Title: Economic Development Study Notes!

Summary Topic: Themes of Poverty and Inequality: Poverty Traps, Cross-Country Differences, Macro Models of
Economic Development, Endogenous Growth.

Key Points

Economic Growth
- The Solow model analyzes economic growth over time from changes in population, capital stock, and technology.
- Gross National Product measures a country's total economic output.
- Population growth impacts economic development by expanding the labor force.
- Literacy rate reflects human capital that affects development.
- The Human Development Index measures well-being beyond just income.
- Infrastructure includes both physical capital and social services.

Urbanization and Poverty

- Urbanization measures the share of people living in cities.
- Absolute poverty is the lack of basic necessities like food and shelter.
- Relative poverty compares income to the broader standard of living.
- Rural poverty occurs outside urban areas.
- Generational poverty persists across generations of a family.
- Environmental disasters can cause temporary situational poverty.

Inequality and Distribution

- Income inequality examines the uneven distribution of income.
- Functional distribution looks at factors' shares of national income, like labor's share.
- Poverty traps arise from discrimination and lack of social policies.
- Development initially increases then decreases income inequality.

Solow Model Concepts

- Increasing capital stock drives productivity growth in the long run.
- Population growth expands the labor force.
- Infrastructure includes health and education services.

Types of Poverty
Situational Poverty
- Caused by sudden crisis or disaster
- Examples: job loss, natural disaster
- Often temporary if able to recover

Generational Poverty
- Poverty passed down from generation to generation
- Due to systemic inequality and lack of opportunity
- Hard to escape without significant interventions

Absolute Poverty
- Lack basic food, clean water, shelter, healthcare
- Caused by inadequate income and resources
- Measured in terms of minimum calorie intake

Relative Poverty
- Income lower than overall community standard
- Depends on wider socioeconomic distribution
SAINT PAUL SCHOOL OF PROFESSIONAL STUDIES (formerly Saint Paul School of Business and Law)
Campetic Road, Palo, 6501 Leyte, Philippines • Telephone +63 53 323 7778 • Fax +63 53 323 4402 • www.spsps.edu.ph
Rural Poverty
- Affects remote areas with limited infrastructure
- Reduced access to transportation, utilities, healthcare

Urban Poverty
- Affects marginalized areas in cities
- Inadequate affordable housing, sanitation, schooling

Poverty Traps
- Self-reinforcing cycles that make poverty persistent
- Due to discrimination, lack of social protection, access to credit/capital

References:

Banerjee, A. V., & Duflo, E. (2011). Poor economics: A radical rethinking of the way to fight global poverty.
PublicAffairs.

Dollar, D., Kleineberg, T., & Kraay, A. (2016). Growth still is good for the poor. European Economic Review, 81, 68-85.
https://doi.org/10.1016/j.euroecorev.2015.05.008

Kraay, A., & McKenzie, D. (2014). Do poverty traps exist? Assessing the evidence. Journal of Economic Perspectives,
28(3), 127-148. https://doi.org/10.1257/jep.28.3.127

Lopez, J. H., & Servén, L. (2009). Too poor to grow. Policy Research Working Paper 5012. The World Bank.

Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A contribution to the empirics of economic growth. The Quarterly
Journal of Economics, 107(2), 407–437. https://doi.org/10.2307/2118477

Mincer, J. (1958). Investment in human capital and personal income distribution. Journal of Political Economy, 66(4),
281–302.

Nelson, R. R. (1956). A theory of the low-level equilibrium trap in underdeveloped economies. American Economic
Review, 46(5), 894–908.

Solow, R. M. (1956). A contribution to the theory of economic growth. The Quarterly Journal of Economics, 70(1), 65–
94.

"Studying is not a duty, it's an opportunity."

- G.A.M

SAINT PAUL SCHOOL OF PROFESSIONAL STUDIES (formerly Saint Paul School of Business and Law)
Campetic Road, Palo, 6501 Leyte, Philippines • Telephone +63 53 323 7778 • Fax +63 53 323 4402 • www.spsps.edu.ph