Chapter 1 K47 CLC Oanh

8/8/2019 Chapter 1 K47 CLC Oanh

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Chapter 1:

Introduction todeveloping countries


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Questions to be addressed

1. How is the global incomedistributed?

2. How are countries classified?

3. What is the brief history ofdeveloping countries?

4. What are the characteristics of

developing countries?5. How are they compared to

developed countries in their earlierstages?


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Contents

1. The global distribution of income

2. Classification of countries

3. The emergence of developing countries4. Characteristics of developing countries

5. Comparing developing countries todayand developed countries in their earlier

stages: both internal and externalfactors


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Part 1. The global distribution ofincome

1.1 How are two halves of theworld living?


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How are two halves of the world living?(extracted from the reading)

There is a sharp contrast between lives inNorth America, Northern Europe, WesternEurope Australia and in Latin America,

South and South East Asia and Africaillustrated by two respective typicalfamilies.

Differences can be seen in various

aspects, such as... Contrast also be witnessed within a single

country in Asia, Latin America and Africa

Whats more?


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1.2. Some statistics on incomedistribution


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Global income distribution in 2008(Source:WB website 2010,Key Development Data & Statistics,http://web.worldbank.org/WBSITE/EXTERNAL/DATASTATISTICS/0,,contentMDK:20535285~menuPK:1192694~pagePK

:64133150~piPK:64133175~theSitePK:239419,00.html)

World High incomecountries

Medium and lowincome countries

Absolute

value

Absolute

value

as a

percentageof the world

Absolute

value

as a

percentageof theworld

GDP

(USDbn)

60,587 43,189 71.3% 17,398 28.7%

Population

(millions)

6,692 1,

068 1

6% 5,

624 84%

Incomepercapita

(USD)

8,613 39,345 3,094


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For whom are the world producing?Source: WB website 2009


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Annual per capita incomes in selected countries(Source:WB website 2010,Key Development Data & Statistics,

http://siteresources.worldbank.org/DATASTATISTICS/Resources/GNIPC.pdf)

Country GDP per capitaCountry

GDP per capita

Atlas method(using officialexchangerate)

PPP Atlas method(using officialexchange rate)

PPP

Switzerland 65,330 46,460 Malaysia 6,970 13,740

Japan 38,210 35,220 thePhilippines

1,890 3,900

USA 47,580 46,970 Vietnam 890 2,700

UK 45,390 36,130 Bangladesh 520 1,440Singapore 34,760 47,940 Uganda 420 1,140Poland 11,880 17,310 Nepal 400 1,120Mexico 9,980 14,270 Ethiopia 280 870


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Is the global income gap being narrowed or widened?

Income of the richest 20% /income of poorest 20%

(Source: Y.Hayami, 2006)

1960 301970 32

1980

451991 61

2000 70


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Income gap in regions


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Income gap within selected countries.


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Access to water by richest 20% and poorest 20% in selecteddeveloping countries


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How severe global poverty is? Some figures


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How severe global poverty is?


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Some more facts and figures on globalpoverty (1/4)

1. Almost half the world over threebillion people live on less than $2.50a day (At least 80% of humanity lives on lessthan $10 a day)

2. More than 80 percent of the worldspopulation lives in countries whereincome differentials are widening.

3. The poorest 40 percent of the worldspopulation accounts for 5 percent of

global income. The richest 20 percentaccounts for three-quarters of worldincome.


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4. According to UNICEF, 25,000 children die eachday due to poverty. And they die quietly insome of the poorest villages on earth, farremoved from the scrutiny and the conscienceof the world. Being meek and weak in life makes

these dying multitudes even more invisible indeath.5. Around 27-28 percent of all children in

developing countries are estimated to beunderweight or stunted. The two regions thataccount for the bulk of the deficit are South Asia

and sub-Saharan Africa.

If current trendscontinue, the Millennium Development Goalstarget of halving the proportion of underweightchildren will be missed by 30 million children,largely because of slow progress in SouthernAsia and sub-Saharan Africa


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6. Based on enrolment data, about 72million children of primary school age inthe developing world were not in school

in 2005; 57 per cent of them were girls.And these are regarded as optimisiticnumbers.

7. Nearly a billion people entered the 21st

century unable to read a book or signtheir names.


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8. Less than one per cent of what the world spentevery year on weapons was needed to put everychild into school by the year 2000 and yet itdidnt happen.

9. Infectious diseases continue to blight the lives ofthe poor across the world. An estimated 40million people are living with HIV/AIDS, with 3million deaths in 2004. Every year there are350500 million cases of malaria, with 1 million

fatalities: Africa accounts for 90

percent ofmalarial deaths and African children account forover 80 percent of malaria victims worldwide.


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Part 2: Country classification

WB

UNDP


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WB classification: by annual GNI per capita

(Source: WB website 2010, http://go.worldbank.org/K2CKM78CC0 ) WB classify all their member countries (186), and

all other economies with populations of more than30,000 (210 total)

Economies are divided according to 2008 GNI percapita, calculated using the World Bank Atlasmethod. The groups are:

low income, $975 or less;

lower middle income, $976 - $3,855;

upper middle income, $3,856 - $11,905; and

high income, $11,906 or more.

The critical incomes levels used to groupcountries change over time


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Income groups by WB

Countrygroup

In 2005 ($) In 2006 ($) In 2007 ($) In 2008 ($)

Low income < 875 < 905 < 935 < 975

Lowermiddleincome

< 3465 < 3595 < 3705 $3,855

Uppermiddle

income

< 10725 < 11115 < 11455 $11,905

Highincome

> 10725 > 11115 > 11455 $11,906

Vietnam 620 700 790 890


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Notes on the term and WB countryclassification

In general discussions in Bank reports,the term "developing economies" hasbeen used to denote the set of low and

middle income economies. Bank publications with notes on the classification of

economies state that the term "developingeconomies... does not imply either that all theeconomies belonging to the group are actually in theprocess of developing, nor that those not in the

group have necessarily reached some preferred orfinal stage of development."


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UN classification: by HDI

Human Development IndexThis index measures the average achievement of eachcountry in three basic areas of human development:

Life expectancy at birth; Adult literacy and school enrolment; Standard of living as measured by the Gross

National Product per capita (in PPP$). The HDI uses a scale from 0-1. Zero is the lowest score

and would indicate the lowest level of humandevelopment; one is the highest score and would indicatethe highest level of human development. The index isdivided into three categories: High, Medium, and Low.


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HDI (continued)

High Human DevelopmentAll countries scoring 0.80 and higher on the HDIare considered to be countries that have achievedhigh human development.

Medium Human DevelopmentAll countries scoring between 0.50-0.79 on theHDI are considered to be countries that haveachieved medium human development.

Low Human Development

All countries scoring below 0.50 on the HDI areconsidered to be countries that have achievedlow human development.


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UN definition:

Developing economies: Sometimescountries with Medium and Low HDI arecalled developing countries

These economies have standards of livinglower than developed economies andeconomies in transition. Many have deepand extensive poverty. Developingcountries are usually importers, rather thandevelopers, of innovations in science and

technology. They also tend to be morevulnerable to economic shocks.


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Some more words on HDI Each year since 1990 the Human Development

Report has published the human developmentindex (HDI) which looks beyond GDP to a broaderdefinition of well-being.

The HDI provides a composite measure of three

dimensions of human development: living a longand healthy life (measured by life expectancy), beingeducated (measured by adult literacy and enrolment atthe primary, secondary and tertiary level) and having adecent standard of living (measured by purchasingpower parity, PPP, income).

However, the index is not in any sense acomprehensive measure of human development.It does not, for example, include important indicatorssuch as gender or income inequality and more difficultto measure indicators like respect for human rightsand political freedoms


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Part 3: The emergence of developing

countries

3.1 History:

Most of the present developing

countries were colonies of WesternEuropean countries such Britain,France, Belgium, the Netherlands,Germany, Portugal and Spain.

Group discussion: Can you argue howthis historical background of developingcan impact on the present development

progress and prospects?


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Suggested answers (1/3)-expecting discussions, arguments, comments and examples by creative students

1. Formerly being exploited by the rulersand bearing the negative effects

2. Affected by colonial heritage:economic, educational and socialinstitutions are modeled or shaped orimpacted by the former colonialrulers. Evidence: Colonies of Spainand Portugal share relatively similar

economic, social and culturalinstitutions and face similar problems,colonies of Britain have progressedfaster than those of France.


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Suggested answers (2/3)

3. Obtaining late independence andemergence in international arena

their interests were not taken intoaccount by major internationaleconomic institutions: BrettonWoods Institutions (set up by the

agreements at Bretton Woodsconference) WB, IMF, GATT (WTO)


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Suggested answers (3/3)

4. Facing disadvantages of late comersintechnological application, market access,natural resources...

5. Being induced/impacted by recentglobalization process to develop in the morecompetitive and interdependent contextinternal and external context does not allowa country to be isolated/ to close the

economy and grow on its own feet. This issevere in the case the countries arerelatively weak.


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3.2 Different terminologies: developingcountries vs. the rest of the world

backward/traditionaleconomy

advanced/moderneconomy

under-developedcountry

developed country

less-developed country more-developedcountry

the third world the first & secondworld

the South the North

developing country developed country


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Some more words on defining developing world

The group of countries referred to asdeveloping and transitionaleconomies is a combination of several

groups of countries defined by incomeand non-income factors

What most clearly identifies these

countries is that they do not belong tothe group of countries that aregenerally recognized as developed.


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Least developed countries - a subgroup

of developing world

Having the following characteristics A Low Income Country (Per Capita GDI of under

$900) Weak human assets (defined by a Human AssetsIndex)

Poor nutrition per capita caloric intake

Health child mortality rate

Access to education secondary school enrollmentratio

Literacy adult literacy rate

Economic vulnerability (defined by an EconomicVulnerability Index)

Instability in agricultural production

Instability in exports of goods and services

Limited economic importance of non-traditionalactivities (manufacturing and modern services)


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List of Least developed countries (50) (1/2)(Source: UNCTAD, The Least Developed Countries Report 2006 )

Arab States: Djibouti, Mauritania, Sudan andYemen

South and West Asia: Afghanistan,Bangladesh, Bhutan, Maldives and Nepal

East Asia: Cambodia, Lao PeoplesDemocratic Republic (Lao), Myanmar andTimor-Leste

Pacific: Kiribati, Samoa, Solomon Islands,Tuvalu and Vanuatu

Caribbean: Haiti


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List of Least developed countries (50) (2/2)(Source: UNCTAD, The Least Developed Countries Report 2006 )

Sub-Saharan Africa: Angola, Benin,Burkina Faso, Burundi, Cape Verde,Central African Republic, Chad,Comoros, Democratic Republic of the

Congo, Equatorial Guinea, Eritrea,Ethiopia, Gambia, Guinea, Guinea-Bissau, Lesotho, Liberia, Madagascar,Malawi, Mali, Mozambique, Niger,

Rwanda, Sao Tome and Principe,Senegal, Sierra Leone, Somalia, Togo,Uganda, United Republic of Tanzaniaand Zambia


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Notes on least developed countries

The list of LDCs is reviewed everythree years by the Economic and

Social Council of the United Nations,in the light of recommendationsmade by the Committee forDevelopment Policy.


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Part 4: Characteristics of developingcountries

4.1 Common characteristics

4.2 Diversity


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4.1 Common characteristics

Developing countries demonstrateseveral common attributes: Low levels of living

Low productivity

High rate of population growth highdependency burden

Relatively high dependence on agriculturalproduction and export of primary-product

Imperfect markets

Economic vulnerability


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4.1.1 Low Levels of Living

Lets start with an easy Q:

What indicator/measurement of levelsof living can you think of? Which ofthem indicate means and which depictends?

Answer:


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Suggested answers:

Nationwide, low levels of living means low income,inequality,poor health andinadequate education,measured in different aspects using different indicators:

Income: GNI/head, caloric intakeHealth: Life expectancy, malnutrition rate, infant mortality rate,

access to clean drinking water, number of doctors or hospitalbeds/100,000 citizens (4.4 vs. 217 in developed countries, in1995), spread of diseases: HIV/AIDS

Education: Education opportunities, Literacy rate, school drop-outrate

Inequality: Income inequality (by Gini, Lorenz), inequality inaccess to health care and education service


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Low levels of living-illustrative data(Source: Learning materials, MDE (NEU), 2007)

Country Group

GNI PER

CAPITA

(2003)

LIFE

EXPECTANCY

(2003)

CHILD

MORTALITY

(per 1000)

(2003)

LITERACY

RATE

(2000)

Least Developed 310 51 150 52

Low Income 440 58 123 58

Lower-middle Income 1,490 69 39 90

Upper-middle Income 5,160 74 22 91

High-income non-OECD 16,060 77 7 99High-income OECD 27,220 79 5 99

World 5,130 67 86 79

SOME MEASURES OF LIVING STANDARDS


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4.1.2 Low levels of productivity(Source: Learning materials, MDE (NEU), 2007)

Value added per worker (in relative terms) tends to below in all sectors agriculture, industry, services and arereflected in lower wages

C O U N T R Y G R O U P

V A L U E A D D E D P E R

W O R K E R I N

A G R I C U L T U R E

( 2 0 0 2 )

L e a s t d e v e lo p e d c o u n t r i e s 2 5 2

L o w i n c o m e 3 6 6

L o w e r m i d d l e i n c o m e 6 2 4

U p p e r m i d d le i n c o m e 3 , 9 3 1

H i g h I n c o m e : n o n - O E C D

H i g h i n c o m e : O E C D 2 1 , 3 6 4

W o r ld 7 6 5


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Another easy Q

What leads to low productivity?

Answer:


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4.1.3 High Rate ofPopulation Growth

Few developing countries have completedthe demographic transition (permanentlylow natural population growth rates)

whereas all developed countries have(Source: Learning materials, MDE (NEU), 2007)

C O U N T R Y R O U P

R a t e o f P o l a t i o

r o t

( 2 0 0 1 )

e a s t e v e l o e 2 . 2

o i c o m e 1 . 8

o e r m i l e i c o m e 0 . 9

U p p e r m i l e i c o m e 1 . 3

i g i c o m e o O E C D 1 . 9

i g i c o m e O E C D 0 . 7

o r l 1 . 3


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high dependency burden

Birthrates is sufficiently high ascompared to death rates childrenunder 15 make up 40% in developing

countries as opposed to 20% indeveloped countries overalldependency is 45% in developingcountries as opposed to 33% in

developed world (Todaro M.P, (2006))


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A bit more difficult Q

Why is the gap between birthratesin developing and developedcountries wider than that of overall

volume/magnitude of dependencyburden?

Answer:


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4.1.4 Persistent dependence on agricultureand primary export products(Source: Learning materials, MDE (NEU), 2007)

C O U N T R Y R O U P

V a l e e i

g r ic lt re

a s % o f D P

( 2 0 0 0 )

E m p lo y m e t i

g r ic lt re

a s % o f to t a l

( 1 9 9 5 )

e a s t D evelo p e 3 5 .6 - -

o i co m e 2 4 .7 5 7 .3

o er m i le i c o m e 1 2 .7 4 2 .9

U p p er m i le i co m e 6 .2 2 0 .5

ig i co m e o O E C D 1 .3 - -

ig i co m e O E C D 1 .9 4 .8

o rl 3 .9 3 8 .5


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More Q for brain storming

What are the disadvantages ofprimary export?

Answer: (more can be found in Chap.6)


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4.1.5 Persistent market imperfections

Limited institutional development in areas such as: Banking and insurance Law and enforcement Standard setting institutions (engineering, medicine etc.) Information gathering and dissemination Information asymmetries

high transaction cost (costs incurred innegotiating or enforcing a contract oragreement)

Markets that are commonplace in developed economies(bond markets, mortgage markets) do not exist or work

very imperfectly in these economies Limit the ability ofthese countries to compete in the production of certaingoods and services due to limited investment/mobilizationof capital for investment


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Q for relaxing

What are the disadvantages ofattribute 4.1.6 for developingcountries?


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4.2 The diversity of developing countries

The fact that these countries areallless developedin some sensemeans that they all face a commonchallenge ofdevelopment

However, this is by no means ahomogeneous group of countries

and the nature of the challengeswill vary with the structuralattributes diversity come shortly


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The differences between developing countries(and, in a large part, the nature of their growthexperience) can be seen in various aspects,including:

Country size Historical background

Resource endowment

Ethnic and religious composition

Public-private mix

Industrial structure

Political and institutional structures

Dependence on external economic and political forces

4 2 1 Size differentials


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4.2.1 Size differentials(Source: Learning materials, MDE (NEU), 2007)

Country Population

(million)

Surface

area(thousandsq.km)

GDP

(current $)(bn)

GNI per

capita(current $,atlas method)

China 1,318 9,598.1 3,205.5 2370

India 1,124.8 3,287 1,176.9 950

Brazil 191.6 8,514.9 1,313.4 5860

Nigeria 148 923.8 165.5 920

Ethiopia 79 1,104.3 19.4 220

Nepal

28.1 147.2 10.3 350Chad 10.8 1284 7.1 540

Paraguay 6.1 406.8 12.2 1710

Fiji 0.8 18.3 3.4 3750


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Large countries tend to be more diverse (resources,

ethnicity, religion etc), more self sufficientand less trade dependent

Diversity in production and consumption canbe achieved more easily.

Economic growth is more internally driven. Ethnic and religious conflicts are more likely.Small countries tend to be more uniform, less self-sufficient

and more trade dependent Less likelihood of internal discord.

Openness becomes a necessary condition fordevelopment (by any definition) Less economic diversity and therefore

greater vulnerability

Size differentials (continued)


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4.2.2 Historical Experience: Colonialism

Effects of colonialism varied with the colonialpower, such as: governance was administeredby local people or expatriates: the political andinstitutional structures were purely exotic orimpacted by local authorities/communities as

well. The degree to which this process of adaptation

has been successful (or complete) has beenalso dependent on the nature and length ofcolonization itself: the longer, the more difficult

to adjust after gaining independence The colonial heritage can also affect current

economic ideology: in spite of differentgeographical and demographic diversity,Spanish and Portuguese colonies are sharing

similar economic and cultural institutions


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Historical Experience: Communism

Communism in Eastern Europe andCentral Asia (as well as parts of Asia)meant:

The removal of basic institutions ofcapitalism (private property, private bankingetc.)

Development of centrally planned economies

Extremely large (and dominant) publicsectors


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4.2.3 Resource Endowment (1/2)

Mineral Exporters Mineral wealth is not easily translated into broad

based economic growth. These countries also tend tobe more unequal.

Oil Exporting Countries: Saudi Arabia, Venezuela

Other Mineral exporters: Chile, Angola, Congo

Land Resource Endowment Some countries are blessed with large tracts of fertile

land while others have either limited or poor land

resources, such as: Argentina the pampas help thecountry have good cows and beef


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Human Capital Endowment

Human capital endowment can come invarious forms: A highly educated and skilled labor force

India, Chile

A large population

China, India, Indonesia

little of either

Ethiopia, Chad

Resource Endowment (2/2)


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4.2.4 The Mix of Public and Private Sectors

Most developing countries have mixed economic systems but theyhave various combinations of public and private sectors, and differentdegree of foreign ownership in the private sector.

A large foreign-owned private sector creates economic and politicalopportunities but also cause potential problems

A large private sector can allow for more rapid rates of economicinnovation but can perpetuate inequality

A large public sector can be created based on the assumption thatlimited skilled manpower can be best used by coordinating ratherthan fragmenting administrative and entrepreneurial activities. Alarge public sallow for more rapid resource mobilization and betterincome distribution but can lead to stagnation and inefficiency. Large public sectors: Sri Lanka, Vietnam, Cuba, Tanzania Large private sectors: : Chile, South Africa, Colombia

Latin American and Southeast Asia have larger private sectors thanSouth Asia due to historical circumstances and political ideology


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4.2.5 Ethnic and Religious Diversity

Ethnic and religious diversity maymake it more difficult to develop a

national consensus and, at worst,lead to conflict

Religious diversity: India

Ethnic Diversity Kenya, Malaysia

Both Nigeria, Indonesia


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4.2.6 Industrial Structure

Developing Countries vary from highly

industrialized economies to many withno significant industrial development:

NIEs of Asia and Latin America: Malaysia,

South Korea, Taiwan, Thailand, Singapore,

Argentina Brazil, Chile and Mexico

Industrialized economies of Eastern Europe

Besides, there are agrarian economies ofAfrica, Asia and Latin America

Ethiopia, Cambodia, Nicaragua etc.

Several countries (China, India) have largeindustrial sectors but these are still verysmall as compared to the agrarian sectors (interms of employment, though not necessarilyoutput)


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4.2.7 Political and Institutional Structures

Developing countries vary from wellfunctioning democracies to dictatorships Each of these political systems present their

own challenges and opportunities

While the determination and implementation ofpolicy may be easier in non-democraticframeworks, the development of a nationalconsensus may be more difficult.

Institutional endowment may vary from

highly efficient legal, administrative andfinancial systems (Taiwan) to nearanarchy (Somalia)


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4.2.8 Dependence on external economicand political forces

Extent of dependence on foreign economic,social and political forces is related to size,resource endowment and political history.

Most small nations are dependent on thedeveloped world

Dependence is not confined to economicmatters but also for other aspects such as

education, governance values, patterns ofconsumption and attitude toward life, workand self.


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Group discussion

Compare the three cases ofdeveloping countries in the threevignettes (in the readings):Summarize each case and compareroughly the levels of development


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To conclude: How severe is the povertyand malaise in developing countries?

The common challenges thatdeveloping countries are facing canbe described as a vicious circle ofpoverty from both demand andsupply sides


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From supply side....

Low investment

Lowproductivity

Low income per

capita

Limited savings


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From demand side....

Limited size ofmarkets

Potential investorsare not encouraged

No incremental

investment

Low productivity

Low income


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5. Contemporary developing countries inthe current world today

5.1 How has the world been changing?5.2 How are developing countries

today compared to developedcountries in their earlier stages?


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The world been changing dramatically:globalization

What is economic globalization? Globalization is the integration of national

economies into the international economy throughtrade in goods and services, direct foreigninvestment, short-term capital flows,

international movement of people and flow oftechnology (Perkins, 2006, p.9) Globalization is the pervasive decline in barriers

to the global flow of information, ideas, factors (ofproduction) (especially capital and skilled labor),technology and goods (Kaplinsky, 2001, p.14)

Globalization is much more thaninternationalization: it implies functionalintegration between internationally dispersedactivities (Gereffi, 2002, p.3)


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More specifically, the world has beenchanged as follows:

Global trade increased rapidly, transportation &communication costs fell sharply; global production networksemerged; higher extent of integration with global markets

Capital move more quickly and easily: developing countriescan utilize foreign capital (but danger of financial crisis incase local financial institutions are weak and foreign capital is

withdrawn quickly) Technology can make ideas and information spread more

quickly and developing countries can engage in serviceprovision via internet or telephone lines

There have been substantial demographic shifts toward lowerpopulation growth rates in many countries pressures onpensions and other social programs

Many low-income countries have adopted democratic politicalsystems since 1990s, but the impact of the move oneconomic development is still controversial

The spread of diseases, especially HIV/AIDS, threatensdevelopment progress in many countries. Why? Answer:.


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5.2 How are they compared to developed

countries in their earlier stages?

The situation of developing countriestoday differ significantly from that ofdeveloped countries when they starttheir stage of modern economic growth.Nine significant differences can be

identified.


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The nine aspects are...

Physical and human resource endowments

Relative levels of per capita income and GDP

Climate differences

Population size, distribution and growth

The historical role of migration

The growth stimulus of international trade

Basic scientific and technological researchand development capability

Stability and flexibility of political and socialinstitutions


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5.1 Physical and Human Resource Endowments (1/2)

Developing countries today have lessnatural resources as compared todeveloped countries when they begantheir rapid economic growth. Only a few

are endowed with supplies of petroleumand other minerals.

Some countries having abundantnatural resources face limit of capital

investments to exploit or to sacrificesubstantial control to get externalfinancing


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5.1 Physical and Human Resource Endowments (2/2)

There is substantial gap regarding HRendowments. This weakness hamper theexploitation of natural resources to sustainlong-term economic growth.

HR development gap (idea gap) + physicalobject gap = technology gap low capacity togenerate economic value.

(HR are human characteristics that raise a workers

productivity; HR depends on workers knowledge, skillsand attitudes)


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5.2 Relative levels of income per capita and GDP

Present developing countries: having muchlower levels of real per capita income +having to grow and develop in a moreinterdependent world = disadvantage become

more severe. (a metaphor of the incomelevels between these two groups ofcountries)

Such economic difficulties make these poorcountries sometimes determine or desire to

grow at any cost: making a trade off betweencurrent survival and long term improvementin levels of living


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5.3 Climatic differences

Most of developing countries arelocated in tropical zones. Heat and highhumidity discourage workers to work

hard or to be creative. Tropical climate bring about danger of

spread of diseases costs for remedy orprevention


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5.4 Population size, distribution and growth

Relatively higher population growth (2,5 to 3%as compared to less than 2% for developedcountries in the past).

More importantly, population growth indeveloping countries nowadays is exogenous(supported by foreign aids in health care andothers), while in developed countries it wasendogenous (induced by accelerated eco.growth in the economy)

Population concentration means low person to

land ratios low labour productivity Relatively bigger population size


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5.5 Role of international migration

Developing countries today can notrelieve high population density throughinternational migration due to

restrictive immigration law indeveloped.

At the same time, the face brain drain

(find illustrative data in the reading)


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5.6 The growth stimulus of international trade

Previously, developed countries can use freetrade as engine of growth as: export marketswere expanding, consequential local marketexpansion larger scale manufacturingindustries cheap capital costs production

expansion

increase in imports

morediversifies industrial structure...

Present developing countries are facing:Deteriorating trade position, declining terms oftrade, being unable to afford advanced techno,

low ability to compete internally More will be discussed in chap.6

5 7 B i i tifi d t h l i l h


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5.7 Basic scientific and technological researchand development capacity

Previously, in developed countries: massapplication of technological innovations highproductivity economic growth investmentin further R&D more techno. innovations

Present developing countries: (1) lowfinancial resources for investment in R&D and(2) dependence on rich countries fortechnologies that do not match their resource

endowments


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5.8 Social and political institutions

Previously, developed countries:independent, politically unifiedsocieties, fully devoted to economic

development Present developing countries: being

either distracted by internal wars orexternally influenced, no fullconcentration on economic growth


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5.9 Efficacy of domestic eco. institution

Previously, developed countries: institutionsare more transparent; ensure property rights,low cost, effective and rapid access to disputeresolution such as contract enforcementthrough courts

Present developing countries: unclearinstitutions, outdated institutions imposed byformer colonizers, and difficult to change

discourage business development andinnovations; result in low investment andhigh transaction costs


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A very easy Q to close our class today

Can historical economic growthexperience of developed

nations in their earlier stage beapplied in developing countriestoday? Why or why not?

G di i th i


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Group discussion on these ninedifferences, with the support of the lecturer

Any difficult ideas or phrase orexpressions?

Documents

Chapter 1 K47 CLC Oanh