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.
Topic 16 introduced some of these. The gap between developed and developing countries usually involves several reinforcing factors at once.
Developed countries have more machinery, factories, infrastructure, transport networks and communication systems per worker. A worker with better tools produces more output per hour. The accumulated capital stock is the result of decades of investment, and investment requires saving, which is harder in low-income countries where most income is spent on immediate needs.
Developed countries have higher levels of education, training and healthcare. A more educated workforce is more productive; a healthier workforce works more hours and learns faster. Most developing countries have made huge progress in human capital over recent decades, but gaps remain in tertiary education and specialised skills.
Developed countries are usually the source of new technologies (R&D investment, patents, world-class research universities). Developing countries can adopt technology from elsewhere, but the adoption is rarely as fast or as complete as making it in-house.
Natural resources can support development (Norway's oil wealth, Australia's mineral exports, Saudi Arabia's hydrocarbons). But they do not guarantee it. The resource curse describes how some resource-rich countries actually grow slower than resource-poor ones:
Resource-rich countries that diversify, save resource revenues sensibly, and maintain strong institutions (Norway) escape the curse. Those that do not (some African oil exporters) stay poor despite the wealth.
Countries with weak institutions struggle to develop even when they have other advantages.
Many developing countries are trade-dependent on a narrow range of primary exports. This creates two risks:
Countries that diversify into manufacturing and services tend to grow faster than those stuck in primary exports.
A country with a young dependency-heavy population (many children per worker) has less to invest in capital and infrastructure. A country with a demographic dividend (a large working-age share with few dependants) can grow rapidly. Most developing countries are somewhere in transition between these states.