1. Econ 171 Economic Development
Atanu Dey
MTWTh 2:00 PM – 3:30 PM
3 Le Cont

2. Review Discussions of the assignment Questions
Meeting 2 / N171 / Atanu Dey

3. Economic Policies
“Economic history is overwhelmingly a story of economies that failed to produce a set of economic rules of the game (with enforcement) that induce sustained economic growth.” -- Douglass North, Nobel Laureate
Policies matter  Politics matter
Meeting 2 / N171 / Atanu Dey

4. Extremes of the Global Economy
Gunnar Myrdal  Swedish Nobel Laureate economist said 50 years ago that Asia will be mired in poverty
Asia was already taking off.
50 years of successes in East Asia
China is the A-class students of American economics
In just 15 years, more than 450 million Chinese got out of poverty between 1990 and 2005
Africa population with less than $1.25 per day went from <300 to 388 million in 2005
MDG of poverty reduction will not be achieved
Meeting 2 / N171 / Atanu Dey

5. What’s the Secret What accounts for the successful?
Botswana is very successful cases. Why?
Data exists in huge piles. But making right inferences is hard.
Growth is necessary but not sufficient for long term poverty reduction
US median income 2009 is lower than it was in 1997.
GDP has increased, GDP per capita has increased
People in the middle and bottom are not doing well.
Meeting 2 / N171 / Atanu Dey

6. Growth & Development They are distinct
Growth is necessary but not sufficient for poverty reduction
How to get growth
How are the benefits of growth to be shared
50 years ago it was shortage of capital for poor countries – The World Bank
The WB failed to make the promised difference
The focus was to change to policies
Meeting 2 / N171 / Atanu Dey

7. Economic Diversity
Output per US worker 10 times that of a worker in India, and 50 times that of a worker in Congo
Real income per capita
US: $48k, India: $3K, Congo: $280
World Bank defines
Low-income countries < $975 (2008 $)
Lower-middle > $976 < $3855
Upper-middle > $3856 < $11,906
High-income > $11,907
Meeting 2 / N171 / Atanu Dey

8. Is Saudi Arabia a Developing Country?
What is a developing country?
Emerging markets?
Newly industrialized countries
Meeting 2 / N171 / Atanu Dey

9. Development Indicators
Real income: per capita adjusted for purchasing power (Measure of the standard of living)
Health: life expectancy at birth, child mortality and undernourishment
Education by literacy and years of schooling
Human Development Index of the UNDP
See the Human Development Reports
Play around here
to see the trends
Meeting 2 / N171 / Atanu Dey

10. Developing World Characteristics
Lower levels of productivity and living
Lower levels of human capital (health, education, skills)
Higher levels of inequality and absolute poverty
20% of the poorest people globally receive on 1.5% of the world income (1.4 billion people)
Living on less than $1.25 income per day
What would it require to bring everyone above this poverty line?
Meeting 2 / N171 / Atanu Dey

11. Extremes of income & wealth
About 2% of the income of the richest 10%
Scale of global inequality is unfathomable
Even within countries, there are extremes of wealth
Meeting 2 / N171 / Atanu Dey

12. Developing World Characteristics (contd)
Higher population growth rates
1800 CE: < 1 billion
1900 CE: 1.65 billion
2000 CE: 6 billion
Late 2011: 7 billion
Large rural populations and rapid rural-urban migration
Lower levels of industrialization and manufactured exports
Adverse geography
Tropical or semi-tropical
Meeting 2 / N171 / Atanu Dey

13. Developing World Characteristics (contd)
Underdeveloped markets
Lingering colonial impacts
Extractive and exploitative policies
Not development oriented
Meeting 2 / N171 / Atanu Dey

14. Differences between low-income today and in the past
Physical and Human Resource Endowments
Relative Levels of Per Capita Income and GDP
Climatic differences
Population size, distribution and growth
The role of International Migration
60 million migrated to the Americas between and 1914 (world population was a fourth of today’s)
Brain drain?
Free trade
Meeting 2 / N171 / Atanu Dey

15. Convergence?
Next time
Meeting 2 / N171 / Atanu Dey