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15 Cards in this Set

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Lewis' 2 sector model
explains the growth of a developing economy in terms of a labor transition between the capitalist and subsistence sectors. It explains howcountries need to transform theirstructures, away from agriculture,with low productivity of labour,towards industrial activity, with ahigh productivity of labour
Autarky
A nation that isself-sufficient.Exists withoutexternal aid
comparative advantage
David Ricardo- demonstrates the ways which protectionism/mercantilism is unnecessary in free trade. free trade works even in one partner in a deal holds absolute advantage in all areas of production.
Factor endowments
capacities of country interms of capital and labor. rich countries=more capital developing= more labor
tariffs versus quotas
tariffs- taxes imposed on imported goods. Quotas- numerical limits on imported goods
formal institutions
officially established- governmental, have laws, business corporations, labor unions.
informal institutions
not officially established ex: institution of marriage societal institutions.
asymmetric information
transaction where one party has more info about a products quality than the other party
moral hazard
the possibility of unobservable actions one of the contracting parties can take that will hurt the interest of the other contracting party.
the lemon market
market where the seller knows more than the buyer. lemon = car that is found to be defective after the purchase.
balanced growth
all economic sectors grow at the same rate.
unbalanced growth
sectors grow at differentrates
balanced vs unbalanced growth
balanced is more theoretical ideal, but unbalanced growth is more successful because it requires less administrative government capabilities and intersectoral linkages correct gaps in government policy.
east asian miracle
four tigers (hong kong,singapore, korea, taiwan) rapid growth in east asian countries economies due to market friendly economic policies that lead to higher incomes and better allocation of resources.
backward linkages vs forward linkages
backward -effects on upstream sectors that are suppliers for a given sector. forward= effects on downstream sectors that are clients of a given sector.