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Aid

Filling the savings gap through international aid
According to Harrod- Domar model growth is held back by lack of domestic savings,
due to low levels of income and low living standards
Policies responses to this would be to narrow this gap in savings, one policy is to
seek international…

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TOPIC 3
Economic development
Meaning and measurement of economic development

Economic development: the process of improving peoples economic wellbeing and quality of life
Development is a concept that encompasses much more than just levels of income
GDP per capita figures do not tell us what resources are used for, who…

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National income/ population = GDP per capita
The world bank then uses these figures to class them into categories
Low income country = GDP per capita $905 or less
Lower middle income country= $906-$3595
Upper middle income country= $3956- $11,115
High income country- $11,116 or more
Using the dollar helps…

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Cost and value are also an issue, to improve HDI there is opportunity cost of
allocating resources to health and education as opposed to clean water and
transport infrastructure improvement
HDI says nothing about the quality of indicator e.g. greater amount of education
doesn't say anything about the quality of…

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Resource endowment
Historical background
Economic structure
Balance between states and markets

So developing countries should not be viewed as a homogenous group
Constraints on development

The continuing dominance of the primary sector in developing countries can be down
to the factor endowments of that country
E.g. Namibia has high diamond…

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thoughts focussed on the failure of markets, and government intervention through
large scale economic planning to introduce high levels of public investment, state
ownership of firms and controls on the private sector
the above have been done by setting up state owned enterprises, setting maximum
prices for agricultural commodities and…

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Filling the savings gap through international aid (page 21)

Washington consensus

After planning protectionism and aid had failed, the Washington consensus was formed, it has 10
policy recommendations which can be summaries under 3 headings:

Fiscal discipline- elimination of budget deficit, limit on government spending, and
development of reliable tax…

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Making better use of scarce resources to increase goods and services available for
consumption
To be sustainable there must be sufficient resources allocated to investment in
human and physical capital, (improving supply side performance)

Social objectives of economic growth:
Everybody has certain basic goods and services so lives are healthy…

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This can be used to judge whether sustainable development as occurred
Also used in assessment of policy choices, however they aren't currently, due to limitations of
composite indicators:
Lack of agreement on the choice of adjustments to be made to GDP more detail
could be added as in the measure…

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