File Name: why some countries are rich and others are poor .zip
Imagine living on a dollar a day.
Many people mark the birth of economics as the publication of Adam Smith's The Wealth of Nations in Actually, this classic's full title is An Inquiry into the Nature and Causes of the Wealth of Nations , and Smith does indeed attempt to explain why some nations achieve wealth and others fail to do so.
Yet, in the years since the book's publication, the gap between rich countries and poor countries has grown even larger. Economists are still refining their answer to the original question: Why are some countries rich and others poor, and what can be done about it? In common language, the terms "rich" and "poor" are often used in a relative sense: A "poor" person has less income, wealth, goods, or services than a "rich" person.
When considering nations, economists often use gross domestic product GDP per capita as an indicator of average economic well-being within a country. GDP is the total market value, expressed in dollars, of all final goods and services produced in an economy in a given year. In a sense, a country's GDP is like its yearly income. So, dividing a particular country's GDP by its population is an estimate of how much income, on average, the economy produces per person per capita per year.
In other words, GDP per capita is a measure of a nation's standard of living. The Republic of Korea is the official name of South Korea. Because GDP per capita is simply GDP divided by the population, it is a measure of income as if it were divided equally among the population.
In reality, there can be large differences in the incomes of people within a country. So, even in a country with relatively low GDP, some people will be better off than others. And, there are poor people in very wealthy countries. In the most recent year comprehensive data on global poverty are available , million people, or For nations specifically, which measure wealth in terms of GDP, escaping poverty requires increasing the amount of output per person that their economy produces.
In short, economic growth enables countries to escape poverty. Economic growth is a sustained rise over time in a nation's production of goods and services. How can a country increase its production?
Well, an economy's production is a function of its inputs, or factors of production natural resources, labor resources, and capital resourc es , and the productivity of those factors specifically the productivity of labor and capital resources , which is called total factor productivity TFP. Consider a shoe factory. Total shoe production is a function of the inputs raw materials such as leather, labor supplied by workers, and capital resources, which are the tools and equipment in the factory , but it also depends on how skilled the workers are and how useful the equipment is.
Now, imagine two factories with the same number of workers. In the first factory, workers with basic skills move goods around with push carts, assemble goods with hand tools, and work at benches.
In the second factory, highly trained workers use motorized forklifts to move pallets of goods and power tools to assemble goods that move along a conveyer belt. Because the second factory has higher TFP, it will have higher output, earn greater income, and provide higher wages for its workers. Similarly, for a country, higher TFP will result in a higher rate of economic growth.
A higher rate of economic growth means more goods are produced per person, which creates higher incomes and enables more people to escape poverty at a faster rate. But, how can nations increase TFP to escape poverty? While there are many factors to consider, two stand out. First, institutions matter. For an economist, institutions are the "rules of the game" that create the incentives for people and businesses.
For example, when people are able to earn a profit from their work or business, they have an incentive not only to produce but also to continually improve their method of production. The "rules of the game" help determine the economic incentive to produce. On the flip side, if people are not monetarily rewarded for their work or business, or if the benefits of their production are likely to be taken away or lost, the incentive to produce will diminish.
For this reason, many economists suggest that institutions such as property rights, free and open markets, and the rule of law see the boxed insert provide the best incentives and opportunities for individuals to produce goods and services.
North and South Korea often serve as an example of the importance of institutions. In a sense they are a natural experiment. These two nations share a common history, culture, and ethnicity. In these nations were formally divided and governed by very different governments.
North Korea is a dictatorial communist nation where property rights and free and open markets are largely absent and the rule of law is repressed. In South Korea, institutions provide strong incentives for innovation and productivity. The results?
North Korea is among the poorest nations in the world, while South Korea is among the richest. While this seems like a simple relationship—if government provides strong property rights, free markets, and the rule of law, markets will thrive and the economy will grow—research suggests that the "institution story" alone does not provide a complete picture.
In some cases, government support is important to the development of a nation's economy. Closer inspection shows that the economic transformation in South Korea, which started in the s, was under the dictatorial rule of Park Chung-hee who redirected the nation's economic focus on export-driven industry , not under conditions of strong property rights, free markets, and the rule of law which came later. China is another example of an economy that has grown dramatically.
In a single generation it has been transformed from a backward agrarian nation into a manufacturing powerhouse.
China tried market reforms during the Qing dynasty whose modernization reforms started in and lasted until its overthrow in and the Republic Era , but they were not effective. China's economic transformation began in under Deng Xiaoping, who imposed a government-led initiative to support industrialization and the development of markets, both internally and for export of Chinese goods.
Second, international trade is an important part of the economic growth story for most countries. Think about two kids in the school cafeteria trading a granola bar for a chocolate chip cookie.
They are willing to trade because it offers them both an opportunity to benefit. Nations trade for the same reason. When poorer nations use trade to access capital goods such as advanced technology and equipment , they can increase their TFP, resulting in a higher rate of economic growth. Many nations, however, have trade barriers that restrict their access to trade.
Recent research suggests that the removal of trade barriers could close the income gap between rich and poor countries by 50 percent. Economic growth of less-developed economies is key to closing the gap between rich and poor countries. Higher productivity promotes faster economic growth, and faster growth allows a nation to escape poverty. Factors that can increase productivity and growth include institutions that provide incentives for innovation and production.
In some cases, government can play an important part in the development of a nation's economy. Finally, increasing access to international trade can provide markets for the goods produced by less-developed countries and also increase productivity by increasing the access to capital resources. Social Education. Louis Review , Third Quarter , 98 3 , pp. Louis Economic Synopses , No. The views expressed are those of the author s and do not necessarily reflect official positions of the Federal Reserve Bank of St.
Louis or the Federal Reserve System. Also known as productive resources. They are used over and over again in the production process. Also called capital goods and physical capital.
Also known as per capita real GDP gross domestic product. Stay current with brief essays, scholarly articles, data news, and other information about the economy from the Research Division of the St. Louis Fed. Information for Visitors. Working Papers St. About Careers Events Research Staff. September How Do Economies Grow? Institutions First, institutions matter. Trade Second, international trade is an important part of the economic growth story for most countries.
Notes 1 Globalist. Scott A. Financial Conditions Indexes. Treasury Offset Program to the Rescue. Subscribe to Our Newsletter Stay current with brief essays, scholarly articles, data news, and other information about the economy from the Research Division of the St. Email Address:. Louis, MO Information for Visitors follow stlouisfed.
Scott Wolla Page One Economics Newsletter , , Abstract: Economic growth of less-developed economies is key to closing the gap between rich and poor countries. Increasing access to international trade can provide markets for the goods produced by less-developed countries and also increase productivity by increasing the access to capital resources. Bibliographic data for series maintained by. Is your work missing from RePEc? Here is how to contribute. Questions or problems? Page updated
Reflecting the times in the s, the exhibition tried to show the essential equality of all cultures around the globe at the end of the fifteenth century. Europeans had taken over the major trading routes within Asia. Europeans transported vast amounts of silver from the mines of Peru across the Pacific to Manila and into China, or else across the Atlantic to the exchanges of Antwerp and London. Europeans were conquering vast tracts in north and south America, while enslaving millions of natives and Africans, as well as fighting mercilessly among themselves. Nor was European distinctiveness simply a matter of guns, ships, and commerce, important as these things were.
One difference is that this approach originated in the Third World primarily Latin America , rather than among Western academics. Third World dependency thinkers were concerned with explaining the unequal and unjust situations in which they and their nations found themselves. Third World countries were poor while "developed" countries were rich. Third World countries had bad health conditions, while other countries had good health conditions. Third World countries had little military power, while other countries had tremendous military resources.
Don't have an account? If these countries were to improve their governance and institutions sufficiently, there would be huge gains from foreign investment and advanced technologies, which are for the most part, available at relatively modest cost to poor countries. The evidence for this view is taken from studies of the borders of countries and the flows of labour migration and capital that cross them, and data on per capita income in relation to population density. Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service.
Some countries, such as Japan and South Korea, have seen miraculous economic growth, whereas countries such as Argentina and Uruguay have not experienced expected levels of growth. The factors that affect development trajectories include natural resource endowments, geography, history, institutions, politics, and power. While overall levels of poverty have declined, levels of inequality are rising in almost all countries.
Metrics details. This paper develops an alternative theoretical and empirical case that economic structures are the fundamental cause of economic performance. Economic structures determine the rate of structural learning, affect institutional performance, influence the distribution of income and establish the direction of political transitions, thereby, economic performance.
A developing country is a country with a less developed industrial base and a low Human Development Index HDI relative to other countries. There is also no clear agreement on which countries fit this category. The World Bank classifies the world's economies into four groups, based on Gross National Income per capita: high, upper-middle, lower-middle, and low income countries. Least developed countries , landlocked developing countries and small island developing states are all sub-groupings of developing countries.
В этом нет никакого смысла, - размышляла. - Если он не знал, что мы его убиваем… Ничего не понятно. Слишком поздно. Мы упустили что-то очень важное. На экране ВР у входа толпились и множились хакеры, число их за последние минуты удвоилось.
Беккер посмотрел. Человек в очках в тонкой металлической оправе стоял внизу, спиной к Беккеру, и смотрел в направлении площади. Беккер прижал лицо к прорези, чтобы лучше видеть. Иди на площадь, взмолился он мысленно. Тень Гиральды падала на площадь, как срубленная гигантская секвойя.
- На какие же параметры нацелен этот червь. На военную информацию. Тайные операции. Джабба покачал головой и бросил взгляд на Сьюзан, которая по-прежнему была где-то далеко, потом посмотрел в глаза директору. - Сэр, как вы знаете, всякий, кто хочет проникнуть в банк данных извне, должен пройти несколько уровней защиты. Фонтейн кивнул.
Сверху раздался душераздирающий крик Стратмора. ГЛАВА 86 Когда Сьюзан, едва переводя дыхание, появилась в дверях кабинета коммандера, тот сидел за своим столом, сгорбившись и низко опустив голову, и в свете монитора она увидела капельки пота у него на лбу. Сирена выла не преставая. Сьюзан подбежала к. - Коммандер. Стратмор даже не пошевелился. - Коммандер.
Никакой Цифровой крепости не существует! - сказал Стратмор. - Что.
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