The National Teachers College

Quiapo, Manila

Research

in

Economic Planning and Strategy

Chapter 5: Poverty, Inequality, and Development

Chapter 6: Population Growth and Economic Development:

Causes, Consequences and Controversies

Chapter 7: Urbanization and Rural-Urban Migration: Theory and Policy

Chapter 8: Human Capital: Education and Health in Economic Development

Schedule:

Monday-Thursday 11:30- 1:00 PM

Gatchalian, Lerner L.

BSED- Social Science

Mr. Dennis San Gregorio

(Professor)

February 2, 2017
Chapter 5: Poverty, Inequality, and Development

Two Types of Poverty:

Relative Poverty: This is when income is less than the average income by a
certain amount. Therefore, a rise in economic growth will cause a change in what
constitutes economic growth.

Absolute Poverty: This is Income below a certain level necessary to maintain a

minimum standars of living. (e.g. enough money to buy the basic necessities of
food, shelter and heat.

Therefore, economic growth should reduce absolute poverty, so long as the

poorest can gain some increase in living standards from the nations growth.

Economic Growth will reduce Income inequality if:

Wages of the lowest paid rise faster than the average wage.

Government benefits, such as; unemployment benefits, sickness benefits

and pensions are increased in line with average wages.

Economic Growth creates job opportunities which reduce the level of

unemployment. Unemployment and lack of employment is one of the biggest
causes of relative poverty.

Minimum Wages increased in line with average earnings.

Economic Growth will not necessarily solve unemployment. For example, growth
cannot solve structural and frictional unemployment; this is unemployment caused
by lack of skills and geographical immobilitys.

Income Inequality

Income inequality is the unequal distribution of household or individual income

across the various participants in an economy. Income inequality is often
presented as the percentage of income to a percentage of population. For
example, a statistic may indicate that 70% of a country's income is controlled by
20% of that country's residents.

Income inequality is often associated with the idea of income "fairness." Most
people consider it "unfair" if the rich have a disproportionally larger portion of a
country's income compared to the general population. The causes of income
inequality can vary significantly by region, gender, education and social status.
Education is known to affect equality in societies. Certain social-economic groups
of people do not have access to quality education in the United States, especially
at the secondary school level. In countries that provide higher-quality secondary
education across the economic spectrum, there is much less income disparity.

Family and social interactions impact earning potential. Social and emotional skills
critical to leading a quality life are not sufficiently developed in economically
distressed areas with a high percentage of unstable families.

Increased demand for high-skilled workers adds to a widening wage gap.

Companies are investing more heavily in developing a high-skilled workforce,
driving wages up for high-skilled workers. This leads to de-emphasizing or
automating low-skilled functions, pushing wages for low-skilled workers down.

Chapter 6: Population Growth and Economic Development:

Causes, Consequences and Controversies

Global human population growth amounts to around 75 million annually, or 1.1%

per year. The global population has grown from 1 billion in 1800 to 7 billion in
2012. It is expected to keep growing, and estimates have put the total population
at 8.4 billion by mid-2030, and 9.6 billion by mid-2050.

"Go Forth and Multiply!" That's what the human population has successfully been
doing for thousands and thousands of years, expanding, exploring, migrating,
conquering, utilizing, evolving, civilizing, industrializing, and now, destroying the
very land upon which we live.

Many feel (as has been the case throughout history) that the major international
wars to be fought in the future will continue to be over natural resources. Power
conflicts and self-interest will perhaps mean that there will be gross violation of
basic rights and death or misery for millions of innocent people. Throughout
history, most wars have had trade and resources at their core (leading to
ideological battles) fueled by imperialistic motives. In the future, while this pattern
is likely to continue, as resources get depleted and wasted in these wars (hot and
cold), additional conflicts and contention will arise through access to even more
limited resources.

Many of us have grown up learning and being told that 6 billion is too much and
this "over population" is primarily impacting the planet's ability to cope. But is that
really the case? Sure, the planet is facing incredible stress. But how much of that
is due to large populations, and how much is based on other factors, such as how
we choose to live, how we produce, consume and waste our resources? The poor
are numerous, but as we shall see, consume far less resources of the planet, for
example.

Studies point to ecological limits to sustain people, but these limits can be
different, based on the way we consume resources etc. so it is hard to say for sure
what overpopulation means let alone if we are at some threshold, below, or above
it. The information understood so far provides valuable insights and is very
important to consider, nonetheless. Yet, the figure of 6 billion and literature about
over-population naturally looks to the poor regions where there are high
populations and environmental degradation as the problem.

Population Growth on the Economic Development

The existing state of knowledge does not warrant any clear-cut generalization as
to the effect of population growth on economic development in today's less
developed areas. Some theoretical analyses argue that high population growth
creates pressures on limited natural resources, reduces private and public capital
formation, and diverts additions to capital resources to maintaining rather than
increasing the stock of capital per worker. Others point to positive effects such as
economies of scale and specialization, the possible spur to favorable motivation
caused by increased dependency, and the more favorable attitudes, capacities, and
motivations of younger populations compared with older ones. The actual evidence
on the association between growth rates of population and per capita income does
not point to any uniform conclu sion, though the true relationship may be
obscured in a simple two-variable comparison. None of this means that per capita
income growth, currently and in the past, would have been the same if population
growth rates had been markedly higher or lower. But it is possible that the effect
of population growth on economic development has been exaggerated, or that no
single generalization is justified for countries differing as widely in growth rates,
densities, and income levels as do today's less developed areas. Clearly there is
need for more intensive research on the actual experience of nations,
currently and in the past.

Is population growth good or bad for economic development?

The relationship between population growth and economic development has been
a recurrent theme in economic analysis since at least 1798 when Thomas Malthus
famously argued that population growth would depress living standards in the long
run. The theory was simple: given that there is a fixed quantity of land, population
growth will eventually reduce the amount of resources that each individual can
consume, ultimately resulting in disease, starvation, and war. The way to avoid
such unfortunate outcomes was moral restraint He didnt foresee the
technological advances that would raise agricultural productivity and reduce the
toll of infectious diseasesadvances that have enabled the worlds population to
grow from 1 billion in 1798 to 7.4 billion today.

Nevertheless, his essential insight that population growth constitutes a potential

threat to economic development remained influential and informed international
development policy agendas, especially in the 1950s and 1960sa period marked
by unprecedentedly rapid rates of population growth in many developing countries.

Chapter 7: Urbanization and Rural-Urban Migration: Theory and Policy

Urbanization and growth go together: no country has ever reached middle income
status without a significant population shift into cities. Urbanizations necessary to
sustain (though not necessarily drive) growth in developing countries, and it yields
other benefits as well. But it is not painless or always welcomed by policymakers
or the general public. Managing urbanization is an important part of nurturing
growth; neglecting citieseven in countries in which the level of urbanization is
lowcan impose heavy costs.

In terms of development and growth theory, urbanization occupies a puzzling

position. On the one hand, it is recognized as fundamental to the multidimensional
structural transformation that low-income rural societies undergo to modernize
and to join the ranks of middle- and high-income countries.

Migration Economics

Migration economics has traditionally stressed the effects of migration restrictions

on income distribution in the host country. Recently the literature has taken a new
direction by estimating the costs of migration restrictions to global economic
efficiency. A new strand of research posits that migration restrictions could be not
only desirably redistributive, but in fact globally efficient. This new case rests on
the possibility that without tight restrictions on migration, migrants from poor
countries could transmit low productivity to rich countries, offsetting efficiency
gains from the spatial reallocation of labor from low to high-productivity places.
Clemens and Pritchett provide an assessment, and conclude that the new case for
efficiency-enhancing restrictions on labor mobility turns out to be an efficiency
case against most existing restrictions on labor mobility. On current evidence
about the magnitudes of the relevant parameters, dynamically efficient policy
would not imply open borders but would imply relaxations on current restrictions.
Migration and Development

Migration and development are highly interdependent processes. International

migration in the development context relates both to people who have chosen to
move of their own accord, and forced migrants who can ultimately end up
contributing to both their country of resettlement and possibly their country of
origin if it is ever safe to return. Development, meanwhile, is a dynamic process
implying growth, advancement, empowerment and progress, with the goal of
increasing human capabilities, enlarging the scope of human choices, and creating
a safe and secure environment where citizens can live with dignity and equality. In
the development process, it is important that peoples productivity, creativity and
choices are broadened, and that opportunities are created.

Economic Effects of Migration

The economic effects of migration vary widely. Sending countries may experience
both gains and losses in the short term but may stand to gain over the longer
term. For receiving countries temporary worker programs help to address skills
shortages but may decrease domestic wages and add to public welfare burden.
The economic effects of migration for both sending and receiving countries may
also vary depending on who is moving, specifically with respect to migrant
workers skill levels.

According to the World Bank, remittances totaled $529 billion worldwide in 2012,
with $401 billion of that money flowing into developing nations (2013).
Significantly, these figures only account for funds sent through formal channels, so
the amount of remittances is likely much larger than these numbers suggest. The
World Bank notes that remittances sent through informal channels could add at
least 50 percent to the globally recorded flows (UNCTAD, 2011).

A recent UNCTAD report notes: Remittances are more stable and predictable as
compared to other financial flows and, more importantly, they are counter-cyclical
providing buffer against economic shocks. In conflict or postconflict situations,
remittances can be crucial to survival, sustenance, rehabilitation, and
reconstruction. In providing primarily for household livelihoods, remittances are
spent on general consumption items in local communities that contribute to local
economies by supporting small businesses. A fair share of these expenditures is
directed to the construction of homes, health care and education, alongside
savings in financial institutions, thereby generating employment in these critical
services sectors. Moreover, in contributing to foreign exchange earnings,
remittances can spur economic growth by improving sending countries
creditworthiness and expanding their access to international capital markets
(UNCTAD, 2011). At the same time, developing countries can suffer from brain
drainthe loss of trained and educated individuals to emigration.

Chapter 8: Human Capital: Education and Health in Economic

Development

Education in every sense is one of the fundamental factors of development. No

country can achieve sustainable economic development without substantial
investment in human capital. Education enriches peoples understanding of
themselves and world. It improves the quality of their lives and leads to broad
social benefits to individuals and society. Education raises peoples productivity and
creativity and promotes entrepreneurship and technological advances. In addition,
it plays a very crucial role in securing economic and social progress and improving
income distribution.

The Role of Education in Economic Development

Economist been considering physical capital as the most important factor

determining economic growth and have been recommending that rate of physical
capital formation in developing countries must be increased to accelerate the
process of economic growth and raise the living standards of the people. But in the
last three decades economic research has revealed the importance of education as
a crucial factor in economic development. Education refers to the development of
human skills and knowledge of the people or labor force.

It is not only the quantitative expansion of educational opportunities but also the
qualitative improvement of the type of education which is imparted to the labour
force that holds the key to economic development. Because of its significant
contribution to economic development, education has been called as human capital
and expenditure on education of the people as investment in man or human
capital.

Education and Economic Growth

Several empirical studies made in developed countries, especially the U.S.A.
regarding the sources of growth or, in other words, contributions made by various
factors such as physical capital, man- hours, (i.e., physical labor), education etc.
have shown that education or the development of human capital is a significant
source of economic growth.

Health and Development

Better health is central to human happiness and well-being. It also makes an

important contribution to economic progress, as healthy populations live longer,
are more productive, and save more.

Many factors influence health status and a country's ability to provide quality
health services for its people. Ministries of health are important actors, but so are
other government departments, donor organizations, civil society groups and
communities themselves. For example: investments in roads can improve access
to health services; inflation targets can constrain health spending; and civil service
reform can create opportunities - or limits - to hiring more health workers.

WHO's work on 'Health and development' tries to make sense of these complex
links. It is concerned with the impact of better health on development and poverty
reduction, and conversely, with the impact of development policies on the
achievement of health goals. In particular, it aims to build support across
government for higher levels of investment in health, and to ensure that health is
prioritized within overall economic and development plans. In this context, 'health
and development' work supports health policies that respond to the needs of the
poorest groups.

The policies for better health, poverty reduction, and less inequality, throughout
the world, require thorough understanding of both the processes and causal paths
that underlie the intricate relationship between health and wealth (income). This is
deemed difficult, contingent, and only partially understood. The adage health is
wealth is still, primarily, an intuitive proposition. A vast majority of researchers
instead present theoretical and empirical arguments of the reverse proposition, i.e.
wealth is health. A recent strand of the literature, however, reflects changes in the
perceptions: improvements of health and longevity are no longer viewed as a
mere end- or by-product of economic development; but argued as one of the key
determinants of, and therefore means to achieve, economic development and
poverty reduction. Hence, better health does not have to wait for an improved
economy; rather, measures to reduce the burden of disease, to give children
healthy childhoods, to increase life expectancy etc. will in themselves contribute to
creating richer economies. Drawing on the traditional and emerging perspectives
on the health-income relationship, this literature review presents a non-exhaustive
survey of existing methodological approaches and their results that are applied to
track and measure how health influences economic outcomes.

Bibliography

Book References:

"The Economic Development" by Michael Todaro and Stephen Smith

"Introduction to Economics" by Stephen Dobson and Susan Palfreman

Internet References:

The United Nations Economic and Social Council "https://www.un.org/ecosoc"

The World Bank "http://www.worldbank.org/"

The Economist - World News, Politics, Economics, Business & Finance

"www.economist.com/"

The World Health Organizations http://www.who.int/hdp/en/