Atanu Dey MTWTh 2:00 PM – 3:30 PM 3 Le Cont

 Discussions of the assignment  Questions Meeting 2 / N171 / Atanu Dey2

 “Economic history is overwhelmingly a story of economies that failed to produce a set of economic rules of the game (with enforcement) that induce sustained economic growth.” -- Douglass North, Nobel Laureate  Policies matter  Politics matter Meeting 2 / N171 / Atanu Dey3

 Gunnar Myrdal Swedish Nobel Laureate economist said 50 years ago that Asia will be mired in poverty ◦ Asia was already taking off. ◦ 50 years of successes in East Asia  China is the A-class students of American economics ◦ In just 15 years, more than 450 million Chinese got out of poverty between 1990 and 2005  Africa population with less than $1.25 per day went from <300 to 388 million in 2005  MDG of poverty reduction will not be achieved Meeting 2 / N171 / Atanu Dey4

 What accounts for the successful? ◦ Botswana is very successful cases. Why?  Data exists in huge piles. But making right inferences is hard.  Growth is necessary but not sufficient for long term poverty reduction  US median income 2009 is lower than it was in ◦ GDP has increased, GDP per capita has increased ◦ People in the middle and bottom are not doing well Meeting 2 / N171 / Atanu Dey5

 They are distinct  Growth is necessary but not sufficient for poverty reduction  How to get growth  How are the benefits of growth to be shared  50 years ago it was shortage of capital for poor countries – The World Bank  The WB failed to make the promised difference  The focus was to change to policies Meeting 2 / N171 / Atanu Dey6

 Output per US worker 10 times that of a worker in India, and 50 times that of a worker in Congo  Real income per capita ◦ US: $48k, India: $3K, Congo: $280  World Bank defines ◦ Low-income countries < $975 (2008 $) ◦ Lower-middle > $976 < $3855 ◦ Upper-middle > $3856 < $11,906 ◦ High-income > $11, Meeting 2 / N171 / Atanu Dey7

 What is a developing country?  Emerging markets?  Newly industrialized countries Meeting 2 / N171 / Atanu Dey8

 Real income: per capita adjusted for purchasing power (Measure of the standard of living)  Health: life expectancy at birth, child mortality and undernourishment  Education by literacy and years of schooling  Human Development Index of the UNDP ◦ See the Human Development Reports ◦ ◦ Play around here to see the trends Meeting 2 / N171 / Atanu Dey9

 Lower levels of productivity and living  Lower levels of human capital (health, education, skills)  Higher levels of inequality and absolute poverty ◦ 20% of the poorest people globally receive on 1.5% of the world income (1.4 billion people) ◦ Living on less than $1.25 income per day ◦ What would it require to bring everyone above this poverty line? Meeting 2 / N171 / Atanu Dey10

 About 2% of the income of the richest 10%  Scale of global inequality is unfathomable  Even within countries, there are extremes of wealth Meeting 2 / N171 / Atanu Dey11

 Higher population growth rates ◦ 1800 CE: < 1 billion ◦ 1900 CE: 1.65 billion ◦ 2000 CE: 6 billion ◦ Late 2011: 7 billion  Large rural populations and rapid rural-urban migration  Lower levels of industrialization and manufactured exports  Adverse geography ◦ Tropical or semi-tropical Meeting 2 / N171 / Atanu Dey12

 Underdeveloped markets  Lingering colonial impacts ◦ Extractive and exploitative policies ◦ Not development oriented Meeting 2 / N171 / Atanu Dey13

 Physical and Human Resource Endowments  Relative Levels of Per Capita Income and GDP  Climatic differences  Population size, distribution and growth  The role of International Migration ◦ 60 million migrated to the Americas between 1850 and 1914 (world population was a fourth of today’s)  Brain drain?  Free trade Meeting 2 / N171 / Atanu Dey14

 Next time Meeting 2 / N171 / Atanu Dey15