5.1 Sources of 5.1 Sources of economic growth economic growth

and/or developmentand/or development 1.1. Natural factors: the quantity and/or quality of land Natural factors: the quantity and/or quality of land

or raw materialsor raw materials2.2. Human factors: the quantity and/or quality of Human factors: the quantity and/or quality of

human resourceshuman resources3.3. Physical capital and technological factors: the Physical capital and technological factors: the

quantity and quality of physical capital – not quantity and quality of physical capital – not covered today. covered today.

What are the possible advantages and What are the possible advantages and disadvantages of LDCs finding deposits of disadvantages of LDCs finding deposits of

diamonds?diamonds?

What are the advantages and What are the advantages and disadvantages of relying on tourism?disadvantages of relying on tourism?

Natural factors: the quantity Natural factors: the quantity and/or quality of land or raw and/or quality of land or raw

materialsmaterials Land and raw materials can be used for Land and raw materials can be used for

productive purposes, creating productive purposes, creating employment, income and export revenue.employment, income and export revenue.

BUT:BUT: Low YED for farming outputLow YED for farming output Low value addedLow value added Low skilled jobs / limited transferable skillsLow skilled jobs / limited transferable skills Abundant resources can be a curse.Abundant resources can be a curse.

Ample natural resources – a Ample natural resources – a blessing or a curse?blessing or a curse?

Ranis (1981):Ranis (1981):Large countries with ample natural resources Large countries with ample natural resources (especially those of S America) exploit this (especially those of S America) exploit this apparent advantage – producing more beef, apparent advantage – producing more beef, coffee or sugar instead of investing in the coffee or sugar instead of investing in the development of a manufacturing sector. development of a manufacturing sector. Entrenched interests perpetuated the prevailing Entrenched interests perpetuated the prevailing patterns of production. patterns of production. S Asian countries could not simply expand the S Asian countries could not simply expand the production of primary products to increase export production of primary products to increase export earnings because they do not have the land. They earnings because they do not have the land. They had to take the industrialisation route to earn had to take the industrialisation route to earn foreign currency.foreign currency.

An inverse relationship between resource An inverse relationship between resource exports as % of GDP and growth?exports as % of GDP and growth?

The resource curseThe resource curse Exporting large quantities of Exporting large quantities of

primary products:primary products: make the country vulnerable make the country vulnerable

to changes in pricesto changes in prices Low YED / low incomesLow YED / low incomes Deteriorating terms of tradeDeteriorating terms of trade Force up the exchange rate and Force up the exchange rate and

negatively impact on the negatively impact on the competitiveness of other competitiveness of other (manufacturing) sectors to (manufacturing) sectors to emerge (the Dutch disease)emerge (the Dutch disease)

Political corruption and Political corruption and instability is often associated instability is often associated with the natural resource curse with the natural resource curse but which causes the other?but which causes the other?

Human factors: the quantity Human factors: the quantity and/or quality of human and/or quality of human

resourcesresources The accumulation of human capital is one of The accumulation of human capital is one of

the fundamental keys to the development the fundamental keys to the development process. process.

In pairs write down why education could be In pairs write down why education could be so important to economic development. so important to economic development. Consider the meaning of development as well as Consider the meaning of development as well as straightforward economic factors.straightforward economic factors.

For each reason come up with one analysis point and one For each reason come up with one analysis point and one evaluation point.evaluation point.

Consider why women’s education might be Consider why women’s education might be particularly important to development.particularly important to development.

Education and growthEducation and growth A 1990 World Bank study of the high performance Asian economies A 1990 World Bank study of the high performance Asian economies

found that enrolment in primary education in 1960 predicted the found that enrolment in primary education in 1960 predicted the following percentages of growth during the period 1960 – 1985:following percentages of growth during the period 1960 – 1985:

% of total % of total predicted growthpredicted growth Hong Kong Hong Kong 8686 IndonesiaIndonesia 7979 JapanJapan 5858 South KoreaSouth Korea 6767 MalaysiaMalaysia 7373 TaiwanTaiwan 6969 SingaporeSingapore 7575 ThailandThailand 8787 This table suggests that the level of primary education was far and This table suggests that the level of primary education was far and

away the most important contributor to the predicted growth rates away the most important contributor to the predicted growth rates of the HPAEs and Japan. of the HPAEs and Japan.

Womens’ educationWomens’ education Pass on education to childrenPass on education to children Opportunity cost of having childrenOpportunity cost of having children More able to care for sick children – can read More able to care for sick children – can read

instructionsinstructions In Africa studies have shown that a 10% increase in In Africa studies have shown that a 10% increase in

female literacy rates reduces child death rates by female literacy rates reduces child death rates by 10%, men’s rates had no impact.10%, men’s rates had no impact.

Thailand – women with primary education were 30% Thailand – women with primary education were 30% more likely to be able to treat diarrhoea in children.more likely to be able to treat diarrhoea in children.

Studies in Indonesia, Kenya, Morocco and Peru show Studies in Indonesia, Kenya, Morocco and Peru show relationship between years of women’s education relationship between years of women’s education and reduced child mortality rates.and reduced child mortality rates.

In Guatemala it takes 15 times more spending to In Guatemala it takes 15 times more spending to achieve a given improvement in child nutrition when achieve a given improvement in child nutrition when income is earned by the father than when it is income is earned by the father than when it is earned by the mother.earned by the mother. World World Bank 1993Bank 1993

The Population ProblemThe Population Problem % change in GDP = % change in GDP = % change in - % change in% change in - % change in

per capitaper capita GDP population GDP population

The demographic transition modelThe demographic transition model

CBR determined by family income and education level of CBR determined by family income and education level of women. As these rise birth rates fall. Access to & women. As these rise birth rates fall. Access to & knowledge about contraception / abortion and social moral knowledge about contraception / abortion and social moral legal views impact upon fertility. legal views impact upon fertility.

The role of children in LDCs, worker, sibling carer, insuranceThe role of children in LDCs, worker, sibling carer, insurance

What is the economic ‘role’ of children in MEDCs?What is the economic ‘role’ of children in MEDCs?

Infant mortality ratesInfant mortality rates