econ 171 economic development

Atanu DeyMTWTh 2:00 PM – 3:30 PM

3 Le Cont

Discussions of the assignment Questions

21-06-2011Meeting 2 / N171 / Atanu Dey 2

“Economic history is overwhelmingly a story of economies that failed to produce a set of economic rules of the game (with enforcement) that induce sustained economic growth.” -- Douglass North, Nobel Laureate

Policies matter Politics matter


Gunnar Myrdal Swedish Nobel Laureate economist said 50 years ago that Asia will be mired in poverty◦ Asia was already taking off.◦ 50 years of successes in East Asia

China is the A-class students of American economics◦ In just 15 years, more than 450 million Chinese got out

of poverty between 1990 and 2005

Africa population with less than $1.25 per day went from <300 to 388 million in 2005

MDG of poverty reduction will not be achieved


What accounts for the successful?◦ Botswana is very successful cases. Why?

Data exists in huge piles. But making right inferences is hard.

Growth is necessary but not sufficient for long term poverty reduction

US median income 2009 is lower than it was in 1997.◦ GDP has increased, GDP per capita has increased◦ People in the middle and bottom are not doing

well.


They are distinct Growth is necessary but not sufficient for

poverty reduction How to get growth How are the benefits of growth to be shared 50 years ago it was shortage of capital for

poor countries – The World Bank The WB failed to make the promised

difference The focus was to change to policies


Output per US worker 10 times that of a worker in India, and 50 times that of a worker in Congo

Real income per capita ◦ US: $48k, India: $3K, Congo: $280

World Bank defines◦ Low-income countries < $975 (2008 $)◦ Lower-middle > $976 < $3855◦ Upper-middle > $3856 < $11,906◦ High-income > $11,907


What is a developing country? Emerging markets? Newly industrialized countries


Real income: per capita adjusted for purchasing power (Measure of the standard of living)

Health: life expectancy at birth, child mortality and undernourishment

Education by literacy and years of schooling Human Development Index of the UNDP

◦ See the Human Development Reports◦ http://hdr.undp.org/en/statistics/◦ Play around here http://hdr.undp.org/en/data/trends/ to see the trends


Lower levels of productivity and living Lower levels of human capital (health,

education, skills) Higher levels of inequality and absolute

poverty◦ 20% of the poorest people globally receive on

1.5% of the world income (1.4 billion people)◦ Living on less than $1.25 income per day◦ What would it require to bring everyone above

this poverty line?


About 2% of the income of the richest 10%

Scale of global inequality is unfathomable

Even within countries, there are extremes of wealth


Higher population growth rates◦ 1800 CE: < 1 billion◦ 1900 CE: 1.65 billion◦ 2000 CE: 6 billion◦ Late 2011: 7 billion

Large rural populations and rapid rural-urban migration

Lower levels of industrialization and manufactured exports

Adverse geography◦ Tropical or semi-tropical


Underdeveloped markets Lingering colonial impacts

◦ Extractive and exploitative policies◦ Not development oriented


Physical and Human Resource Endowments Relative Levels of Per Capita Income and GDP Climatic differences Population size, distribution and growth The role of International Migration

◦ 60 million migrated to the Americas between 1850 and 1914 (world population was a fourth of today’s)

Brain drain? Free trade


Next time


econ 171 economic development

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