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$: Chapter 19 Economic Development - PC\|MACimages.pcmac.org/SiSFiles/Schools/AL/MadisonCity/BJHigh/Uploads/DocumentsCategories...2 CONTEMPORARY ECONOMICS: LESSON 19.1 © SOUTH-WESTERN$
© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 19.11

CHAPTER 19

Economic Development

19.1 Developing Economies and Industrial

Market Economies

19.2 Foreign Trade, Foreign Aid, and


19.3 Rules of the Game, Transition

Economies, and Convergence


CHAPTER 19


Why are some countries poor while others are rich?

What determines the wealth of nations?

How much does foreign aid help poorer countries?

How does terrorism affect economic development?

What’s the “brain drain,” and how does it affect poorer

countries?

Why are birth rates higher in poorer countries?

Are poorer countries catching up with the rest of the world?

Consider


LESSON 19.1

Developing Economies and

Industrial Market Economies

Distinguish between developing

countries and industrial market

countries.

Explain why labor productivity is so low

in developing countries.

Objectives


LESSON 19.1

Developing Economies and

Industrial Market Economies

developing countries

industrial market countries

fertility rate

Key Terms


Worlds Apart

Developing Countries

Low GDP per capita

High rates of illiteracy

High unemployment

High fertility rates

Industrial Market Countries

High GDP per capita

Low rates of illiteracy

Low unemployment

Low fertility rates


GDP Per Capita for

Selected Countries in 2001


Life Expectancy

World average is 67 years

Infant mortality

Malnutrition

Diseases


High Birth Rates

The fertility rate is the average number

of births during a woman’s lifetime.

Fertility rates are lower in industrial

countries and higher in developing

countries.


Fertility Rates for

Selected Countries in 2001


Productivity and


Low labor productivity

Less education

Inefficient use of labor

Few entrepreneurs

Reliance on agriculture

Vicious cycle of low income and low

productivity


LESSON 19.2

Foreign Trade, Foreign Aid,

and Economic Development

Identify two foreign-trade strategies and

assess their impact on economic

development.

Assess the impact of foreign aid on

economic development.

Objectives


LESSON 19.2

Foreign Trade, Foreign Aid,

and Economic Development

import

substitution

export promotion

brain drain

foreign aid

Key Terms

bilateral aid

multilateral aid

U.S. Agency for

International

Development

(USAID)


Foreign Trade and Migration

Import substitution

Export promotion

International migration


Import Substitution

Import substitution is a development strategy

that emphasizes domestic manufacturing of

products that are currently imported.

Reasons for popularity of import substitution

Demand already existed

Addressed the shortage of foreign exchange

Popular with those who supplied labor, capital, and

other resources


Export Promotion

Export promotion is a development

strategy that focuses on producing for the

export market.

Export promotion emphasizes

comparative advantage and trade

expansion.


International Migration

Job opportunities

Foreign exchange

Brain drain


Foreign Aid

What is foreign aid?

Does foreign aid promote economic

development?


What Is Foreign Aid?

Foreign aid is any international transfer

made on especially favorable terms to

promote economic development.

Bilateral aid

Multilateral aid


U.S. Agency for International

Development (USAID)

Part of U.S. State Department

Mission

To further American foreign policy interests

in expanding democracy and free markets

To improve living standards in the

developing world


Does Foreign Aid Promote

Economic Development?

Purchasing power

Corruption

Privatization

© SOUTH-WESTERNCONTEMPORARY ECONOMICS: LESSON 19.3 21

LESSON 19.3

Rules of the Game, Transition


Assess the impact of a nation’s physical

infrastructure and rules of the game on its

economic development.

Discuss why many centrally planned economies

are trying, with difficulty, to introduce market

forces.

Explain convergence theory, and discuss why the

reality has not yet matched the theory’s prediction.

Objectives


LESSON 19.3

Rules of the Game, Transition


physical infrastructure

soft budget constraint

privatization

convergence theory

Key Terms


Infrastructure

Physical infrastructure includes

transportation, communication, energy, water,

and sanitation systems provided by or

regulated by government.

Many developing countries have serious

deficiencies in their physical infrastructures.

Without vital infrastructures, efficient

production will not take place.


Rules of the Game

Formal and informal institutions that promote

production incentives and economic activity.

Formal institutions include a country’s codified

rules and laws, along with the system for

establishing and enforcing them.

Informal institutions include customs and

informal mechanisms that help coordinate

production.


Fixed and Mobile Telephone Lines Per

1,000 Population by Country in 2001


Economies in Transition

Prices and profit in centrally planned

economies

Privatization


Are the World’s

Economies Converging?

Reasons for convergence

Not much convergence

Higher birth rates and less human capital

Reasons for optimism