5.2 Development Economics Growth

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Economic DevelopmentTopic 5.2

Sources and Consequences of Economic Growth and

Development

+Key concepts for Topic 5.2

Explain and give sources of economic growth

Distinguish and give examples of physical and social capital

Distinguish and give examples of the concepts of capital widening and deepening

Explain consequences of economic development

Give examples of infrastructure

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Sources of Economic Growth and Development

+Comparing Singapore and Zambia

Singapore is a modern developed country with high standards of living.

Zambia is a land locked county with low levels of development and few opportunities for Economic Growth.

Both countries were colonized at similar times

So where do the differences come from?

GDP growth 7.5% (2007)GDP per capita $48,900 (2007)GDP by sector agriculture: 0%, industry: 33.7%,

services: 66.3% (2007)

GDP growth 6.0% (2007)GDP per capita $1400 (2007)GDP by sector agriculture: 22%,

industry: 29%, services: 48.9%

(2007)

+Singapore hasn’t always been economically developed….

+Sources of Economic GrowthSingapore

+Natural resources

+Human Capital Factors Quantity of human capital

Population growth – grants and financial support Immigration levels – working visas Getting older people and more women into work

Quality of human capital Immigration schemes to target skilled professionals,

relocation costs, tax credits Investment in education, longer hours – budget 21% of

government spending – USA 4% Promoting training at work schemes (apprenticeships) Improvements in Healthcare to extend working life

+Physical Capital - Technological Quantity of investment

Changing variables such as domestic savings, level of private investment, government involvement, foreign investment

Government owned corporations create 60% of GDP Reduce barriers to investment, tax credits, foreign

ownership rules – 1965 onwards Stimulate aggregate demand and shift aggregate supply in

LR

Quality of investment? Skill training for workers, Higher education and research Access to foreign technology and expertise Capital widening vs Capital Deepening Productivity increases 3000 Multinational Corporations

+Institutional Factors Adequate banking system

Legal system free from Corruption

Good education system

Developed modern infrastructure MRT Changi Airport Ports and refining industries

Political stability – one party democracy

International Relations – member of ASEAN and APEC, US Free Trade agreement

+So what sets Singapore apart?

Singapore was faced with a lack of physical resources and a small domestic market. In response, the Singapore Government

adopted a pro-business, pro-foreign investment, export-oriented economic policy combined with state-directed investments in strategic government-owned

corporations