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Ch 31 -Strategies to promote economic growth and economic development
Trade strategies used to achieve economic growth and development:
Import substitution:
Advantages:
ISI protects jobs in domestic market, protects the local culture and social habits
Protects the economy from the power and bad influence
Disadvantages:
ISI may only protect jobs in the short run. In the long run, economic growth may be lower in economy and the lack of growth may lead to a lack of job creation
ISI may lead to inefficiency in domestic industries
ISI may lead to high rates of inflation due to domestic aggregate supply constraints
Export promotion:
Outward oriented growth strategy based on openness and increased international trade
Economic integration:
Developing countries have been involved in many preferential access schemes and regional free-trade agreements
Market based policies impact economic growth and development:
Trade liberalisation: removal of trade barriers that block the free trade of goods and services between countries
Privatisation: sale of public government-owned firms to the private sector
Deregulation: governments have placed many regulations on the operations of businesses which increases cost of production and reducing output in the economy
Social enterprises and economic development:
Social enterprises: are organisations that have specific social objects as their primary goal
When externalities in the free market result in less efficiency private benefits/costs which are not equal to social benefit/costs
May be non-profit, profit is a secondary goal
These enterprises promote economic development by overcoming local and global issued
How can institutional change impact economic growth?
Improved access to the banking system
Microfinance: a financial service that is geared specifically to the poor
Example: Mobile phone banking
Increasing women’s empowerment
Empowerment is the process by which women gain power and control over their own lives and have the ability to make strategic changes/choices
Reducing corruption
Reform institutions
Build professional civil service
Promote secure property rights and land tenure rights
How can transfer payments impact economic development:
Conditional cash transfers (CCT): are transfer payments targeting low income people
Aim to reduce poverty by making welfare programs conditional upon the actions of the person receiving the money
CCT’s do not create jobs, but they permit children more access to healthcare and education
Role of minimum wage in promoting economic development:
Establishment of minimum wage can be a valuable tool to reduce poverty and inequality
Minimum wage is not livable wage. Development strategy would be to increase minimum wage
Merit goods: provide many external benefit
Development aid: is given by governments and nonprofit organisations to alleviate systemic poverty and promote the social, environmental or political development in recipient countries
Humanitarian aid: is given to save lives and alleviate suffering in response to emergencies such as natural or human made cruises
Non-governmental organisations: have a major role in promoting economic growth and economic development
Some NGOs promote economic development by aiding humanitarian and sustainable development