Terms in this set (90)
Adjustment-Deflationary approach to structural adjustment
Refers to policies that are aimed at stabilizing external accounts often by reducing domestic economic activity rather than through growth
Development implications of agricultural and natural resource exports are sensitive to the production characteristics of the commodities.
Conditional cash transfer programs
Government programs (e.g. Bolsa Familia in Brazil or Oportunidades/Prospera in Mexico) that promote policy goals, such as improving education outcomes, by linking cash transfers to household behaviors.
Contributory and Non-Contributory programs
The former refers to government programs (such as Social Security in the US) that are directly financed by taxes on employees and/or firms, while the latter refers to similar ones that are paid for out of general funds. Both expanded in the 2000s in many Latin American countries.
Concept often linked to public or private officials using bribes or extortion to secure payments for services generally against the public interest. Two types of corruption are often identified: Grand and Petty corruption. The former usually refers to higher public officials getting big-time payments or bribes for favors to private firms or individuals, while the latter refers to payments made by the public for access to government services or assistance.
The difference between a) exports of goods and services plus inflows of unrequited official and private transfers (e.g. remittances sent by migrants), and (b) imports of goods and services plus unrequited transfers to the rest of the world. Excluded from this balance are all interest payments on external and publicly guaranteed debt.
The surplus that is lost when prices are different to free market prices. A deadweight loss is generated as a consequence of a tariff or a subsidy. The concept of deadweight loss has been used by the Washington Consensus to promote market oriented government policies.
Alternate view of development to neoclassical and structuralism that arose in the 1960s and 70s, and was often viewed as offering a "voice for those who cannot speak for themselves". Was more radical than structuralism and saw international exploitation of the periphery by the core countries as central to the problem of underdevelopment. Declining terms of trade (via unequal exchange), multinational company monopolies, and disarticulated consumption are three major mechanisms for this exploitation. System maintained by the cooperation of a "comprador" (sell-out) class within the periphery.
Development Income-based measures
Use GNP/Capita and distributional measures like poverty count or income distribution comparisons.
Development Capability-based measures
Development can also be measured by looking at the levels and changes of outcomes like literacy, life expectancy, health care access, education, nutrition, etc.
Explanation for the distorted pattern of growth and structural change often associated with resource booms. Key mechanisms underlying these patterns are the resource movement effect and the income spending effect, the first of which pulls resources into the boom sector from other sectors and the second of which pulls resources into the non-tradeable sector from the boom sector and other tradeable activity.
Education traps and inequality
Intergenerational poverty traps or weak economic outcomes can result from a combination of poor educational outcomes in one generation being transferred to the next for private and public reasons. Public reasons can relate to the lack of adequate school access and quality for poor children.
Effective rate of protection
Value added at domestic prices minus the value added at world prices divided by the value added at world prices, capturing the idea that differential tariff rates on outputs and inputs can alter the "effective" protection offered to domestic producers.
Price of foreign currency, e.g. number of pesos it costs to buy a dollar.
refers to the share of a country's export coming from a type of activity (e.g. agriculture, manufacturing)
Refers to a country's or a region's stock of physical capital, labor, natural resources, and human capital, i.e., key productive factors. Usually thought about in relative terms (e.g., a country with relatively little capital and a lot of labor will be called labor abundant). Concept is fundamental to explaining patterns of trade across countries in neoclassical (Heckscher-Ohlin) trade theory.
Gap between government expenditures and revenues. When expenditures outpace revenues, then governments run fiscal deficits. Monetarists view fiscal deficits as source of inflation. Structuralists often view fiscal deficits as both critical to jump-starting growth and sustaining growth during crises, especially ones based on external (or global) shocks.
Fixed exchange rate regime
When the government provides foreign exchange to economic agents at a set price in terms of the domestic currency. This is often done to reduce risk and discipline inflationary tendencies domestically.
Flexible exchange rate regime
When the government allows the country's exchange rate to be set by the market and does not guarantee a set price in terms of the domestic currency.
Foreign Direct Investment
Investment by a private firm, usually a multinational company or a state-owned enterprise in the ownership and management of productive assets in a foreign country.
Foreign Direct Investment Types
Efficiency-seeking, Market-seeking, Resource rent
Can overlap but classic theory of FDI is about efficiency seeking but arguably lots of LA FDI is other types (e.g., minerals = resource rent
Walmart = market-seeking).
FDI and trade as complements and substitutes
When they are complements, they can be viewed as creating positive synergies for growth. When they are substitutes, likely to be less synergistic (example - FDI can be a way to get inside a market that is protected via trade barriers).
Foreign Investment and ISI
Common way for importing firms to overcome protectionist policies by "investing behind tariff walls." Formal sector employment - Refers to workers whose jobs are with firms that are 'registered' and likely pay into compensatory programs, like pension and unemployment insurance.
Measure of inequality that ranges from 0 perfect equality to 1 perfect Inequality.
Gross Domestic Product (GDP)
Measures the total final output of goods and services produced by the country's economy - i.e., within the territory by residents and non-residents regardless of its allocation between domestic and foreign claims. Sometimes written as = C + I + G + X - M, where C = Private Consumption, I = Investment, G = Govt Expenditure, X = Exports, M = Imports
Gross National Product (GNP)
Measures the total domestic and final output claimed by residents of a country = GDP + factor incomes accruing to residents from abroad, less the income earned in the domestic economy accruing to person's abroad.
GDP or GNP per capita
Divides the previous figures by the country's total population to provide an average measure of economic well-being for the population.
Usually describes the rate of change of some important variable, especially GDP or GDP per capita on an annual basis. Also, considered to be a gradual change in any other quantity (wealth, savings, investment, etc.).
Growth with equity models
Balance of policies pursued in Latin America especially since ~2000 to promote economic growth along with reductions in poverty and inequality. Some of the main principles are: Strategic integration of the national economy into the international economy gradual and measured trade and financial liberalization including regional cooperation and agreements. Growth-oriented macroeconomic policy (inflation and fiscal deficit controls), aimed also at improving the supply side or productive capacity of the economy.
(private initiative over public ownership), w/govt playing a focusing and mobilizing role. Distributional Policies managed to achieve legitimacy, especially via a broader base of asset ownership.
Heckscher-Ohlin (HO) Model
Basis for comparative advantage idea, wherein free trade enables nations to make best use of the productive resources they have in relative abundance and to trade for goods which are intensive in resources they do not have in relative abundance. Model's core assumptions are the same as neoclassical orthodoxy given below, plus that all countries have access to the same technologies, that different goods require productive factors in different relative proportions, and that the relative endowments of countries differ. HO model predicts that under these conditions free trade promotes higher output and consumption possibilities, equalization of returns to productive factors (and therefore more equality across workers), and more growth possibilities.
Heterodox inflation policy approach
A mix of policies toward combating inflation in Latin America that recognize both the structuralist and monetarist concerns about inflation and attempt to break hyper-inflationary episodes through a combination of measures. Examples Plan Real in Brazil, Austral Plan in Argentina, and others.
Import Substitution Industrialization
Industrial development strategy based on promoting domestic industrial production that substitutes for imports. Often involves trade restrictions and favorable policies for local investment in manufacturing.
An input or output is considered as imperfectly tradable if the costs of trading that good with the rest of the world are of importance. (Look at the definition of investment coordination failure)
refers to financing the ISI model via borrowing
a concept used to capture the notion of how wealth, income, or some other valuable resource is distributed among a population or group of economic agents.
Inequality declines in 2000s
sources: Labor vs non-labor sources, with the former referring to instances where labor earnings rise more quickly for poorer cohorts than richer ones, and the latter referring to programs that benefit the poor.
Infant Industry Argument
This argument states that due to learning by doing as well as fixed costs of production, firms will reach lower costs as they increase their production level. This argument justifies the creation of barriers to trade, which will allow domestic firms to grow and, with time, become cost efficient.
Measure of the change in prices for individual goods and services or a bundle of goods and services within a given time period. Generally used to refer to changes in price levels within an economy during a year or quarter of a year.
Institutions and inequality
Key argument of Engerman and Sokoloff regarding the impacts of highly inegalitarian wealth and income distribution in New World colonies on the evolution of institutions that perpetuate inequality (e.g., voting franchise, immigration policy, schools, taxes, banking systems, and the like.
Not a theory of development but a model of how inflation and balance of payments stability are likely to be maintained or disrupted by government fiscal and monetary policy. Usually coupled with export-led growth theory (based on HO model) as a neoclassical prescription for development.
Investment coordination failure
When the rate of return of individual investment is lower than the rate of return of coordinated investments. Increasing returns to scale together with imperfect tradability of inputs imply an investment coordination failure.
Import-Substitution Industrialization (ISI)
Response of structuralists to underdevelopment problems associated with being a primary product exporter. Countries in the periphery can industrialize by using temporary trade protection (tariffs and quotas) and other governmental measures (such as easy credit, infrastructural improvements, favorable exchange rates) to promote the development of domestic industries which substitute for imports.
Identifying market, securing technological/production know-how and local industry, initial protection strategy, and staging of ISI efforts.
Land access/rights in the Central American hinterland
Contrasting perspectives of cattle ranchers and campesinos (peasants, see Williams)
Refers to changes in the value of or quantity of output per worker. Generally, rising productivity of workers is associated with rising wages because in competitive markets workers should be paid according to their marginal product.
Law of One Price
Core assumption of international monetarist approach that prices will be the same in all countries (allowing for transportation costs) when there are no trade restrictions limiting the flow of goods. Commodity arbitrage will equate prices. Assumed to hold for all goods combined as well as individual goods.
Depiction of industry level equilibrium in short and long-run demonstrates how competitive markets give rise to efficiency in production and consumption outcomes.
Middle-Class Income Trap
Theory propounded by Eva Paus and other economists that asks whether Latin American economies (and others with a high reliance on primary product exports) might get 'stuck' at middle income levels. Specifically, they cannot compete internationally in standardized, labor-intensive commodities, because wages are too high, but they cannot compete in higher value-added activities on a broad scale because productivity is too low. Closely related to Rodrik's Premature Deindustrialization idea.
Refers to notion that the potential to migrate (especially internationally) may be constrained for poorer households by high costs and lack of financing. Might mean that migration will increase from one locale even when wages or earnings are rising, because more people can realize their intention to migrate.
Refers to the idea that patterns of migration may have positive or negative feedbacks that shape future migration outcomes. Example - as people with more capacity to finance migration do so, their migration efforts can provide a basis lowering costs and improving finances of subsequent migrants.
Migration and remittances
Migration by individuals is often pursued with the intention of sending resources back to their family back home for purposes of helping with consumption and investment of other household members.
Neoclassical Orthodoxy Basic Assumptions
Perfect information, agents as price-takers, perfect substitution among factors of production, rational behavior, free entry, and complete markets.
Neoclassical View of Development
Gradual, continuous, and cumulative, where markets are at the heart of the process and prices provide signals to economic agents about how to allocate their resources. Development spreads across international boundaries with benefits for all countries via free trade, foreign investment, and technology transfer and learning. Basis for "neoliberal" policies.
Synthesis of structuralism and neoclassical which emphasizes the importance of recognizing key market failures and structural limitations of certain kinds of market outcomes, but does not proscribe a central role for the state in managing production. Emphasizes the among: (1) equity and growth, (2) industrial policy, human capital investments, and technological change
(3) longterm foreign direct investment and technology transfer
and other such areas here markets may need to be adjusted via state policy.
New Left in Latin America
Refers to the range of political parties (populist to social democratic) that took power in 2000 in many LA countries and pursued policies of growth with equity.
New World Colonies
3 types of colonies discussed in Engerman and Sokoloff.
Nominal rate of protection
The tariff rate imposed on a good.
Refers to goods and services that are produced only for local markets because of transport costs or other impediments to trade (e.g., services, such as restaurants, haircuts, schools, professional services
also certain goods
such as cement, construction, and so forth).
refers to an economic strategy (often favored by W Consensus policy) that includes free trade (or at least trade liberalization), promotion of foreign direct investments and other types of capital in-flows.
Overvalued Exchange Rates
when exchange rate is allowed to appreciate to a level such that foreign currency and goods look cheap in domestic terms. An overvalued exchange rate is lower than the "free market" price of the foreign currency.
Dani Rodrik's idea that some regions of the world, especially Latin America and Sub-Saharan Africa may be 'deindustrializing' too soon, before they have passed through the structural economic and political changes that help to insure ongoing innovation and productivity on the economic side and democratic, redistributive policies on the political side. The result of this 'premature deindustrialization' process is likely to be weaker and more volatile growth (due to reliance on primary products) and unstable political situations (resulting from the lack of a robust middle class).
Core view of structuralists that terms of trade for countries in the periphery will decline over time. The Prebisch explanation for declining terms of trade is supply-side and argues that monopoly behavior by firms and trade unions in center allows them to hold onto productivity gains in the form of higher profits and wages and therefore prices, while competitive markets in the periphery mean that productivity advances lower prices. The Singer explanation is demand-side and argues that as incomes rise, the percentage increase in demand for primary products increases less quickly than it does for manufactured goods (based on Engel's Law). Thus, more rapidly rising demand for manufactured goods will lead their prices to rise more rapidly than prices for primary products.
often measured relative to GDP, based on the accumulation of previous fiscal deficits. Can be viewed as a measure of a government's vulnerability, especially in an era of high interest rates when servicing the debt can be costly.
Purchasing Power Parity
A means of adjusting income levels to make comparisons across countries more reflective of the real prices of goods and services faced by consumers in different countries. In particular, the relative prices of goods and services not traded in international markets tend to vary substantially from one country to another, leading to large differences in the relative purchasing power of currencies and thus in welfare as measured by GNP per capita. Usually, these conversions are made to U.S. dollars, using PPP measures.
Effects of a quota on rents to producers and the specific impacts in the Central America cattle boom.
Real Interest Rates
The nominal interest rate minus the inflation rate. Measure used to compare the interest rate over time, or across countries, that controls for underlying changes in prices of goods and services faced by investors.
The nominal wage divided by the price level. Measure used to compare wages over time for individuals, groups, or a country, and control for underlying changes in prices of goods and services faced by workers.
Countries with rich natural resource bases frequently have worse growth and development outcomes, attributable to dutch disease, excessive borrowing, conflict and competition over rents, and so forth.
Returns above normal profit rates usually associated with having a prime source of a natural resource (2 historical examples, wild rubber in Amazon, nitrates in Chile).
Secondary Market Value
resale value of a financial instrument (e.g. debt) to other Investors
refers to government programs and initiatives aimed at improving the welfare of certain segments of the population or of the entire population (e.g., universal health care coverage or pension programs).
A Latin American approach to economic development that grew out of the economic disruptions caused by the Great Depression and World War II and is often credited to Raul Prebisch and other social scientists from CEPAL. Views the international division of labor, particularly the division of the world into primary product exporters in the periphery and manufacturing product exporters in the center, as a principal cause of underdevelopment. Declining terms of trade and slower productivity growth are seen as two principal results of this international division of labor that hamper development in the periphery.
Structuralism and its Contradictions
Internal critiques, neoclassical critiques, and a major path to the 1980s debt crisis.
Supply side factors in Central American cattle boom
Roads, modern USDA approved packing plants, land titling, credit, etc.
Technical Progress and ISI
View that the tradeoffs of current distortions can pay off in terms of technical progress by learning and investing in increasing returns activities.
trade, and FDI,Interactions among these depend on types of trade, FDI, and the potential they carry for innovation and productivity growth.
Total factor productivity
measure of innovation or technological change recovered from standard economic growth model accounting that identify the 'economic growth' not accounted for by labor growth or human and physical capital accumulation as emanating from technological change.
FDI, and Human Capital Growth,Likewise different patterns of trade and FDI can help to encourage or discourage investment (public and private) in human capital. Example - arguably primary product-led export growth might generate less incentive to invest in human capital than manufacturing-led export growth.
Terms of trade
The price of a country's exports relative to its imports. Declining terms of trade suggest decreased purchasing power of a country's exports. Also depicted in terms of net income terms of trade, which would be the total value of exports divided by key import prices or a key import price index. This measure gives an indication of the trends in the volume of imported goods the country can purchase over time.
The notion from dependency that trade between core and periphery countries is unfair because low wages of periphery keep down the prices of their exports.
Vent for surplus
Exports can bring into production, resources that might otherwise be idle, especially sparsely or unsettled regions.
Voluntary debt relief
Debt relief strategy that allows creditors (and debtors) to enter into a voluntary agreement to 'reduce' debt.
Pursue macroeconomic stability by controlling inflation and reducing fiscal deficits
Open economies to the rest of the world through trade and capital market liberalization
Liberalize domestic product and factor markets.