ECONOMIC DEVELOPMENT REVIEWER: FINALS
Population Growth and Economic
Development:
Doubling time- the period that a given
population or other quantity takes to increase
by its present size.
Sudden changes in overall population trends
influenced by the combined effects that
resulted in high and fluctuating death rates are:
Famine, disease, malnutrition, plague, and war
Rate of population increase- The growth rate of
a population, calculated as the natural increase
after adjusting for immigration and emigration
Natural Increase- The difference between a
given population's birth and death rates.
Net international Migration- The excess of
persons migrating into a country over those
who emigrate from the country
Crude Birth Rate - The number of children born
alive each year per 1,000 population
Death Rate - The number of deaths each year
per 1,000 population
Total Fertility Rate- The number of children that
would be born to a woman if she were to live to
the end of her childbearing years and bear
children in accordance with the prevailing age-
specific fertility rates
Life Expectancy at Birth - The number of years a
newborn child would live if subjected to the
mortality
risks prevailing for the population at the time of
the child’s birth
Under 5-Mortality Rate - Deaths among children
between birth and 5 years of age per 1,000 live
births
Youth Dependency Ratio - The proportion of
young people under age 15 to the working
population aged 16 to 64 in a country
Hidden Momentum of Population Growth - The
phenomenon whereby the population
continues to increase even after a fall in birth
rates because the large existing youthful
population expands the population’s base of
potential parents.
Demographic Transition - The phasing-out
process of population growth rates
from a virtually stagnant growth stage,
characterized by high rates and death rates
through a rapid growth stage with high birth
rates and low death rates to a stable, low-
growth stage in which both birth and death
rates are low.
Replacement Fertility - The number of births per
woman that would result in stable population
levels
The Malthusian Population Trap -The threshold
population level
anticipated by Thomas Malthus (1766–1834) at
which population increase was bound to stop
because life-sustaining resources, which
increase at an arithmetic rate, would be
insufficient to support human
population, which would increase at a
geometric rate.
The Microeconomic Household Theory of
Fertility
• The theory that family formation has costs
and benefits that determine the size of families
formed.
• children are viewed as a special kind of
consumption good (an investment).
• According to the Theory of Fertility, children
are considered as a special kind of consumption
(and in
developing countries, particularly low-income
countries, investment) good so fertility
becomes a
rational economic response to the consumer’s
(family’s) demand for children relative to other
goods.
The Real problem is not population growth but
one or all of the following issues:
1.Underdevelopment
2.World Resource Depletion and
Environmental Destruction
3.Population Distribution
4.Subordination of Women
Population Growth is a Real Problem
1. The Extremist Arguments
2. The Theoretical Arguments
3. Empirical Arguments
- Lower Economic Growth
- Poverty and Inequality
- Adverse impact on education
- Adverse impact on health
- Food issues
- Impact on the environment
-International Migration
Five specific policies that developing country
governments might try to adopt to lower birth
rates in the short run:
1. Persuade people
2. Enhance family-planning programs
3. Manipulate economic incentives and
disincentives
4. Coerce people
5. Raise the social and economic status of
women
Urbanization and Rural-Urban Migration
The Migration and urbanization dilemma
caused by number of factors:
-rural-urban migration
-natural population increase
-annexation
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ECONOMIC DEVELOPMENT REVIEWER: FINALS
Reason why rural-urban migration continues to
be rampant may be due to factors such as:
• Better job opportunities
• Economic advantages
• Increased salary in urbanized cities
TWO TYPES OF AGGLOMERATION ECONOMIES
Urbanization Economies - Agglomeration effects
associated with the general growth of a
concentrated geographic region.
-the existence of industrial districts or clusters,
facilitates technology spillovers
Localization Economies- Agglomeration effects
captured by particular sectors of the economy,
such as finance or autos, as they grow within an
area.
-refers to reduction in costs due to backward
(inputs, skilled workers) and forward
(transportation)
linkages.
URBAN AGGLOMERATIONS ADVANTAGES
1.cost reductions due to economies of scale and
proximity.
2.positive economic externalities: skilled
workers, cheap transport
3. positive social externalities: cultural
amenities
URBAN AGGLOMERATIONS DISADVANTAGES
1.social costs of progressive overloading of
housing and social services.
2. congestion cost: higher cost of real estate
3. increase pollution
4, increase crime
Social capital- The productive value of a set of
social institutions and norms, including group
trust, expected cooperative behaviors with
predictable punishments for deviations, and a
shared history of successful collective action,
that raises expectations for participation in
future cooperative behavior.
Congestion- An action taken by one agent that
decreases the incentives for other
agents to take similar actions. Compare to the
opposite effect of a complementarity
FIRST - CITY BIASED
A form of urban bias that has often caused
considerable distortions might be termed first-
city bias. The country’s largest or first (“first-
place”) city receives a disproportionately large
share of public investment and incentives for
private investment in relation to the country’s
second-largest city and other smaller cities. As a
result, the first city receives a
disproportionately—and inefficiently—large
share of population and economic activity.
CAUSES OF URBAN
GIANTISM
1. Inheritance of a colonial transportation
system designed to extract natural resources
2. lack of appropriate government intervention
to solve the “coordination failure”
3. ”first city bias” disproportionate public
investment in capital cities
Informal Sector - Urban economies in
developing countries are defined by small,
family-owned businesses, labor-intensive
methods, petty retail trade and services, free
entry, and market-determined factor and
product prices.
FIVE POLICY IMPLICATIONS
1 Reduction of urban bias
2. Imbalances in expected income opportunities
is crucial
3. Indiscriminate educational expansion fosters
increased migration and unemployment
4. Wage subsidies and scarcity factor pricing can
be counterproductive
5. Programs of integrated rural development
should be encouraged
COMPREHENSIVE URBANIZATION, MIGRATION
AND EMPLOYMENT STRATEGY
1. Creating an appropriate rural-urban
economic balance
2. Expansion of small-scale, labor-intensive
industries.
3. Eliminating factor price distortions.
4. Choosing appropriate labor-intensive
technologies of production
5. Modifying the linkage between education
and employment
6. Reducing population growth
7. Decentralizing authority to cities and
neighborhoods
8. Leveraging untapped opportunities for
urban dynamism
9. Addressing the desperate poverty needs of
the poor now living in urban slum
conditions
10. Anticipating and assisting the new “climate
migrants
Human Capital: Education and Health in
Economic Development
Health and education are therefore essential
for growth and development since they are
inputs into the process of aggregate
production. They play a pivotal part in economic
development due to their dual position as
inputs and outputs.
Health and education are two human capital
issues which are closely tied together. The
connection includes;
• Similar analytical treatment, both are forms of
human capital
• Dual impact of effect of health spending on
effective education and vice versa.
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ECONOMIC DEVELOPMENT REVIEWER: FINALS
• Fundamental fact that investing in either of
the issues would ultimately benefit the same
person
Education and Health as Joint Investments for
development Greater health capital may raise
return on investment in education because of
the following;
1. Increased school attendance
2. Students will learn more efficiently
3. Longer life spans raise the return on
investments in education
4. Able to use education productively at any
point in life
Greater education capital may raise return on
investment in health because of the following;
1. Health programs rely on skills learned in
school
2. School teaches basic personal hygiene and
sanitation
3. Formatting and training of health personnel
4. Finally, an improvement in productive
efficiency from inv in education raises the
return on a lifesaving investment in health.
Human capital is the term used for education,
health and other human capacities that can
raise productivity when increased. Focuses on
their indirect ability to increase utility by
increasing income.
MULTIPLE EQUILIBRIA
• A model which shows how ban on child labor
can help this issue whereby banning child labor
would prove beneficial. Sometimes this shift can
be self-enforcing, so active intervention is only
needed at first.
• Luxury Axiom – A household with sufficiently
high income would not send its children to work
• Substitution Axiom – Adult and child labor are
substitutes, in which the quantity of output by a
child is given fraction of that of an adult.
Education is fundamental to development and
growth, and it is a human right, a powerful
driver of development, and one of the
instruments for reducing poverty and improving
health, gender equality, peace, and stability.
Aspect to consider in examining the interplay
between educational system and development
Human Capital Development
Workforce Skills:
Education plays a crucial role in developing the
skills and knowledge necessary for a productive
workforce. A well-educated population is often
more adaptable to changes in the job market
and can
contribute more effectively to economic
development.
Innovation and Creativity:
Education fosters innovation and creativity by
providing individuals with the tools and
knowledge to think critically, solve problems,
and generate new ideas. This, in turn,
contributes to technological and scientific
advancements.
Social Development
Equality and Social Cohesion:
Education can promote social cohesion by
fostering a sense of shared identity and
common values. Moreover, it can contribute to
reducing inequalities by providing equal
opportunities for all members of society,
regardless of their background.
Cultural Development:
Education plays a role in preserving and
promoting cultural heritage. It can help
individuals appreciate diversity and develop a
global perspective.
Economic Development
Poverty Reduction:
Education is often seen as a powerful tool for
poverty reduction. It equips individuals with the
skills to
secure better job opportunities, leading to
increased income and a higher standard of
living.
Entrepreneurship:
Education can contribute to the development of
an entrepreneurial mindset, fostering the
creation of small businesses and promoting
economic growth.
Health & Well-Being
Health Education:
Educational systems contribute to public health
by disseminating information on
healthy lifestyles, disease prevention, and
healthcare practices.
Quality of Life:
Higher levels of education are often associated
with improved health outcomes, as
educated individuals tend to make healthier
choices and have better access to healthcare.
Technological Advancement
Research and Development:
Higher education institutions are often at the
forefront of research and development. They
contribute to technological advancements and
scientific discoveries that can drive overall
societal progress.
Policy & Governance
Informed Citizenship:
Education is essential for creating an informed
and engaged citizenry. It empowers individuals
to
participate in the democratic process,
understand their rights and responsibilities, and
contribute to good governance.
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ECONOMIC DEVELOPMENT REVIEWER: FINALS
Capacity Building:
Educational systems contribute to building the
capacity of individuals to participate effectively
in various
sectors, including government, civil society, and
business.
Environmental Sustainability
Environmental Education:
Education can raise awareness about
environmental issues and promote sustainable
practices. It plays
a role in shaping attitudes and behaviors
towards the environment.
Health is a crucial component of human capital,
playing a pivotal role in economic development.
The measurement of health indicators and
understanding the disease burden within a
population are essential for formulating
effective policies that promote both individual
well-being and overall economic growth.
Health Measurement:
Life Expectancy - key indicator reflecting the
overall health of a population. It measures the
average number of years a person is expected
to live, providing insights into the quality and
accessibility of healthcare, nutrition, and living
conditions. Higher life expectancy often
correlates with better
economic outcomes.
Infant and child mortality rates - are critical
indicators of a society's health. These rates
reflect the
effectiveness of healthcare services, sanitation,
and nutrition for the most vulnerable members
of the
population. A reduction in these rates is
associated with improved economic conditions.
According to Dattani, Spooner & Roser (2021),
child mortality stands as one of the most
significant
global challenges, with approximately 6 million
children under the age of 15 succumbing
annually.
Maternal mortality ratio - highlights the risks
associated with childbirth. A lower ratio
indicates better maternal healthcare and overall
health infrastructure. Improvements in
maternal health contribute to the well-being of
families and communities, positively impacting
economic productivity.
Access to Healthcare Services - The availability
and accessibility of healthcare services are
essential for maintaining and improving health.
Metrics such as the number of healthcare
facilities, healthcare professionals per capita,
and health insurance coverage provide insights
into the health
infrastructure of a region.
Disease Burden:
Communicable Diseases:
The prevalence of communicable diseases, such
as malaria, tuberculosis, and HIV/AIDS,
significantly impacts economic development.
Effective disease control programs not only
improve health outcomes but also contribute to
increased workforce productivity.
Non-Communicable Diseases (NCDs):
MCDs, including cardiovascular diseases,
diabetes, and respiratory illnesses, pose a
growing threat to global health and economic
development. Monitoring the prevalence of
NCDs is crucial for designing preventative
strategies and ensuring a healthier and more
productive workforce.
Mental Health:
Mental health is an integral aspect of overall
well-being. Stress, anxiety, and
depression can affect productivity and
economic participation. Recognizing and
addressing mental health issues are crucial for
fostering a healthy and resilient
workforce. The economic burden extends to
healthcare costs, with direct expenses
for mental health services and indirect costs
related to decreased productivity.
Education outcomes and skill development may
also suffer, impacting contributions
to the workforce.
DEFINITION OF TERMS
Acquired immunodeficiency syndrome (AIDS)
Viral disease transmitted predominantly
through sexual contact.
Basic education- The attainment of literacy,
arithmetic competence, and elementary
vocational skills.
Conditional cash transfer (CCT) programs
Welfare benefits provided conditionally based
on family behavior such as children’s regular
school attendance and health clinic visitations.
Derived demand- Demand for a good that
emerges indirectly from demand for another
good.
Discount rate- In present value calculations, the
annual rate at which future values are
decreased to make them comparable to values
in the present.
Educational certification- The phenomenon by
which particular jobs require specified
levels of education.
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ECONOMIC DEVELOPMENT REVIEWER: FINALS
Educational gender gap Male-female
differences in school access and completion.
Health system All the activities whose primary
purpose is to promote, restore, or
maintain health.
Human capital- Productive investments
embodied in human persons, including skills,
abilities, ideals, health, and locations, often
resulting from expenditures on education,
on-the-job training programs, and medical care.
Human immunodeficiency virus (HIV) The virus
that causes the acquired
immunodeficiency syndrome (AIDS).
Literacy- The ability to read and write.
Neglected tropical diseases Thirteen treatable
diseases, most of them parasitic, that are
prevalent in developing countries but receive
much less attention than tuberculosis,
malaria, and AIDS.
Private benefits- The benefits that accrue
directly to an individual economic unit. For
example, private benefits of education are
those that directly accrue to a student and
his or her family.
Private costs- The costs that accrue to an
individual economic unit.
Social benefits of education- Benefits of the
schooling of individuals, including those
that accrue to others or even to the entire
society, such as the benefits of a more
literate workforce and citizenry.
Social costs of education Costs borne by both
the individual and society from private
education decisions, including government
education subsidies.
World Health Organization (WHO) The key UN
agency concerned with global health
matters.
Agricultural Transformation and Rural
Development
Gun Myrdal (Nobel Laureate in Economics) It is
in the agricultural sector that the battle for
long-term economic development will be won
or lost
INTEGRATED RURAL DEVELOPMENT - the broad
spectrum of rural development activities,
including small farmer agricultural progress, the
provision of physical and social infrastructure,
the development of rural nonfarm industries,
and the capacity of the rural sector to sustain
and accelerate the pace of these movements.
Countries whose population is more than 8015
rural include Ethiopia, Nepal, Niger, Papua New
Guinea, Rwanda, South Sudan, Sri Lanka, and
Uganda.
GREEN REVOLUTION - the boost in grain
production associated with the scientific
discovery of new hybrid seed varieties of wheat,
rice, and corn that have resulted in high farm
yields in many developing countries.
PATTERN OF AGRICULTURAL DUALISM
LATIFUNDIO- a very large landholding found
particularly in the Latin American agrarian
system, capable of providing employment for
more than 12 people, owned by a small number
of landlords, and comprising a disproportionate.
MINIFUNDIO - a landholding found particularly
in the Latin American agrarian system
considered too small to provide adequate
employment for a single family.
FAMILY FARM - A farm plot owned and
operated by a single household.
MEDIUM SIZE FARM - A farm employing up to
12 workers.
TRANSACTION COSTS - Costs of doing business
related to gathering information, monitoring,
establishing reliable suppliers, formulating
contracts, obtaining credit, and so on.
NOBEL LAUREATE GUNNAR MYRDAL IDENTIFIED
THREE MAJOR INTER RELATED FORCES THAT
MOLDED THE TRADITIONAL PATTERN OF LAND
OWNERSHIP INTO ITS PRESENT FRAGMENTED
CONDITION:
1.the intervention of European rule
2.the progressive introduction of monetized
transactions and the rise in power of the
moneylender.
3.the rapid growth of Asian populations.
LANDLORD - the proprietor of a freehold
interest in land with rights to lease out to
tenants in return for some form of
compensation for the use of the land.
SHARECROPPER - a tenant farmer whose crop
has to be shared with the landlord, as the basis
for the rental contract.
TENANT FARMER - one who farms on land held
by a landlord and therefore lacks ownership
rights and has to pay for the use of that land,
for example, by giving a share of output to the
owner.
MONEY LENDER - a person who lends money at
high rates of interest, for example to peasant
farmers to meet their needs for seeds,
fertilizers, and other inputs.
SUBSISTENCE FARMING - farming in which crop
production, stock rearing, and other activities
are conducted mainly for personal
consumption.
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ECONOMIC DEVELOPMENT REVIEWER: FINALS

THE LOW-PRODUCTIVITY SUBSISTENCE Conditions for rural development:

FARMING CHARACTERISTIC OF MOST TRADI 1.land reform
TIONAL AFRICAN AGRICULTURE RESULTS FROM 2.supportive policies
A COMBINATION OF THREE HISTORICAL FORCES 3.integrated development objectives
RESTRICTING THE GROWTH OF OUTPUT:
1.uses only traditional tools
2.shifting cultivation
3.labor is scare

SHIFTING CULTIVATION - Tilling land until it has

been exhausted of fertility and then moving to a
new parcel of land, leaving the former one to
regain fertility until it can be cultivated again
CASH CROPS - Crops produced entirely for the
market.
STAPLE FOOD - A main food consumed by a
large portion of a country’s population.

ISSUE IN SHARECROPPING:
1. Intrinsically Inefficient due to poor
incentives.
2. Monitoring approach.
3. Compromise between two types of risk.
4. Screening argument (if high ability then
take pure rental).
5. Empirical evidence for inefficiency form Ali
Shaban (Comparing same farmer,
controlling soil).
6. Giving sharecroppers a larger share of the
produce and security of tenure on land can
increase efficiency

NTERLOCKING FACTOR MARKETS - factor

markets whose supply functions are
interdependent,
frequently because different inputs are
provided by the same suppliers who exercise
monopolistic or oligopolistic control over
resources.

DIVERSIFIED (MIXED) FARMING - the production

of both staple crops and cash crops and simple
animal
husbandry typical of the first stage in the
transition from subsistence to specialized
farming.

SPECIALIZED FARMING - the final and most

advanced stage of the evolution of agricultural
production in
which farm output is produced wholly for the
market.

SCALE-NEUTRAL - Unaffected by size; applied to

technological progress that can lead to the
achievement of higher output levels
irrespective of the size (scale) of a firm or farm.

LAND REFORM - A deliberate attempt to

reorganize and transform agrarian systems with
the intention of fostering a more equal
distribution of agricultural incomes and
facilitating rural development

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