Economic Development · 4 question types
Past paper frequency (2018 to 2024)
This topic accounts for approximately 9% of your exam marks.
Reasons for development gaps and the role of trade, aid, and investment come up frequently in Section B; typically 6 to 8 marks.
A developing country can use several internal strategies to raise its living standards. These complement aid, trade and FDI.
The single most reliable long-term strategy. Spending on:
The returns take decades to fully appear, but the effect on long-run productivity is large.
Roads, ports, airports, electricity, water, sanitation, broadband. Better infrastructure:
Funded through government revenue, borrowing, FDI, or aid.
A country that depends on coffee, copper or oil for most of its exports is vulnerable to commodity-price swings. Active policy to diversify into manufacturing and services:
Examples: South Korea moved from primary exports in the 1960s to manufacturing in the 1970s–80s to high-tech in the 2000s. Most of East Asia's success stories follow a similar trajectory.
Lowering tariffs, removing import quotas, encouraging firms to enter export markets. The argument: exposure to world competition forces domestic firms to become more productive, and gives them access to the much larger world market. Combined with a competitive exchange rate (often slightly undervalued), this is the basis of the export-led growth model.
The counter-argument: developing-country firms may need protection in their early years (the "infant industry" argument) before they can compete with established foreign competitors. The right approach is often a mix of protection for emerging industries and openness in others.
Small loans to people too poor to access regular banks. Allows them to start small businesses, buy productive assets (sewing machines, farm equipment), and become self-sustaining. Effective for poverty reduction; less effective as a country-wide growth strategy.
As covered in section 4: useful but with significant trade-offs.
Already covered in topic 17. Falling birth rates (through education and family planning) reduce the dependency ratio over a generation and give the country a demographic dividend to support growth.
Long-term institutional reform (tackling corruption, strengthening property rights, reforming the legal system, professionalising the civil service) has large but slow-acting effects on development. It is the foundation that lets other strategies work.