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Countries Rich and Poor. Why are some countries rich while others are poor? Daniel S. Taylor-Roman.

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Presentation on theme: "Countries Rich and Poor. Why are some countries rich while others are poor? Daniel S. Taylor-Roman."— Presentation transcript:

1 Countries Rich and Poor

2 Why are some countries rich while others are poor? Daniel S. Taylor-Roman

3 Research Questions Which are the poorest countries? Which are the richest countries? What are the commonalities between the “poorest countries” group? What are the commonalities between the “richest countries”group? What factors allowed rich nations to become rich? What factors keep poor nations in poverty?

4 Hypotheses

5 Hypothesis 1 Countries that allow free trade and have a capitalist economic structure are on the richest side while the poorest countries lack those elements in their economic society.

6 Hypothesis 2 The amount of exploitable natural resources a country has determines whether or not they fall under the poverty category. Specifically, countries with less natural resources tend to be poorer. Countries with more natural resources tend to be richer.

7 What is poverty? Definitions and Limitations

8 Poverty Definitions The state of having little or no money and few or no material possessions Poverty (also called penury) is deprivation of common necessities that determine the quality of life, including food, clothing, shelter and safe drinking water, and may also include the deprivation of opportunities to learn, to obtain better employment to escape poverty, and/or to enjoy the respect of fellow citizens.

9 Poverty Definitions The state of living on less than $2 a day, according to the World Bank. Poverty can also represent a lack of opportunity and empowerment, and bad quality of life in general. An income level defined by the Census Bureau that determines a family’s poverty status. This level is adjusted yearly as changes occur in the national economy’s Consumer Price Index and costs of living.

10 Limitations The first two definitions are almost impossible to measure. The second two are money based – income level.

11 Poverty line Where do we draw it? Who draws it?

12 Limitations Glewwe and van der Gaag agree that these definitions are too short and fail to grasp poverty as a “whole”. In 1988 they developed a way to measure poverty through a combination of different indicators such as income, food consumption, education, etc. Many other organizations concerned with the topic of poverty such as the World Bank and the UN have come up with indeces that attempt to measure poverty.

13 Poverty Analysis By the World Bank

14 WB Poverty Analysis Discusses the different dimensions of poverty and its measurement by analizing the concept of well-being. Focuses on three aspects of well-being: poverty, defined as whether households or individuals have enough resources or abilities today to meet their needs; inequality in the distribution of income, consumption or other attributes across the population; and vulnerability, defined here as the probability or risk today of being in poverty – or falling deeper into poverty -- in the future.

15 Human Development Index UN measuring tool

16 HDI The first Human Development Report (1990) introduced a new way of measuring development by combining indicators of life expectancy, educational attainment and income into a composite human development index, the HDIHuman Development Report (1990) The breakthrough for the HDI was the creation of a single statistic which was to serve as a frame of reference for both social and economic development. The HDI sets a minimum and a maximum for each dimension, called goalposts, and then shows where each country stands in relation to these goalposts, expressed as a value between 0 and 1.

17 Rich Countries Poor Countries

18 Who’s who? The richest and the poorest according to both indeces

19 HDI world map 2008 update Green shades indicate.75 or more  high development Yellow shades indicate.60 or more Orange to Maroon indicate.50 or less  low development

20 RichestPoorest Iceland Norway Australia Canada Sierra Leon Burkina Fasso Guinea-Bissau Niger 2008 update Richest: Top ranking from top to bottom Poorest: Least ranking from top to bottom

21 Do you promote free trade? Do you have a capitalist economy? Hypothesis 1

22 Iceland Iceland's Scandinavian-type social-market economy combines a capitalist structure and free-market principles with an extensive welfare system, including generous housing subsidies. CIA worldfactbook

23 Norway The Norwegian economy is a prosperous bastion of welfare capitalism, featuring a combination of free market activity and government intervention. The government controls key areas, such as the vital petroleum sector, through large-scale state enterprises.

24 Sierra Leone Sierra Leone is an extremely poor nation with tremendous inequality in income distribution. The fate of the economy depends upon the maintenance of domestic peace and the continued receipt of substantial aid from abroad, which is essential to offset the severe trade imbalance and supplement government revenues.

25 Burkina Fasso Burkina Faso has embarked upon a gradual but successful privatization of state-owned enterprises. Having revised its investment code in 2004, Burkina Faso hopes to attract foreign investors.

26 How many natural resources do you have? Hypothesis 1

27 Iceland Not many natural resources at all. Iceland's economy has been diversifying into manufacturing and service industries in the last decade, with new developments in software production, biotechnology, and tourism.

28 Norway The country is richly endowed with natural resources - petroleum, hydropower, fish, forests, and minerals - and is highly dependent on the petroleum sector, which accounts for nearly half of exports and over 30% of state revenue.

29 Sierra Leone While it possesses substantial mineral, agricultural, and fishery resources, its physical and social infrastructure is not well developed, and serious social disorders continue to hamper economic development. Nearly half of the working- age population engages in subsistence agriculture.

30 Burkina Fasso Thanks to this new code and other legislation favoring the mining sector, the country has seen an upswing in gold exploration and production. One of the poorest countries in the world, landlocked Burkina Faso has few natural resources and a weak industrial base. About 90% of the population is engaged in subsistence agriculture, which is vulnerable to periodic drought.

31 Findings

32 Hypothesis 1 True Best governmental practices lead less poorer countries

33 Hypothesis 2 Depends Some rich countries have lots of natural resources but some do not and are still very rich. Some poor countries have lots of natural resources and are still very poor.

34 Conclusion The ability that their people have to develop their potential  healthy lifestyles, have access to education, develop infraestructure, etc. will determine whether a country is on which side of the poverty line.

35 Bibliography Olson, M. (1996). Distinguished Lecture on Economics in Government: Big Bills Left on the Sidewalk: Why Some Nations are Rich, and Others Poor. The Journal of Economic Perspectives, 10, Retrieved April 4, 2009, from Lucas, R. E. (1990, May). Why Doesn't Capital Flow from Rich to Poor Countries?. The American Economic Review, 80, Retrieved April 20, 2009, from 8282% %2980%3A2%3C92%3AWDCFFR%3E2.0.CO%3B2-J % %2980%3A2%3C92%3AWDCFFR%3E2.0.CO%3B2-J Hall, R. E., & Jones, C. I. (1998). Why Do Some Countries Produce So Much More Output than Others?. Retrieved April 20, 2009, from Glewwe, Paul and Jacques van der Gaag. (1988) Confronting Poverty In Developing Countries: Definitions, Information,and Policies. Living Standards Measurement Study. Working Paper No. 48. Retrieved on April 17, 999/03/31/ _ /Rendered/PDF/multi0pag e.pdf 999/03/31/ _ /Rendered/PDF/multi0pag e.pdf Hibbs, D. A., & Olsson, O. (2003). Geography, biogeography, and why some countries are rich and others are poor. PNAS, 101, Retrieved April 20, 2009, from

36 Bibliography Tornell, A., & Velasco, A. (1992). The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?. The Journal of Political Economy, 100, Retrieved April 20, 2009, from Easterlin, R. A. (1994, September, 22). Will Raising the Incomes of All Increase the Happiness of All?. Journal of Economic Behavior and Organization, 27, Retrieved April 20, 2009, from Reinhart, C. M., & Rogoff, K. S. (2004). Serial Default and the “Paradox” of Rich to Poor Capital Flows. National Bureau of Economic Research, Retrieved April 20, 2009, from Matsuyama, K. (1996, August). Why are there Rich and Poor Countries?: Symmetry-Breaking in the World Economy. National Bureau of Economic Research, Retrieved April 20, 2009, from Mankiw, N. G., Romer, D., & Weil, D. N. A Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics, 107, Retrieved April 20, 2009, from

37 Bibliography - Websites World Bank Human Development Index CIA: The World Factbook world-factbook/ world-factbook/

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