Global Inequality and Economic Development Quiz

Economic Development

• Economic development is a multifaceted process, encompassing improvements in living standards, reduction of inequality, and expansion of opportunities.
• It involves a complex interplay of economic, social, political, and institutional factors.
• Different theories and models offer various perspectives on the factors driving and shaping it.

Rural-Urban Migration

• Urban populations are growing faster than rural populations globally.
• The majority of the world's population currently lives in cities.
• Factors influencing rural-urban migration include economic opportunities, higher wages, and better living conditions in urban areas.

Incomes and Growth Around the World

• Income inequality is substantial globally.
• Growth rates vary significantly across countries, with some countries experiencing rapid growth while others remain stagnant.
• Both rich and poor countries can experience changes in their income levels over time.

Methodological Approach

• Economic development studies utilize various approaches and theories, along with case studies.
• Different frameworks, such as the international dependence model versus the market failure and government intervention approach, shape analysis and focus areas.

Nature of Development Economics

• Development economics broadly considers the efficient allocation of resources and optimal growth of resources over time to produce an ever-expanding range of goods and services, going beyond elementary neoclassical economics.
• It encompasses social and institutional processes through which economic and political elites influence resource allocation.
• Development economics has a broader scope, addressing the economic, social, political, and institutional mechanisms necessary to achieve improvements in living standards for people across diverse regions.

Non-economic Factors

• Values, attitudes, and institutions are crucial elements influencing the overall development process.
• Development is a multidimensional process.
• It requires changes to structures, popular attitudes, national institutions and eradicating poverty.

Economic Growth and Development

• Economic growth often leads to a reduction in poverty in many countries.
• There is a relationship between income and poverty rates.
• Some models show that inequality may increase initially with economic growth but may decrease later.

Measuring Development

• GDP per capita is a widely used measure, but it has limitations as a comprehensive measure of development as it doesn't consider income distribution.
• Purchasing power parity (PPP) factors are incorporated in various measures of economic development to correct for the different purchasing power of currency in a country.
• The Human Development Index (HDI) considers multiple aspects of development, including income, health, and education.

Development Theories: Stages of Growth, Structural Change, and Dependence

• The linear-stages model of development suggests that countries follow a series of chronological phases in their economic growth process, with developed countries as guides.
• The structural-change model focuses on the transformation from a primarily agricultural economy to one dominated by manufacturing and service industries.
• The international dependence approach, often critical of previous models, emphasizes the role of external factors and global power imbalances in shaping economic development.

Neoclassical Counter-Revolution

• Neoclassical economists generally favor market-driven approaches to development, emphasizing the efficiency of market mechanisms and minimizing government intervention.
• This school of thought challenges the earlier emphasis on government intervention.
• This approach is usually viewed as a rebuttal to the interventionist approach of the previous models/theories.

Development as Growth & Linear-Stages Theories

• Capital is understood as the binding constraint.
• Development is closely linked to investment and capital accumulation.

Development as a Social Process

• Development is a multifaceted social process, encompassing economic factors, social structures and institutions.
• Historical trajectories and political contexts heavily influence development outcomes.

Theories of Economic Growth and Development

• The theories of economic growth and development evolved during the post-World War II era, with both developed world and less developed country scholars contributing.
• Linear-stages, structural change, and international dependence theories each offered different perspectives.

Factors of Development (Economic)

• Savings and investments are crucial to economic growth.
• Production factors, such as the availability of labor, land, capital, and resources influence growth rates.
• Productivity levels, technology advancements and efficiency improvements influence economic growth.

The Production Function (of Growth)

• Economic models use functions explaining the relationships between input and output.
• These are used to explain how variables, such as labor and capital, relate to outputs like production output.

The O-ring Theory

• Kremer’s O-ring model stresses the importance of complementarities and matching of skills among workers in production.
• The model explains how skill differences affect the productivity of groups of workers, showing that efficient matching is essential for high output and that variations in individual skills significantly impact overall productivity.
• This model emphasizes how specialization and the efficiency/inefficiency of skill combination can lead to varying outcomes in different economies.

The Big Push Model

• The Big Push model suggests the need for a large-scale investment to overcome coordination failures and stimulate economic growth.

Poverty Traps

• Poverty traps describe how poverty can perpetuate itself due to various economic, social, or psychological factors.
• Models explain various types of traps.
• Poverty traps, often linked to multiple equilibria, hinder development progress, emphasizing the importance of policies that improve conditions of existing systems.

Population Growth

• Rapid population growth can hinder development, leading to strained resources and reduced living standards.
• Population growth is related to various indicators of development.
• Population is not the primary issue driving underdevelopment. Other factors, including issues inherent in institutions and policy, play more critical roles in development outcomes.
• Policies for population control have been controversial and often poorly received/rejected in developing countries.

Urbanization and Development

• Urbanization is a significant shift in population distribution to cities.
• Cities offer economic and social opportunities, potentially spurring growth, but also have various issues that can hinder or slow growth.
• Development strategies often fail to address the specific issues relevant to urban growth, so strategies to improve development in cities are specific and need their own policy considerations.

Traditional and Modern Sectors

• Development models often distinguish between traditional (agricultural) and modern (industrial) sectors in economies.
• Transformation from agriculture to industry is a common process in developing countries.

Economic Growth and Development Models

• Many models are used to explain the economic growth of a country.
• Various theories try to analyze the connection between economic growth rate and inequality.
• These theories can have strong assumptions, so the theories need to be seen within that framework.

Test your knowledge on global income distribution changes from 1970 to 2000. This quiz explores various aspects of poverty, GDP, and economic theories related to development. Understand the impact of inequality and the evolution of economic sectors over time.