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(ECOPE05) CHAPTER 04_081611

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9 views

(ECOPE05) CHAPTER 04_081611

Uploaded by

felicildarobert7
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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ECOPE05

Economic
Development
Module

Prepared by:
Dina Campos
CBA Faculty
CHAPTER 4
CHARACTERISTICS AND
INSTITUTIONS OF DEVELOPING
COUNTRIES
Learning Objectives:
Understand the institutions and their role in Developing countries

This chapter surveys the characteristics of developing countries, with particular emphasis on
low-income economies. It looks at income distribution, political framework, family system,
relative size of agriculture and industry, technology and capital levels, saving rates, dualism,
international trade dependence, export patterns, population growth, labor force growth,
literacy, and skill levels, and the nature of economic and political institutions, including
governance; democracy and dictatorship; transparency; social capital; the state bureaucracy;
tax collecting capability; a legal and judicial system; property and use rights; statistical
services and survey data; and land, capital, insurance, and foreign exchange markets. The last
section examines rent seeking and corruption and their relationships to state weakness and
failure. Subsequent chapters will expand on economic patterns of development.

Economic Development

Characteristics of Developing Countries


Developing countries, often referred to as the Global South, share a number of common
characteristics:
1. Low Levels of Economic Development:
Low per capita income
High poverty rates
High unemployment and underemployment rates
2. Dependence on Primary Commodities:
Reliance on agriculture, mining, and other primary sectors for export earnings
Vulnerability to price fluctuations in global commodity markets
3. Rapid Population Growth:
High birth rates and declining mortality rates
Strain on resources and infrastructure
4. Inequality:
Unequal distribution of wealth and income
Disparity between urban and rural areas
1. Poor Infrastructure:
Inadequate transportation, energy, and communication networks
Hindrance to economic growth and development
2. Political Instability and Corruption:
Weak governance and corruption
Lack of rule of law and property rights
3. External Debt:
High levels of debt owed to foreign creditors
Limits financial resources for development

Institutions in Developing Countries


Institutions play a crucial role in shaping economic and social outcomes in developing
countries. Key institutions include:
1. Government:
Responsible for creating and enforcing laws, providing public services, and
managing the economy.
Effective governance is essential for sustainable development.
2. Financial Institutions:
Banks, insurance companies, and other financial intermediaries
Provide financial services to businesses and individuals, facilitating economic
activity.
3. Education and Healthcare Systems:
Invest in human capital by providing quality education and healthcare services.
Improve labor productivity and reduce poverty.
4. Legal System:
Enforce contracts, protect property rights, and resolve disputes.
A strong legal system is essential for a stable business environment.
5. Civil Society Organizations:
Non-governmental organizations (NGOs) and community-based organizations
Advocate for social and environmental issues, and provide services to marginalized
communities.

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