Development Economics Exam Review
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Muzayen ShekoDevelopment Economics Exam Review
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Muzayen ShekoCommon questions
Powered by AISocial dualism contributes to economic inequality by reflecting the existence of distinct social groups with disparate resources, capabilities, and opportunities. These disparities, often rooted in colonial legacies, entail differences in education, health access, employment, and infrastructure . Social dualism enhances segregation, leading to unequal economic participation and growth, thereby reinforcing existing social hierarchies and limiting social mobility.
Inequality can adversely impact national growth by limiting access to education, credit, and opportunities for large segments of the population, impeding human capital development and economic efficiency. High inequality can lead to social unrest, political instability, and reduced investments in public goods. Moreover, it may result in inefficient allocation of resources, as economic activities focus on enhancing wealth for the few rather than broad-based growth, thereby stalling overall development .
Dualism in economic development refers to the coexistence of two distinct economic or social situations that are mutually exclusive and contrast within a society. Types of dualism include technological, social, regional, and financial dualism. Technological dualism involves disparity between modern and traditional productive techniques, social dualism reflects social stratification, regional dualism signifies uneven regional development, and financial dualism indicates a split between formal and informal financial systems .
Non-economic factors significantly influence economic development by shaping societal structures, institutions, and individual behavior. They include elements like social structure, culture, and political stability which affect labor dynamics, investment climate, and innovation. A key non-economic factor identified is social structure, which impacts human capital development and economic engagement . These factors define the socio-economic environment necessary for sustainable development.
The Lewis model assumes that rural wages initially remain constant due to surplus labor in agriculture. As industry attracts this surplus labor by paying slightly higher wages, it can grow without increasing production costs significantly. As industrial expansion continues, the supply of cheap labor diminishes, causing rural and industrial wages to rise . This transition impacts industrial profits and necessitates investments in technology and efficiency to maintain growth momentum.
Balanced growth refers to the simultaneous development of various sectors in an economy to maintain a proper balance between industrial and agricultural sectors, as well as between domestic consumption and export production . It contrasts with unbalanced growth, which focuses on strategic development in specific key sectors to induce growth in other areas. Balanced growth aims to prevent structural imbalances, whereas unbalanced growth leverages leading sectors to stimulate overall economic activity.
The Gini coefficient measures income inequality within a nation, where 0 represents perfect equality and 1 indicates perfect inequality. A Gini coefficient of 0.8 signifies a highly unequal distribution of income . This suggests that wealth is concentrated within a small segment of the population, with large income disparities existing across different societal groups, indicating significant social stratification and economic vulnerability.
Hirschman identifies a lack of entrepreneurial abilities as a primary bottleneck to development. Entrepreneurs are crucial for identifying and seizing economic opportunities, driving innovation, creating jobs, and fostering economic growth . Without sufficient entrepreneurial skills, economies may struggle to develop and utilize existing resources efficiently, resulting in stagnation.
The 'vicious circle of poverty' implies a self-reinforcing cycle wherein a set of factors perpetuate each other, keeping a country impoverished. Poor countries lack capital, resulting in low productivity. Low productivity leads to low income, which in turn hampers savings and investment in capital formation, further inhibiting productivity improvements . This cycle often results in limited access to education, health care, and modern technology, preventing economic development.
A Lorenz curve that is farther from the 45-degree line indicates greater income inequality. The 45-degree line represents perfect equality, where each proportion of the population earns an equal share of income. Deviations from this line demonstrate the degree of inequality; a Lorenz curve far from the line suggests that income is concentrated among fewer individuals, highlighting economic disparities and social stratification .