CHAPTER 4. Contemporary Models of Development
and Underdevelopment
Economic agent - economic actor that chooses actions
so as to maximize an objective.
Complementarity - increases the incentives for other
agents to take similar actions, often investments
Coordination failure - leaves all agents worse off than
in an alternative situation
Big push - A concerted, economy wide, and typically
public policy–led effort to initiate or accelerate
economic development
O-ring model - economic model in which production
functions exhibit strong complementarities
Middle-income trap - economy begins development
but is chronically unable to progress
Underdevelopment trap - A poverty trap at the
regional or national level
Deep intervention- A government policy that can
move the economy to a preferred equilibrium
Congestion - The opposite of a complementarity; an
action taken by one agent
Where-to-meet dilemma - A situation in which all
parties would be better off cooperating than
competing but lack information about how to do so
Multiple equilibria - A condition in which more than
one equilibrium exists.
Prisoners’ dilemma - A situation in which all parties
would be better off cooperating than competing but
once cooperation has been achieved, each party
would gain the most by cheating
Pareto improvement - A situation in which one or
more persons may be made better off without making
anyone worse off.
Pecuniary externality - A positive or negative spillover
effect on an agent’s costs or revenues.
Technological externality - A positive or negative
spillover effect on a firm’s production function
Agency costs - Costs of monitoring managers and
other employees
Asymmetric information - A situation in which one
party to a potential transaction has more information
than another party.
Linkages - Connections between firms based on sales.
A backward linkage is one in which a firm buys a good
from another firm to use as an input; a forward
linkage is one in which a firm sells to another firm.
Such linkages are especially significant for
industrialization strategy when one or more of the
industries (product areas) involved have increasing
returns to scale that a larger market takes advantage
of.
Poverty trap – A bad equilibrium for a family,
community, or nation
O-ring production function – A production function
with strong complementarities
Information externality - The spillover of information
Growth diagnostics – A decision tree framework for
identifying a country’s most binding constraints on
economic growth.
Social returns - both costs and benefits are accounted
for
CHAPTER 5. POVERTY, INEQUALITY AND
DEVELOPMENT
Personal distribution of income (size distribution of
income) - The distribution of income according to size
class of persons
Quintile - A 20% proportion of any numerical
quantity.
Decile – A 10% portion of any numerical quantity;
Income inequality - disproportionate distribution
Lorenz curve - A graph depicting the variance of the
size distribution
Gini coefficient - An aggregate numerical measure,
measured graphically
Functional distribution of income (factor share
distribution of income) - The distribution of income to
factors of production
Factors of production - Resources or inputs required
to produce a good or a service, such as land, labor,
and capital.
Absolute poverty - unable or only barely able to meet
the subsistence essentials
Headcount index - country’s population living below
the poverty line.
Total poverty gap (TPG) - The sum of the difference Rate of population increase - The growth rate of a
between the poverty line and actual income levels of population
all people living below that line.
Natural increase - difference between the birth rate
Foster-Greer-Thorbecke (FGT) index – A class of and the death rate
measures of the level of absolute poverty.
Net international migration - The excess of persons
Multidimensional Poverty Index (MPI) - A poverty migrating into a country
measure that identifies the poor using dual cutoffs for
Crude birth rate - The number of children born alive
levels and numbers of deprivations
Death rate - The number of deaths
Kuznets curve - graph reflecting the relationship
between income per capita and income distribution. Total fertility rate (TFR) - The number of children that
would be born to a woman
Character of economic growth - The distributive
implications as reflected in such factors Life expectancy at birth - The number of years a
newborn child would live
Disposable income - The income that is available to
households Under-5 mortality rate - Deaths among children
between birth and 5 years
Asset ownership - The ownership of land, etc
Youth dependency ratio - The proportion of young
Redistribution policies - Policies geared to reducing
people under age 15 to the working population aged
income inequality
16 to 64 in a country.
Land reform - A deliberate attempt to reorganize and
Hidden momentum of population growth -
transform existing agrarian systems
population continues to increase
Progressive income tax - A tax whose rate increases
Population pyramid - A graphic depiction of the age
with increasing personal incomes.
structure of the population
Regressive tax – A tax structure in which the ratio of
Demographic transition - The phasing-out process of
taxes to income tends to decrease as income
population growth rates
increases.
Malthusian population trap - The threshold
Indirect taxes - Taxes levied on goods ultimately
population level
purchased by consumers
Microeconomic theory of fertility - family formation
Public consumption - All current expenditures for
has costs and benefits
purchases of goods and services
Family-planning programs - family size.
Subsidy - A payment by the government to producers
or distributors in an industry Population-poverty cycle –high population growth
become reinforcing.
Workfare program - exchange for benefits
Reproductive choice – The concept that women
Neoclassical price incentive model – model whose
should be able to determine on an equal status
main proposition is adjusted to remove factor price
distortions

Factor price distortions - factors of production are

paid prices

Elasticity of factor substitution - A measure of the

degree of substitutability

CHAPTER 6. POPULATION GROWTH AND ECONOMIC

DEVELOPMENT: CAUSES, CONSEQUENCES AND
CONTREVERSIES.

Doubling time - takes to increase by its present size