Economics of Developing Countries (Essay Sample)

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Economics of Developing Countries – Assignment 1
There are various branches of economics, and development economics is arguably one of the most critical branches of economics. Development economics is the study of how a country's economy is transformed from low-income to high-income status and from stagnation to robust growth. This transformation enables the country and its citizens to overcome problems of absolute poverty and poverty traps. It is also concerned with the economic, cultural, and political requirements for the country's sufficient institutional and structural transformations. Various factors affect economic development, and they are also seen as key drivers of economic growth. They include political stability, macroeconomic policies implemented by the government, trade barriers, infrastructure levels, educational standards, natural resources, foreign aid, and saving rates. The policies instituted by the government, its role, and coordinated economic decision-making also play a critical role in transforming the economy. The common theories of development economics are nationalism, mercantilism, structural-change theory, and the linear stages of the growth model.
The growth of per capita income is often linked to other factors that have to change for the growth to take place. In most cases, the growth of per capita income alone is not sufficient to guarantee the reduction of poverty levels and the development of self-esteem. Factors that have to be considered in the growth of per capita income include the education and training levels within the country. Education is an essential aspect of economic development. With good education and job skills, individuals will be gain critical skills that will enable them to produce more services and goods, seize various opportunities, and earn higher incomes CITATION Fra19 \l 2057 (Sherman). Secondly, proper infrastructure plays a critical role in ensuring per income growth. A good infrastructure includes good road networks or transportation systems, power systems, and telecommunications. This will enable easier movement of goods and people and lower the costs of transportation. Lastly, population growth also plays a role in the growth of income per capita. For instance, countries with restrictive birth policies or lower population growth tend to be more developed and have higher income per capita.
Convergence is often built on the idea that the per capita incomes in developing countries will tend to increase faster than the per capita income of developed countries. This is because the diminishing returns in developed countries are relatively weak compared to the diminishing returns in developing countries. The living standards in developed and developing countries are converging. With increased globalization, many countries, whether developing or developed, are increasingly becoming interconnected. In developing countries, the living standards are converging due to the weak social nets protecting economically vulnerable citizensCITATION Maz03 \p 34 \l 2057 (Mazumdar 34). Some of these countries include India and South Africa. However, in developed countries such as Japan, South Korea, and Norway, their citizens are protected by solid social nets. They also have access to necessities and efficient public services. Given the low living standards in developing countries, there is considerable room for improvement to catch up with developed countries. However, there are limits to this convergence. For instance, the fact that a given nation is poor does not necessarily ensure catch-up growth. For catch-up growth to occur, there must be a change to social capabilities in which new technologies are absorbed into the economy, increased capital, and participation in international trade.
The neo-classical theory is one of the main theories that have often been used to explain economic growth. It emphasizes capital accumulation and linked decisions such as saving habits which are essential elements in economic growth. The theory also considered labor and capital as production functions and critical determinants of economic output. It predicts global economic convergence in which developing countries will often tend to grow faster than developed countries. Similar to the neo-classical theory, the accumulation of physical capital is the key to economic growth. However, the glo