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Chapter 2

Chapter 2. Comparative Economic Development. Common Characteristics of developing countries. Lower levels of living and productivity Lower levels of human capital Higher levels of inequality and absolute poverty Higher population growth rates Greater social fractionalization

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Chapter 2

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  1. Chapter 2 Comparative Economic Development

  2. Common Characteristics of developing countries Lower levels of living and productivity Lower levels of human capital Higher levels of inequality and absolute poverty Higher population growth rates Greater social fractionalization Larger rural population- rapid migration to cities Lower levels of industrialization and manufactured exports Adverse geography Underdeveloped financial and other markets Colonial legacies- poor institutions etc.

  3. Defining the Developing World • World Bank Scheme- ranks countries on GNP/capita • LIC, LMC, UMC, OECD (see Table 2.1 and figure 2.1)

  4. Figure 2.1 Nations of the World, Classified by GNI Per Capita

  5. 2.2/2.3 Measures of Living Levels: Real Income, Health, and Education Gross National Income (GNI) per capita

  6. Figure 2.2 Income Per Capita in Selected Countries

  7. 2.2/2.3 Measures of Living Levels: Real Income, Health, and Education Gross National Income (GNI)PPP method instead of exchange rates as conversion factors

  8. Purchasing Power Parity Adjustment* (*Simple Version - Makes No Allowance for Consumer Substitution) • (1) Pij qij Expenditure, item i, country j • (2) Pi (US) International price(U.S. prices) • (3) Pi (US) qij Value at U.S. prices • (4) Sum up for country j, get GNI for country j valued at U.S. prices

  9. Table 2.2 A Comparison of Per Capita GNI, 2008

  10. 2.2/2.3 Measures of Living Levels: Real Income, Health, and Education Gross National Income (GNI) per capitaPPP method instead of exchange rates as conversion factors Life Expectancy Education

  11. 2.2/2.3 Measures of Living Levels: Real Income, Health, and Education Gross National Income (GNI) per capitaPPP method instead of exchange rates as conversion factors Life Expectancy Education HDI as a holistic measure of living levels

  12. Table 2.4 2009 Human Development Index for 24 Selected Countries (2007 Data)

  13. Table 2.5 2009 Human Development Index Variations for Similar Incomes (2007 Data)

  14. 2.2/2.3 Measures of Living Levels: Real Income, Health, and Education 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

  15. Figure 2.3 Human Development Disparities within Selected Countries

  16. Figure 2.3 Human Development Disparities within Selected Countries (continued)

  17. 10 Characteristics of the Developing World: Diversity within Commonality • 1. Lower levels of living and productivity

  18. Figure 2.4 Shares of Global Income, 2008

  19. 10 Characteristics of the Developing World: Diversity within Commonality • 1. Lower levels of living and productivity • 2. Lower levels of human capital (health, education, skills)

  20. Figure 2.5 Under-5 Mortality Rates, 1990 and 2005

  21. Table 2.7 Primary School Enrollment and Pupil-Teacher Ratios

  22. Figure 2.6 Correlation between Under-5 Mortality and Mother’s Education

  23. 10 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

  24. 10 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

  25. 10 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 • Resource endowments • 9. Underdeveloped Financial and Other markets • Imperfect markets • Incomplete information • 10. Colonial Legacy and external dependence

  26. 2.6 Are Living Standards of Developing and Devolved Nations Converging? Evidence of unconditional convergence is hard to find

  27. Figure 2.8 Relative Country Convergence: World, Developing Countries, and OECD

  28. Figure 2.8 Relative Country Convergence: World, Developing Countries, and OECD (cont’d)

  29. Figure 2.9 Growth Convergence versus Absolute Income Convergence

  30. 2.6 Are Living Standards of Developing and Devolved Nations Converging? Evidence of unconditional convergence is hard to find But there is now growing evidence of “per capita income convergence,” weighting changes in per capita income by population size

  31. Figure 2.10 Country Size, Initial Income Level, and Economic Growth

  32. Figure 2.11 Schematic Representation of Leading Theories of Comparative Development

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