Comparative Economic Development

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Chapter 2:

COMPARATIVE ECONOMIC
DEVELOPMENT
Mallilliin, Niño Raphael A.

Oling, Hadley

Ramirez, Kristhell Jean D.

Ramos, Grace Angela A.

Ramos, Mary Joyce D.


DEFINING THE DEVELOPING
WORLD
The most common way to define the developing world is by per
capita income. Several international agencies, including the
Organization for Economic Cooperation and Development (OECD)
and the United Nations, offer classifications of countries by their
economic status, but the best-known system is that of the World
Bank.
DEFINING THE DEVELOPING
WORLD
In the World Bank’s classification system, 213 economies with a
population of at least 30,000 are ranked by their levels of gross
national income (GNI) per capita.
These economies are then classified as:
low-income countries (LICs),
lower-middle-income countries (LMCs),
uppermiddle-income countries (UMCs),
high-income OECD countries
DEFINING THE DEVELOPING
WORLD
DEFINING THE DEVELOPING
WORLD
DEFINING THE DEVELOPING
WORLD
DEFINING THE DEVELOPING
WORLD
The most common cutoff points for these categories are those used by the
World Bank:
Low-income countries are defined as having a per capita gross
national income in 2011 of $1,025 or less;
lower-middle-income countries have incomes between $1,026 and
$4,035;
upper-middle-income countries have incomes between $4,036 and
$12,475;
and high-income countries have incomes of $12,476 or more.
Basic Indicators of Development:
Real Income, Health, and Education
Purchasing Power Parity

Purchasing power parity (PPP) is the calculation of GNI


using a common set of international prices for all goods
and services, to provide more accurate comparisons of
living standards.
Purchasing Power Parity
The gross national income (GNI) per capita, the most common
measure of the overall level of economic activity, is often used as
a summary index of the relative economic well-being of people in
different nations.
Gross national income (GNI) is the total domestic and foreign
output claimed by residents of a country, consisting of gross
domestic product (GDP) plus factor incomes earned by foreign
residents, minus income earned in the domestic economy by
nonresidents.
Purchasing Power Parity

Gross domestic product (GDP) measures the total value for final
use of output produced by an economy, by both residents and
nonresidents. Thus, GNI comprises GDP plus the difference
between the income residents receive from abroad for factor
services (labor and capital) less payments made to nonresidents
who contribute to the domestic economy.
Purchasing Power Parity
Purchasing Power Parity

In an attempt to rectify this problem, researchers have


tried to compare relative GNIs and GDPs by using
purchasing power parity (PPP) instead of exchange rates
as conversion factors.
Basic Indicators of Development:
Real Income, Health, and Education
Indicators of Health and Education

Besides average incomes, it is necessary to evaluate a nation’s


average health and educational attainments, which reflect core
capabilities.
Table 2.3 shows some basic indicators of income, health and
education
Indicators of Health and Education
Indicators of Health and Education
Indicators of Health and Education

Life expectancy is the average number of years newborn children


would live if subjected to the mortality risks prevailing for their
cohort at the time of their birth.
Undernourishment means consuming too little food to maintain
normal levels of activity; it is what is often called the problem of
hunger.
HOLISTICs MEASURES OF LIVING LEVELS
AND CAPABILITIES
The New Human Development Index

Human Development Index (HDI) is an index measuring


national socioeconomic development, based on
combining measures of education, health, and adjusted
real income per capita.
The New Human Development Index

The New HDI ranks each country on a scale of 0 (lowest human development) to
1 (highest human development) based on three goals or end products of
development:
a long and healthy life as measured by life expectancy at birth;
knowledge as measured by a combination of average schooling attained
by adults and
expected years of schooling for school-age children;
The New Human Development Index

Where H stands for the health index, E stands for the education
index, and I stands for the income index. This is equivalent to
taking the cube root of the product of these three indexes.
The New Human Development Index
The New Human Development Index

Using these three measures of development and applying the


formula to data for all 187 countries for which data is available, the
HDI currently ranks countries into four groups:
low human development (0.0 to 0.535),
medium human development (0.536 to 0.711),
high human development (0.712 to 0.799), and
very high human development (0.80 to 1.0).
Characteristics of the developing world: diversity within
commonality
Lower Levels of Living and Productivity

One common misperception is that low incomes result


from a country’s being too small to be self-sufficient or
too large to overcome economic inertia. However, there
is no necessary correlation between country size in
population or area and economic development.
Lower Levels of Living and Productivity
Characteristics of the developing world: diversity within
commonality
LOWER LEVELS OF HUMAN CAPITAL

Human Capital : health, education, and skills which are vital to economic
growth and human development.

Human capital is important


because it is perceived to have a
relationship with economic
growth and productivity.
LOWER LEVELS OF HUMAN CAPITAL

Compared with developed countries,


much of the developing world has lagged
in its average level of nutrition, health ( as
measured by life expectancy and
undernourishment), and education
(measured by literacy).
Under-5 Mortality : probability of dying
between birth and at the age of 5,
expressed per 1,000 live births.
LOWER LEVELS OF HUMAN CAPITAL

Enrollments have strongly improved in recent years, but student attendance


and completion, along with attainment of basic skills such as functional
literacy, remain problems.
LOWER LEVELS OF HUMAN CAPITAL

Moreover, there are strong synergies (complementarities) between


progress in health and education.
Characteristics of the developing world: diversity within
commonality
Higher Level of Inequality and absolute poverty

Inequality :extremes in the relative incomes of higher- and lower-income


citizens.

“In this countries recently reclassified


as middle income, the majority of the
population remains poor even as the
country might be getting richer
because wealth remains
concentrated in the hands of the rich. “
Higher Level of Inequality and absolute poverty

Absolute poverty: The situation of being unable or only barely able to meet the
subsistence essentials of food, clothing, shelter, and basic health care.

Globally, the poorest 20% of people receive just 1.5% of


world income. The lowest 20% now roughly corresponds to
the approximately 1.2 billion people living in extreme
poverty on less than $1.25 per day at purchasing power
parity.
Large majority of the extreme poor live in the low-income
developing countries of sub-Saharan Africa and South
Asia.
Characteristics of the developing world: diversity within
commonality
Higher POPULATION GROWTH RATES
Crude birth rate : The number of children born alive each year per 1,000
population.

Global population has skyrocketed since the beginning


of the industrial era, from just under 1 billion in 1800 to 1.65
billion in 1900 and to over 6 billion by 2000. World
population topped 7 billion by 2012.
the low-income developing countries have very high
birth rates compared to developed countries.
97% of net population growth (births minus deaths) in
2012 took place in developing regions.
Higher POPULATION GROWTH RATES
Dependency burden: The proportion of the total population aged 0 to 15 and
65+, which is considered economically unproductive and therefore not counted
in the labor force.
Low income countries have greater no. of children
under 15 for each 100 working age adults.
We may conclude, therefore, that not only are
developing countries characterized by higher rates of
population growth, but they must also contend with greater
dependency burdens than rich nations which is deterrent to
economic growth.
Characteristics of the developing world: diversity within
commonality
Greater Social Fractionalization

Fractionalization: Significant ethnic, linguistic, and other social divisions


within a country.

The greater the ethnic, linguistic, and religious diversity of a country, the
more likely it is that there will be internal strife and political instability.
Characteristics of the developing world: diversity within
commonality
Larger Rural Populations but Rapid Rural-to-Urban
Migration

In developing countries, a much higher


share of the population lives in rural
areas, and correspondingly fewer in
urban areas.
massive population shift is also under
way as hundreds of millions of people are
moving from rural to urban areas, fueling
rapid urbanization
Characteristics of the developing world: diversity within
commonality
Lower Levels of Industrialization and Manufactured
Exports

Industrialization is associated with high productivity and incomes


and has been a hallmark of modernization and national economic
power.

Most developing-country governments have made


industrialization a high national priority.
Lower Levels of Industrialization and Manufactured
Exports

Table 2.9 shows the relationship between employment and share of GDP in agriculture, industry, and
services in selected developing and developed countries in the 2004 to 2008 period.
Lower Levels of Industrialization and Manufactured
Exports

Madagascar while about 82% of both men and women worked in


agriculture, it represented only a quarter of total output. In
Indonesia, 41% of both men and women worked in agriculture, but
it represented just 14% of output.
Developing countries have a far higher share of employment in
agriculture than developed countries.
Moreover, in developed countries, agriculture represents a very
small share of both employment and output
Lower Levels of Industrialization and Manufactured
Exports

Table 2.10 reveals the structural transformation of employment that has


been occurring in developing countries
Lower Levels of Industrialization and Manufactured
Exports

There have been substantial declines over this two-decade period


in the share in employment in agriculture in most developing
countries for which comparable data is available.

For example, in Indonesia the proportion of men who work in


agriculture fell from 54% to 37%; and the proportion of women who
work in agriculture fell from 57% to 35%.
Characteristics of the developing world: diversity within
commonality
ADVERSE GEOGRAPHY
Geography must play some role in problems of agriculture, public
health, and comparative development more generally.
As can be observed on the map on the inside cover, developing
countries are primarily tropical or subtropical.
Prior to colonization, some tropical and subtropical regions had
higher incomes per capita than Europe. However, the presence of
common and often adverse geographic features in comparison to
temperate zone countries means it is beneficial to study tropical
and subtropical developing countries.
Characteristics of the developing world: diversity within
commonality
UNDERDERVELOPED MARKETS
Some aspects of market underdevelopment are that they often
lack:
1. A legal system
2. A stable and trustworthy currency
3. An infrastructure of roads and utilities
4. A well-developed and efficiently regulated system of
banking and insurance
5. Substantial market information
6. Social norms
Characteristics of the developing world: diversity within
commonality
Lingering Colonial Impacts and Unequal International
Relations

Colonial Legacy - most developing countries were once colonies


of Europe and often had various effects on development that in
many cases have persisted to the present day.

European colonization often created or reinforced differing


degrees of inequality, often correlated with ethnicity.
Lingering Colonial Impacts and Unequal International
Relations

During colonization, settled indigenous population could be


coerced into labor. This history had long-term consequences.

For example, In Latin America where inequality was extreme, the


result was less movement toward democratic institutions, less
investment in public goods, and less widespread investment in
human capital.
Lingering Colonial Impacts and Unequal International
Relations

Asian colonies introduce three powerful and tradition-shattering


ideas: private property, personal taxation, and the requirement
that taxes be paid in money rather than in kind.
Different colonial heritages and the diverse cultural traditions of
the people have combined to create different institutional and
social patterns in countries.
For Example, Philippines (Spanish and American), Vietnam
(French), Indonesia (Dutch), Korea (Japanese).
Characteristics of the developing world: diversity within
commonality
EXTERNAL DEPENDENCE
Developing nations are also dependent on the developed world for
environmental preservation, on which hopes for sustainable
development depend.

Environmental Dependence, in which it must rely on the developed


world to cease the problem and to develop solutions.
How LoW-income countries today differ from developed
countries in their earlier stages?
State of DEVELOPING COUNTRIES vs.
Early stage ofDEVELOPED COUNTRIES

8 SIGNIFICANT DIFFERENCES
1. Physical and human resource endowments
2. Per capita incomes and levels of GDP in relation to the rest of the world
3. Climate
4. Population size, distribution, and growth
5. Historical role of international migration
6. International trade benefits
7. Basic scientific and technological research and development capabilities
8. Efficacy of domestic institutions
How LoW-income countries today differ from developed
countries in their earlier stages?
Physical and Human Resource Endowments
Developing countries often have fewer natural resources
Plentiful natural resources currently and more yet to be
discovered, but heavy investments of capital are needed to exploit
them.
The ability of a country to exploit its natural resources and to
initiate and sustain long-term economic growth is dependent on
the ingenuity and the managerial and technical skills of its people
and its access to critical market and product information at
minimal cost.
Physical and Human Resource Endowments

Paul Romer
today’s developing nations “are poor because their
citizens do not have access to the ideas that are used in
industrial nations to generate economic value.”
the technology gap between rich and poor nations is
divided into two components: PHYSICAL OBJECT GAP and
IDEA GAP
Physical and Human Resource Endowments

Thomas Homer-Dixon
The idea gap is called ingenuity gap, it is the ability
to apply innovative ideas to solve practical social
and technical problems.
How LoW-income countries today differ from developed
countries in their earlier stages?
Relative Levels of Per Capita Income and GDP
The developed countries today had higher level of real per capita
income compared to the people living in low-income countries
have, on average.
Large fraction of people in the 40% or so least developed countries
are called as the “bottom billion.”
Developed nations were economically in advance of the rest of the
world. They could then take advantage of their strong financial
position to widen the income gap.
How LoW-income countries today differ from developed
countries in their earlier stages?
Climatic Differences

Almost all developing countries are situated in tropical or


subtropical climatic zones. It has been observed that the
economically most successful countries are located in the
temperate zone.
Extremes of heat and humidity in most poor countries
Diseases are often concentrated in tropical areas which pose
significant problems for economic development
How LoW-income countries today differ from developed
countries in their earlier stages?
Population Size, Distribution, and Growth
Population size, density, and growth constitute another important difference
between less developed and developed countries.
By contrast, the populations of many developing countries have been increasing
at annual rates in excess of 2.5% in recent decades
Concentration of these large and growing populations in a few areas means that
many developing countries have considerably higher person-to-land ratios than
the European countries did in their early growth years.
No country that embarked on a long-term period of successful economic growth
approached the present-day population size of India, Egypt, or Pakistan. Nor
were their rates of natural increase anything like that of present-day Kenya, the
Philippines, Bangladesh, Malawi, or Guatemala.
How LoW-income countries today differ from developed
countries in their earlier stages?
The Historical Role of International Migration

More than 60 million people migrated to the Americas


between 1850 and 1914. In countries such as Italy,
Germany, and Ireland, periods of famine combined with
limited economic opportunities in urban industry was the
reason to push unskilled rural workers toward the labor-
scarce nations of North America and Australia.
The Historical Role of International Migration

Brinley Thomas
famously described, the “three outstanding contributions of
European labor to the American economy: 1,187,000 Irish and
919,000 Germans during 1847-1855, 418,000 Scandinavians and
1,045,000 Germans during 1880-1885, and 1,754,000 Italians during
1898-1907—had the character of evacuations.”
The Historical Role of International Migration

The main thrust of international emigration up to World War I was both distant
and permanent, while the period since World War II, international emigration is
over short distances and to a large degree temporary. However, the economic
forces giving rise to this migration are basically the same: surplus rural workers.
Both permanent and nonpermanent nature’s benefit: government being relieved
of the costs of providing for people who in all probability would remain
unemployed and because a large percentage of the workers’ earnings were sent
home, the government received a valuable and not insignificant source of foreign
exchange.
Very restrictive nature of immigration laws in modern developed countries
today.
The Historical Role of International Migration

Illegal migrants
Legal migrants
Citizens want severe restrictions on the number of immigrants
BRAIN DRAIN
BRAIN GAIN
The Philippines lost 12% of its professional workers to the United
States.
How LoW-income countries today differ from developed
countries in their earlier stages?
The Growth Stimulus of International Trade

International free trade has been called the “engine of growth”


FREE TRADE - trade in which goods can be imported and exported
without any barriers in the forms of tariffs, quotas, or other
restriction.
Borrow funds in the international capital market at very low
interest rates
Situation for many developing countries was different since they
faced formidable difficulties in trying to generate rapid economic
growth on the basis of world trade.
The Growth Stimulus of International Trade

Their terms of trade, the price they receive for their exports relative to the
price they have to pay for imports, declined over several decades.
TERMS OF TRADE – the ratio of a country’s average export price to its average
import price
Commodity prices are also subject to large, potentially destabilizing price
fluctuations.
Developed countries have resorted to various forms of tariff and nontariff
barriers to trade, including “voluntary” import quotas, excessive sanitary
requirements, intellectual property claims, antidumping “investigations,” and
special licensing arrangement
How LoW-income countries today differ from developed
countries in their earlier stages?
B a s i c S c i e n t i f i c a n d Te c h n o l o g i c a l R e s e a r c h
and Development Capabilities

Research and Development (R&D)

Scientific investigation with a view toward improving the


existing quality of human life, products, profits, factors of
production, or knowledge.
R&D activities allow scientists and researchers to develop new
knowledge, techniques, and technologies.
As countries invest more in R&D, their economy will grow
faster.
China’s R&D

• China spent 1.76 trillion yuan ($254


billion) on research and development in
2017, a year-on-year increase of
12.3%, according to the National Bureau
of Statistics

• By the end of 2017, the country had 6.2


million employees in R&D. R&D spending
in 2017 accounted for 2.12 percent of
China's gross domestic product.

• Aside from government, The largest


source of China’s research and
development funding is its “business
enterprise” sector
Philippines R&D

• In the 1990s, R&D in our country was


dismal. The Philippine government,
except during the administrations of
Ferdinand Marcos and Fidel V. Ramos,
spent less than 2% of the Gross National
Product (GNP) on R&D.

• In the Global Competitiveness Report


2016-2017 published by the World
Economic Forum (WEF), the Philippines
was ranked 83rd out of 138 countries in
terms of technological readiness.
How LoW-income countries today differ from developed
countries in their earlier stages?
EFFICACY OF DOMESTIC INSTITUTIONS

Technology/innovation together with physical and


human capital accumulation are the drivers of growth
and these proximate drivers of growth are themselves
the product of deeper social, political and economic
processes that have come to be gathered under the
rubric of ‘institutions
Divergence and convergence

Divergence: A tendency for per capita income (or output) to grow faster in
higher-income countries than in lower-income countries so that the income gap
widens across countries over time.

Convergence: The tendency for per capita income (or output) to grow faster in
lower-income countries than in higher-income countries so that lower-income
countries are “catching up” over time. When countries are hypothesized to
converge not in all cases but other things being equal (particularly savings
rates, labor force growth, and production technologies), then the term
conditional convergence is used.
convergence
If the growth experience of developing and developed countries
were similar, two important reasons to expect that developing
countries are exhibiting convergence:

1. Technology Transfer
2. Factor Accumulation
convergence
Technology Transfer
Also called as “leapfrog” or “advantage of backwardness”
This should enable developing countries to skip over some of the
earlier stages of technological development, moving immediately
to high-productivity techniques of production.
Do not need to undergo step by step through the historical stages
of innovation.
convergence
Factor Accumulation

Production Function Analysis


• Developed Countries: high levels of physical and human capital
thus high levels of output per person
• Developing Countries: low levels of physical and human capital
thus low levels of output per person
convergence
Factor Accumulation

Traditional Neoclassical Analysis


• Developed Countries: marginal product of capital and the
profitability of investments would be lower where capital
intensity is higher
• Developing Countries: higher investment rates in developing
countries
How LoW-income countries today differ from developed
countries in their earlier stages?
Relative Country Convergence
Examine whether poorer countries are growing faster than richer
countries.
the relative gap in incomes would be shrinking, as the income of
richer countries would become a smaller multiple of income of
poorer countries
This can be seen on a country by-country basis
Relative Country Convergence

Figure 2.7a. There is no apparent


tendency toward convergence
across countries.
Figure 2.7b. Poor developing
countries have not been catching
up as a group.
Figure 2.7c. growth of high-
income OECD countries is
convergence
ABSOLUTE Country Convergence

Even when the average income of a developing country is


becoming a larger fraction of developed country average incomes,
the difference in incomes can still continue to widen for some
time before they finally begin to shrink country average incomes,
the difference in incomes can still continue to widen for some
time before they finally begin to shrink.
ABSOLUTE Country Convergence

Figure 2.8. in the 1990–2003


period, while income grew 24% in
high-income OECD countries, it
grew 56% in South Asia and 196%
in China. But due to their
relatively low starting income
levels, despite higher growth,
income gains were still smaller in
absolute amount than in the OECD
P o p u l a t i o n - We i g h t e d R e l a t i v e
Country Convergence

This approach frames the question so as to weight the importance


of a country’s per capita income growth rate proportionately to
the size of its population.
World-as-One-Country Convergence

An alternative approach to the study of convergence is to think of


the world as if it were one country.
most researchers and policymakers frame development as a
process that occurs on the national level, something rather
different from global inequality; and country convergence studies
remain the standard.
Sectoral Convergence

Despite evidence that economies are not converging


unconditionally, there can be cross-national convergence of
economic sectors, which in turn may signal the potential for
future convergence.
ECONOMIC INSTITUTIONS

“Humanly devised” constraints that shape interactions (or “rules


of the game”) in an economy, including formal rules embodied in
constitutions, laws, contracts, and market regulations, plus
informal rules reflected in norms of behavior and conduct, values,
customs, and generally accepted ways of doing things.
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T

PHYSICAL INCOME AND HUMAN


ARROW 1
GEOGRAPHY DEVELOPMENT

Diseases and viruses may be an impediment to economic growth


Intermediate degree of genetic diversity (heterozygosity) of
human populations is most conducive
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T

PHYSICAL Local features affecting


ARROW 2 types of colonies
GEOGRAPHY established

When potential settlers faced higher mortality rates (or perhaps other high
costs), they more often ruled at arm’s length and avoided large, long-term
settlement. Unfavorable institutions were therefore established, favoring
extraction over production incentives.
But where mortality was low, populations were not dense, and exploitation of
resources required substantial efforts by colonists, institutions broadly
encouraging investments, notably constraints on executives and protection
from expropriation, were established
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T
Local features affecting
Type of colonial
types of colonies ARROW 3
established regime

Precolonial institutions also mattered to the extent that they had


influence on the type of colonial regime established
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T

PHYSICAL Precolonial
ARROW 4
GEOGRAPHY institutions

The influence of geography on precolonial institutions is captured


by Arrow 4.
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T

Precolonial Type of colonial


ARROW 5
institutions regime

reflects how the pre-colonial institutions affected the type of


colonial regime established
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T
Precolonial labor
PHYSICAL abundances, production
ARROW 6
structure, and potential
GEOGRAPHY comparative advantage

When climate was suitable for a production structure featuring


plantation agriculture (particularly sugarcane in the early history)
slavery and other types of mass exploitation of indigenous labor
were introduced
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T
Precolonial labor
abundances, production Type of colonial
ARROW 7
structure, and potential
comparative advantage
regime

Early inequities were perpetuated with limits on the nonelite


population’s access to land, education, finance, property
protection, and voting rights, as well as labor markets.
Population growth in Europe and technical change had produced a
large supply of people with temperate-zone agricultural skills in
products
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T
Evolution and
PHYSICAL
ARROW 8 timing of European
GEOGRAPHY development

Geography undoubtedly influenced early economic history.


Leading to evolution and timing of European development. Early
development in Europe gave it advantages over most other
regions—advantages that were used to colonize much of the
world.
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T
Evolution and
Type of colonial
timing of European ARROW 9
development
regime

Types of colonial regimes implemented varied considerably,


depending on conditions prevailing at the time of colonization both
in the different parts of the world colonized and within the
colonizer’s home country.
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T
Postcolonial
Type of colonial
ARROW 10 institutional
regime
quality

Not all influences of colonialism were necessarily bad. Along with


enslavement, subjugation, exploitation, loss of cultural heritage,
and repression, colonists also brought modern scientific methods
in fields such as medicine and agriculture.
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T

Type of colonial
regime
ARROW 11 Inequality

High inequality often emerged as a result of slavery in regions


where crops could be “efficiently” produced on slave plantations.
They also emerged where a large, settled indigenous population
could be coerced into labor.
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T
Postcolonial
Inequality ARROW 12 institutional
quality

a tendency of less movement toward democratic institutions


(which could also have facilitated movement to other constructive
institutions)
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T

Inequality ARROW 13 Human capital

Where inequality was extreme, there was less investment in


human capital and other public goods.
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T

Income and human


Human capital ARROW 14
development

The possible role played by specific skills also points up the


importance of human capital investments for development
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T

Public goods
Human capital ARROW 15
quality

The depth and breadth of education in the population will help


determine the effectiveness of government as a force for
development
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T

Public goods
Inequality ARROW 16
quality

Where inequality was extreme, there was less investment in other


public goods
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T
Postcolonial
Public goods
institutional ARROW 17
quality quality

Postcolonial institutional quality has a strong impact on the


effectiveness of the private, public, and citizen (or civil society)
sectors.
Democratic governance, rule of law, and constraints on elites will
encourage more and better quality public goods
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T
Postcolonial
Well-functioning
institutional ARROW 18
quality
markets

Better property rights protections and contract enforcement for


ordinary citizens and broad access to economic opportunities will
spur private investments
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T
Postcolonial
Effective civil
institutional ARROW 19
quality society

Institutions will affect the ability of civil society to organize and act
effectively as a force independent of state and market
S C H E M AT I C R E P R E S E N TAT I O N O F L E A D I N G
T H E O R I E S O F C O M PA R AT I V E D E V E L O P M E N T

Public goods
quality

Well-functioning Income and human


ARROW 21
markets development

Effective civil
society

The activities of the three sectors will each have an influence on productivity
and incomes, and on human development more generally
Thank You

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