Domestic factors and economic development (4.3)

Revision cards for section 4.3 (chapter 29) in the International Baccalaureate economics course


Institutional factors affecting development

There are 10 institutional factors which are affecting development:

  • Education
  • Health care
  • Infrastructure
  • Political stability and a lack of corruption
  • Legal system
  • Financial system, credit and micro-finance
  • Taxation
  • The use of appropiate technology
  • Empowerment of women
  • Income distribution 
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Institutional factors affecting development - Educ

A proper education has severel benefits to a society, these includes a stronger work force and communication, other factors include:

Improve the role of women in society - education tends to empower women in a society, as they will be able to take part in both financial and developing factors in a society. Further it has been seen that education improves child survival rates and fertility rates

Improve levels of health -  as education decreases the number of illiterate people in a country, the people gets more advanced communication methods (in the form of writings). Education can then help making people more aware of health hazards, such as HIV/AIDS, and how to avoid them

"A human being is not attaining his full heights until he is educated" - Horace Mann

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Institutional factors affecting development - Heal

Greater levels of health care, combined with better education opportunities will improve the levels of economic development. There are of course many factors that influence life expectancy, however, we can assume that a better health care system can increase the life expectancy, as we have seen in HDI reports

Access to safe water is also very important, as some people has to drink dirty water in order to survive, which in the end can make them sick, however both access to safe water, training of doctors and nurses and building of hospitals and clinics in lesser developed countries have been increasing for the last years, a tendency that hopefully will continue

"I am interested in getting people to use the healthcare system at the right time, getting them to see the doctor early enough, before a small health problem turns serious" - Donna Shalala

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Institutional factors affecting development - Infr

The definition of infrastructure is "the essential facilities and services such as roads, airports, sewage treatment, water systems, railways, telephone and other utilities that are necessary for economic activity"

Better roads and public transportation allows children to go to school and adults to go to work, and further allows firms to distribute goods to potential buyers

Developed radio and television networks allows people to be linked to the international world, and also to participate in wider communities

Availability of gas and electricity is essential to households in order to perform activities such as cooking and food preservation

"Enhancing revenues will help us improve education and solve our infrastructure problems" - Roy Barnes

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Institutional factors affecting development - Poli

A country with political stability is more likely to attract FDI and aid, and it is also more likely that domestic profits will stay in the country and be used for the country's best. Political instability, however, leads to an unstable country in which the economy can break down

Political instability includes corruption (in the form of electoral corruption and bribery) can diminish the development in a country completely

Corruption is best defined as the dishonest exploitation of power for personal gain

Therefore, by eliminating corruption, a country will be more likely to be able to develop properly

"But eradicating corruption is not enough to sustain a country" - Eduard Shevardnadze

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Institutional factors affecting development - Lega

An honest and fully functioning legal system is in some cases essential in order to achieve development, as this will both uphold the safety of the people and also their right of property

Without property rights citizens will be unable to own and benefit from their own private property

"If dogs could talk it would take a lot of the fun out of owning one" - Andy Rooney

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Institutional factors affecting development - Fina

As economic growth is essential to reaching some points of economic development, financing is very important. Financial services can for example be necessary for poor entrepreneurs wishing to start their own business - this widely known as micro-credit

The difficulties concerning saving and borrowing money are a quite significant barrier to economic growth and development

"The key to ending extreme poverty is to enable the poorest of the poor to get their foot on the ladder of development" - Jeffrey D. Sachs

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Institutional factors affecting development - Taxa

Most of a governments spendings comes from taxation. Through taxation, the government is able to finance essential public services, including education and health care. This can, however, be very difficult for the governments, which does not have a large tax revenue

Seeing as there is a low corporate activity in most developing countries, there is also a very low corporate tax revenue

"America is a land of taxation that was founded to avoid taxation" - Laurence J. Peter

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Institutional factors affecting development - The

Appropriate technology is the technology that is appropriate for the existing factor endowments

By using proper technology to increase their factors of productions, a country can widely increase their economic growth, but as the proper technology costs money to purchase and maintain, most developing countries finds it difficult to increase their technology

"Civilization advances by extending the number of important operations which we can perform without thinking of them" - Alfred North Whitehead

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Institutional factors affecting development - The

By empowering women in developing countries, they will be able to participate in, and create, a stronger workforce, which can increase the economic growth of the country

Empowerment of women can also increase the well being of the womans family and education

"The most common way people give up their power is by thinking they don't have any" - Alice Walker

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Institutional factors affecting development - Inco

Despite all countries having income equality, developing countries have a much larger gap between rich and poor

Income inequality in developing countries is a great barrier to growth and development, as the poor people in developing countries are not able to have very large savings, and further decreases the tax income for governments

"The worst form of inequality is to try to make unequal things equal" - Aristotle

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