Lesson 4: Population Growth
Doubling time – Period that a given population or other quantity takes to increase by its
present size
Rate of Population Increase – The growth rate Of a population, calculated as the natural
increase after Adjusting for immigration and Emigration.
Natural increase - The difference between the birth rate And the death rate of a given
Population.
Net international migration - The excess of persons migrating into a country over those Who
emigrate from that Country.
Crude birth rate - The number of children born alive each Year per 1,000 population (often
shortened to birth rate).
Death rate - The number of Deaths each year per 1,000 Population.
Total fertility rate (TFR) - The number of children that would be born to a Woman if she were
to live to The end of her childbearing Years and bear children in Accordance with the prevailing
age-specific fertility rates.
Life expectancy at birth - The Number of years a newborn Child would live if subjected To the
mortality risks prevailing for the population at the Time of the child’s birth.
Under-5 mortality rate - Deaths among children Between birth and 5 years of Age per 1,000
live births.
Youth dependency ratio - The proportion of young People under age 15 to the Working
population aged 16 To 64 in a country.
Hidden momentum of Population growth - The Phenomenon whereby population continues
to increase Even after a fall in birth rates Because the large existing Youthful population
expands The population’s base of Potential parents.
Population pyramid - A Graphic depiction of the age Structure of the population, With age
cohorts plotted on The vertical axis and either Population shares or numbers Of males and
females in each Cohort on the horizontal axis.
Demographic transition – The Phasing-out process of population growth rates from a virtually
stagnant growth stage, Characterized by high birth Rates and death rates through A rapidgrowth stage with High birth rates and low death Rates to a stable, low-growth Stage in which
both birth and Death rates are low.
Replacement Fertility – The number of births per woman that would result in stable population
levels.
Malthusian population trap - The threshold population Level anticipated by Thomas Malthus
(1766-1834) at which Population increase was Bound to stop because life- Sustaining resources,
which Increase at an arithmetic Rate, would be insufficient to Support human population,
Which would increase at a Geometric rate.
Microeconomic theory of fertility – The theory that family formation has costs and benefits
that determine the size of families formed.
Family Planning Programs – Public Programs designed to help parents plan and regulate their
family size.
Reproductive choice - The Concept that women should Be able to determine on an Equal
status with their Husbands and for themselves How many children they Want and what
methods to Use to achieve their desired Family size.
Lesson 5: Types of Unemployment
Unemployment is a situation in which an individual who is actively looking for employment is
unable to secure one. The unemployment rate represents the number of these unemployed
individuals in the workforce. Nonetheless, the prevalence of joblessness is one of the indicators
of economic performance.
CAUSES BASED ON THE CATEGORIES AND TYPES OF UNEMPLOYMENT
The two broad categories of unemployment are voluntary unemployment and involuntary
unemployment. Unemployment is voluntary when an individual willingly left his or her job in
search of a new one. There are specific and more personal causes of voluntary unemployment
including a desire to look for a higher salary, professional development, migration or relocation,
and conflicts with the employer or colleagues, among others.
On the other hand, unemployment is involuntary when an individual has been laid off and has
no other choice but to look for another job or when he or she is willing to work at the prevailing
wage but remains jobless. A high rate of involuntary unemployment within an economy
indicates a surplus of labor.
There are more specific types of unemployment apart from the aforementioned categories.
These are structural unemployment, frictional unemployment, and cyclical unemployment.
They provide a partial explanation of the causes of unemployment. Take note of the following:
• Structural Unemployment: Structural unemployment arises from the inability of the labor
market to provide jobs for every member of the workforce because of a mismatch between the
skills of the unemployed individuals and the skills requirements of specific jobs, or because of
technological advances in which people are replaced by machines or their skills become
outdated because of inability to keep up with latest trends.
• Frictional Unemployment: Frictional unemployment occurs when an individual is in between
jobs. It corresponds to the time when this individual has to find another job after leaving his or
her employer or when he or she is transitioning from one job to another. Note that this type of
unemployment has some overlaps with structural unemployment. However, its defining
characteristic is that it is usually short-lived.
• Cyclical Unemployment: Cyclical unemployment represents the offshoots of the business
cycle and the boom-and-bust cycle of the economy. Keynesian economics explains that the
frequent shifts in the business cycle and severe economic downturns, such as in the case of the
Great Depression, lead to a shortage in aggregate demand that is not enough to provide
employment for everyone who wants to work.
Lesson 6: Urbanization and Urban Migration
Urban bias - The notion that Most governments in developing countries favor the urban Sector
in their development Policies, thereby creating a Widening gap between the Urban and rural
economies.
Rural-urban Migration – The movement of people from rural villages, towns, and farms to
urban centers (cities) in search of jobs.
Agglomeration economies - Cost advantages to producers And consumers from location In
cities and towns, which Take the forms of urbanization Economies and localization Economies.
Urbanization economies - Agglomeration effects associated with the general growth Of a
concentrated geographic Region.
Localization economies - Agglomeration effects captured by particular sectors of The
economy, such as finance Or autos, as they grow within An area.
Social capital - The productive Value of a set of social institutions and norms, including Group
trust, expected cooperative behaviors with predictable Punishments for deviations, And a
shared history of successful collective action, that raises Expectations for participation In future
cooperative behavior.
Congestion – An action taken by one agent that decreases the incentives or other agents to
take similar actions. Compare to the opposite effect of a complementarity
Informal sector - The part Of the urban economy of Developing countries characterized by
small competitive Individual or family firms, Petty retail trade and services, Labor-intensive
methods, free Entry, and market-determined Factor and product prices.
Todaro migration model - A theory that explains Rural-urban migration as An economically
rational Process despite high urban. Unemployment. Migrants Calculate (present value of)
Urban expected income (or its Equivalent) and move if this Exceeds average rural income.
Harris-Todaro model - An equilibrium version of The Todaro migration model That predicts
that expected Incomes will be equated Across rural and urban sectors when taking into account
Informal-sector activities and Outright unemployment.
Present Value – The discounted value at the present time of a sum of money to be received in
the future.
Labor turnover - Worker Separations from employers, A concept used in theory that The
urban-rural wage gap is Partly explained by the fact That urban modern-sector Employers pay
higher wages To reduce labor turnover rates And retain trained and skilled Workers.
Efficiency wage - The notion That modern-sector urban Employers pay a higher wage Than the
equilibrium wage Rate in order to attract and Retain a higher-quality work- Force or to obtain
higher productivity on the job.
Induced Migration – Process in which the creation of urban jobs raises expected incomes and
induces more people to migrate from rural areas.
Wage subsidy- A government financial incentive to private employers to hire more workers, as
through tax deductions for new job creation.
5 Policies
1.)
2.)
3.)
4.)
5.)
Urban bias needs to more rural – urban migration
Imbalances in Income Opportunities
Indiscriminate Educational Expansion, Fosters increase Migration and Unemployment
Wage subsidies can be counter productive
PART VII: ENVIRONMENTAL ISSUES CONCERNING
AGRICULTURAL TRANSFORMATION AND ITS RELATION TO ECONOMIC DEVELOPMENT
• AGRICULTURE HAS BEEN THE WAY OF LIFE OF MOST OF THE CITIZENS OF THE DEVELOPING
NATIONS.
• THIS LIVELIHOOD HAS BEEN PASSED ON FROM ONE GENERATION TO ANOTHER, AND HAS
TIED THE FAMILIES SO CLOSE THAT IF POSSIBLE, CAN JUST CONTINUE TO BE PASSED ON.
• HOWEVER, MODERNIZATION AND INDUSTRIALIZATION STOPPED THIS DREAM OF HAVING A
SIMPLE AND HAPPY LIFE.
• AGRICULTURE IS MOSTLY CENTERED IN THE RURAL AREAS.
• MUCH CAN BE DISCUSSED ABOUT THE SOURCES OF INCOME IN THE COUNTRYSIDE.
• FARMING IS THE BEST FOUNDATION OF INDUSTRIALIZATION.
• THE RESOURCES AND THE PRODUCE ARE SIGNIFICANTLY NEEDED BY THE INDUSTRIAL
SECTOR.
PURPOSE OF AGRICULTURE
• TO PROVIDE SUFFICIENT LOW-PRICED FOOD AND MANPOWER TO THE EXPANDING
INDUSTRIAL ECONOMY
• THE LEADING SECTOR IN THE ECONOMIC DEVELOPMENT OF DEVELOPING COUNTRIES
• THE TWO-SECTOR MODEL OF LEWIS “IS AN EXAMPLE OF A THEORY OF DEVELOPMENT THAT
PLACES HEAVY EMPHASIS ON RAPID INDUSTRIAL GROWTH, WITH AN AGRICULTURAL SECTOR
FUELING THIS INDUSTRIAL EXPANSION BY MEANS OF ITS CHEAP FOOD AND SURPLUS LABOR.”
• AGRICULTURE HAS THE ABILITY TO KEEP PACE WITH THE POPULATION.
• IT MIGHT HAVE EVEN FALSIFIED THE MALTHUSIAN TRAP THAT EXPLAINS POPULATION
INCREASES FASTER THAN FOOD SUPPLY.
• COUNTRIES HAVE IMPLEMENTED PROGRAMS TO SOLVE THE PROBLEM OF HUNGER.
• THEY EVEN IMPLEMENT PROGRAMS TO PROTECT THE ENVIRONMENT AND NATURAL
RESOURCES.
• ONE OF THIS IS THE GREEN REVOLUTION, WHICH IS THE BOOST IN GRAIN PRODUCTION
ASSOCIATED WITH THE SCIENTIFIC DISCOVERY OF NEW HYBRID SEED VARIETIES OF WHEAT,
RICE, AND CORN THAT HAVE RESULTED IN HIGH FARM YIELDS IN MANY DEVELOPING
COUNTRIES.
THREE AGRARIAN SYSTEMS: (TODARO AND SMITH,2013)
• AGRICULTURE-BASED COUNTRIES, AGRICULTURE IS STILL A MAJOR SOURCE OF ECONOMIC
GROWTH-ALTHOUGH MAINLY BECAUSE AGRICULTURE MAKES UP SUCH A LARGE SHARE OF
GDP
• MOST OF THE WORLD’S RURAL PEOPLE LIVE IN WHAT THE REPORT CATEGORIZES AS
TRANSFORMING COUNTRIES
• URBANIZED COUNTRIES, RURAL-URBAN MIGRATION HAS REACHED THE POINT AT WHICH
NEARLY HALF, OR MORE, OF THE POOR ARE FOUND IN THE CITIES, AND AGRICULTURE TENDS
TO CONTRIBUTE EVEN LESS TO OUTPUT GROWTH.
REQUIREMENTS FOR AGRICULTURAL AND RURAL DEVELOPMENT
• IMPROVING SMALL SCALE AGRICULTURE
• PROVIDE NECESSARY INCENTIVES
• LAND REFORM
• SUPPORTIVE GOVERNMENT POLICIES
PART VIII: GLOBALIZATION, FREE TRADE AND OTHER GLOBAL ISSUES PERVADING
DEVELOPING ECONOMIES.
“GLOBALIZATION IS THE WORD USED TO DESCRIBE THE GROWING INTERDEPENDENCE OF THE
WORLD’S ECONOMIES, CULTURES, AND POPULATIONS, BROUGHT ABOUT BY CROSS-BORDER
TRADE IN GOODS AND SERVICES, TECHNOLOGY, AND FLOWS OF INVESTMENT, PEOPLE, AND
INFORMATION.
THREE PERIODS OF GLOBALIZATION
1870-1914
1945-1980
1980 TO THE PRESENT
( 1870-1914 )
• THIS PERIOD RESULTED FROM THE INDUSTRIAL REVOLUTION IN EUROPE AND THE OPENING
UP OF NEW, RESOURCE-RICH, BUT SPARSELY POPULATED LANDS IN NORTH AMERICA (THE
UNITED STATES AND CANADA), SOUTH AMERICA (ARGENTINA, CHILE, AND URUGUAY),
AUSTRALIA AND NEW ZEALAND, AND SOUTH AFRICA.
• THESE LANDS RECEIVED MILLIONS OF IMMIGRANTS AND VAST AMOUNTS OF FOREIGN
INVESTMENTS, PRINCIPALLY FROM ENGLAND, TO OPEN UP NEW LANDS TO FOOD AND RAW
MATERIAL PRODUCTION.
• THESE SO-CALLED REGIONS OF RECENT SETTLEMENT GREW RAPIDLY DURING THIS PERIOD BY
EXPORTING INCREASING AMOUNTS OF FOOD AND RAW MATERIALS TO EUROPE IN EXCHANGE
FOR MANUFACTURED GOODS.
• THIS PERIOD OF MODERN GLOBALIZATION CAME TO AN END WITH THE BREAKOUT OF
WORLD WAR I IN 1914.
( 1945-1980 )
• IT WAS CHARACTERIZED BY THE RAPID INCREASE OF INTERNATIONAL TRADE AS A RESULT OF
THE DISMANTLING OF THE HEAVY TRADE PROTECTION THAT HAD BEEN PUT IN PLACE DURING
THE GREAT
• DEPRESSION THAT STARTED IN THE UNITED STATES IN 1929 AND DURING WORLD WAR II.
• STAGNATION INFLATION STAGFLATION
( 1980 TO THE PRESENT )
• THE PRESENT GLOBALIZATION REVOLUTION (SINCE 1980) IS:
• ITS SPEED
• DEPTH
• IMMEDIACY RESULTING FROM THE TREMENDOUS IMPROVEMENTS IN
TELECOMMUNICATIONS AND TRANSPORTATION
• MASSIVE INTERNATIONAL CAPITAL FLOWS RESULTING FROM ELIMINATION OF MOST
RESTRICTIONS ON THEIR FLOW ACROSS NATIONAL BOUNDARIES, AS WELL AS BY THE
PARTICIPATION OF MOST COUNTRIES OF THE WORLD.
GRAVITY MODEL
• IT POSTULATES THAT (OTHER THINGS EQUAL), THE BILATERAL TRADE BETWEEN TWO
COUNTRIES IS PROPORTIONAL, OR AT LEAST POSITIVELY RELATED, TO THE PRODUCT OF THE
TWO COUNTRIES’ GDP’S AND TO BE SMALLER THE GREATER THE DISTANCE BETWEEN THE TWO
COUNTRIES [JUST LIKE IN NEWTON’S LAW OF GRAVITY IN PHYSICS).
• THAT IS, THE LARGER (AND THE MORE EQUAL IN SIZE] AND THE CLOSER THE TWO COUNTRIES
ARE, THE LARGER THE VOLUME OF TRADE BETWEEN THEM IS EXPECTED TO BE.
CAPITAL FLOW
• FREELY FLOWING ACROSS NATIONAL BOUNDARIES THAN PEOPLE
• FINANCIAL OR PORTFOLIO CAPITAL (BANK LOANS AND BONDS) GENERALLY MOVE TO
NATIONS AND MARKETS WHERE INTEREST RATES ARE HIGHER, AND FOREIGN DIRECT
INVESTMENTS IN PLANTS AND FIRMS FLOWS TO NATIONS WHERE EXPECTED PROFITS ARE
HIGHER.
• THIS LEADS TO THE MORE EFFICIENT USE OF CAPITAL AND GENERALLY BENEFITS BOTH
LENDERS AND BORROWERS.
PURPOSE OF IE
• TO PREDICT AND EXPLAIN
• EXAMINES THE BASIS FOR AND THE GAINS FROM TRADE,
• EXAMINES THE EFFECTIVENESS OF MACROECONOMIC POLICIES UNDER DIFFERENT TYPES OF
INTERNATIONAL MONETARY ARRANGEMENTS OR MONETARY SYSTEMS
ASSUMPTIONS OF IE
• A TWO-NATION, TWO-COMMODITY, AND TWO-FACTOR WORLD
• NO TRADE RESTRICTIONS TO BEGIN WITH
• PERFECT MOBILITY OF FACTORS WITHIN THE NATIONS BUT NO INTERNATIONAL MOBILITY
• PERFECT COMPETITION IN ALL COMMODITY AND FACTOR MARKETS
• NO TRANSPORTATION COSTS.
CHALLENGES OF IE
• SLOW GROWTH AND HIGH UNEMPLOYMENT IN ADVANCED ECONOMIES AFTER “THE GREAT
RECESSION™
• TRADE PROTECTIONISM IN ADVANCED COUNTRIES IN A RAPIDLY GLOBALIZING WORLD
• EXCESSIVE FLUCTUATIONS AND MISALIGNMENT IN EXCHANGE RATES AND FINANCIAL CRISES
• STRUCTURAL IMBALANCES IN ADVANCED ECONOMIES AND INSUFFICIENT RESTRUCTURING IN
TRANSITION ECONOMIES
• DEEP POVERTY IN MANY DEVELOPING COUNTRIES
• RESOURCE SCARCITY, ENVIRONMENTAL DEGRADATION, CLIMATE CHANGE, AND
UNSUSTAINABLE DEVELOPMENT
THEORY OF ABSOLUTE ADVANTAGE
• ACCORDING TO SMITH, IF TWO COUNTRIES TRADE VOLUNTARILY, EACH OF THEM SHOULD
GAIN FROM THE TRADE. BECAUSE IF ONE DOES NOT GAIN, THE OTHER ONE WILL NOT ENGAGE
IN TRADE ANYMORE.
• THE THEORY OF ABSOLUTE ADVANTAGE STATES THAT COUNTRIES CAN GAIN FROM TRADE IF
THEY DO SPECIALIZATION OF PRODUCTS PRODUCED, AND EXPORT THEM TO OTHER
COUNTRIES.
THEORY OF COMPARATIVE ADVANTAGE
• RICARDO PRESENTED HIS LAW OF COMPARATIVE ADVANTAGE IN HIS BOOK “PRINCIPLES OF
POLITICAL ECONOMY AND TAXATION” IN 1817.
“ACCORDING TO THE LAW OF COMPARATIVE ADVANTAGE, EVEN IF ONE NATION IS LESS
EFFICIENT THAN (HAS AN ABSOLUTE DISADVANTAGE WITH RESPECT TO) THE OTHER NATION IN
THE PRODUCTION OF BOTH COMMODITIES, THERE IS STILL A BASIS FOR MUTUALLY BENEFICIAL
TRADE.
• ARNOLD (2015) DESCRIBES IT AS “THE SITUATION WHERE SOMEONE CAN PRODUCE A GOOD
AT LOWER OPPORTUNITY COST THAN SOMEONE ELSE CAN.”
TRADE THEORY
“INTERNATIONAL TRADE THEORY IS A SUB-FIELD OF ECONOMICS WHICH ANALYZES THE
PATTERNS OF INTERNATIONAL TRADE, ITS ORIGINS, AND ITS WELFARE IMPLICATIONS.
• INTERNATIONAL TRADE POLICY HAS BEEN HIGHLY CONTROVERSIAL SINCE THE 18TH CENTURY.
INTERNATIONAL TRADE THEORY AND ECONOMICS ITSELF HAVE DEVELOPED AS MEANS TO
EVALUATE THE EFFECTS OF TRADE POLICIES.
• CURRENT ACCOUNTS MEASURE INTERNATIONAL TRADE, NET INCOME ON INVESTMENTS,
AND DIRECT PAYMENTS.
• THE FINANCIAL ACCOUNT DESCRIBES THE CHANGE IN INTERNATIONAL OWNERSHIP OF
ASSETS.
• THE CAPITAL ACCOUNT INCLUDES ANY OTHER FINANCIAL TRANSACTIONS THAT DON’T
AFFECT THE NATION’S ECONOMIC OUTPUT.
• A COUNTRY’S BALANCE OF PAYMENTS TELLS YOU WHETHER IT SAVES ENOUGH TO PAY FOR
ITS IMPORTS.
• IT ALSO REVEALS WHETHER THE COUNTRY PRODUCES ENOUGH ECONOMIC OUTPUT TO PAY
FOR ITS GROWTH.
• A BALANCE OF PAYMENTS DEFICIT MEANS THE COUNTRY IMPORTS MORE GOODS, SERVICES,
AND CAPITAL THAN THEY EXPORT.
DEFINITION OF TERMS
1. DEBTORS’ CARTEL
• A GROUP OF DEVELOPING-COUNTRY DEBTORS WHO JOIN TOGETHER TO BARGAIN AS GROUP
WITH CREDITORS.
2. RESTRUCTURING
• ALTERING THE TERMS AND CONDITIONS OF DEBT REPAYMENT, USUALLY BY LOWERING
INTEREST RATES OR EXTENDING THE REPAYMENT PERIOD.
3. BRADY PLAN
• A PROGRAM LAUNCHED IN 1989, DESIGNED TO REDUCE THE SIZE OF OUTSTANDING
DEVELOPING-COUNTRY COMMERCIAL DEBT THROUGH PRIVATE DEBT FORGIVENESS
PROCURED IN EXCHANGE FOR IMF AND WORLD BANK DEBT GUARANTEES AND GREATER
ADHERENCE TO THE TERMS OF CONDITIONALITY
4. DEBT-FOR-EQUITY SWAP
A MECHANISM USED BY INDEBTED DEVELOPING COUNTRIES TO REDUCE THE REAL VALUE OF
EXTERNAL DEBT BY EXCHANGING EQUITY IN DOMESTIC COMPANIES (STOCKS) OR FIXEDINTEREST OBLIGATIONS OF THE GOVERNMENT (BONDS) FOR PRIVATE FOREIGN DEBT AT LARGE
DISCOUNTS.
5. DEBT-FOR-NATURE SWAP
• THE EXCHANGE OF FOREIGN DEBT HELD BY AN ORGANIZATION FOR A LARGER QUANTITY OF
DOMESTIC DEBT THAT IS USED TO FINANCE THE PRESERVATION OF A NATURAL RESOURCE OR
ENVIRONMENT IN THE DEBTOR COUNTRY.
6. DEBT REPUDIATION
• THE 1980S FEAR IN THE DEVELOPED WORLD THAT DEVELOPING COUNTRIES WOULD STOP
PAYING THEIR DEBT OBLIGATIONS.
REPUDIATION OF A DEBT
-
IMPLIES THAT THE DEBT IS JUST, AND THAT ITS PAYMENT IS DENIED, NOT BECAUSE OF
SUFFICIENT LEGAL DEFENSE, BUT TO TAKE ADVANTAGE OF THE RULE THAT A
SOVEREIGN STATE CANNOT BE SUED BY INDIVIDUALS.
• THE REFUSAL OF PUBLIC AUTHORITIES TO ACKNOWLEDGE OR PAY A DEBT.
• OTHER TERMS: DECLINE, REFUSE, REJECT