under-5 Mortality Rates, 1990 and 2005

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-54
Table 2.8 Primary School Enrollment and Pupil-
Teacher Ratios, 2010

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-55
Figure 2.6 Correlation between Under-5 Mortality
and Mother’s Education

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-56
Figure 2.7 Number of People Living in
Poverty by Region, 1981–2005

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-57
Table 2.9 Crude Birth Rates Around the
World, 2009

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-58
2.4 Characteristics of the Developing World:
Diversity within Commonality

5. Greater Social Fractionalization

6. Larger Rural Populations but Rapid Rural-to-
Urban Migration
7. Lower Levels of Industrialization and
Manufactured Exports
8. Adverse Geography
 Developing countries have different socio-
cultural issues, rates of rural to urban migration,
pacing of modernization and industrialization
and geographical issues.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-59
Table 2.10 The Urban Population in Developed
Countries and Developing Regions

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-60
Table 2.11 Share of the Population Employed in the
Industrial Sector in Selected Countries, 2004-2008
(%)

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-61
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
– Taxes in cash rather than in kind

 Developing countries differ in terms of the available financial

markets like some stock markets while some don’t. The rich
control information on the economy in these countries but the
degree of control and which markets are controlled differ. The
countries copy institutions and systems of colonizers but as to
how much is copied and which is copied differ.

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-62
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
 All countries start a low points but those that are developed
now, were in much better position compared to the low-income
countries now in terms of the 8 aspects aforementioned .

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-63
2.6 Are Living Standards of Developing
and Devolved Nations Converging?

• Evidence of unconditional convergence is hard to

find which means it is very difficult to predict
when is the quality of life of developing countries
will become like those of developing countries.
Some countries/economies may get out of their
poor conditions but not all will be able to do just
like Singapore and China.
• But there is increasing evidence of “per capita
income convergence,” weighting changes in per
capita income by population size which can reflect
that developing countries are finding ways to
increase income and reduce population.
Copyright © 2012 Pearson Addison-Wesley. All rights reserved.
1-64
 Figure 2.8 Relative Country Convergence: World,
Developing Countries, and OECD

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-65
 Figure 2.8 Relative Country Convergence: World,
Developing Countries, and OECD (cont’d)

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-66
 Figure 2.9 Growth Convergence versus Absolute
Income Convergence

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-67
Figure 2.10 Country Size, Initial Income
Level, and Economic Growth

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-68
2.7 Long-Run Causes of Comparative
Development

• Schematic Representation represents the different

factors that explain the differences in the levels of
income of countries.
– 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

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-69
Figure 2.11 Schematic Representation of Leading
Theories of Comparative Development

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-70
Nature and Role of Economic
Institutions
Institution is a society, organization founded for some purpose or
an established law, practice or custom. An example of which is the
government, its branches and departments, whose functions are
as follows:
•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 population-
•Constraining the power of elites, and managing conflict
•Provision of social insurance
•Provision of predictable macroeconomic stability

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-71
Role of Institutions

For more information on institutions, the

following can be read:

•Acemoglu, Johnson, and Robinson’s

“reversal of fortune” and extractive
institutions
•Bannerjee and Iyer, “property rights
institutions.” Landlords versus cultivators

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-72
Concepts for Review

• Absolute poverty • Economic Institutions

• Brain drain • Fractionalization
• Capital stock • Free trade
• Convergence
• Gross domestic product
• Crude birth rate
(GDP)
• Dependency burden
• Depreciation (of the capital • Gross national income
stock) (GNI)
• Diminishing Marginal Utility • Human capital
• Divergence • Human Development Index
(HDI)

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-73
Concepts for Review (cont’d)

• Imperfect market • Purchasing power parity

• Incomplete information (PPP)
• Infrastructure • Research and development
• Least developed countries (R&D)
• Low-income countries • Resource endowment
(LICs) • Terms of trade
• Middle-income countries • Value added
• Newly industrializing • World Bank
countries (NICs)

Copyright © 2012 Pearson Addison-Wesley. All rights reserved.

1-74