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15 Cards in this Set
- Front
- Back
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Lewis' 2 sector model
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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
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Autarky
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A nation that isself-sufficient.Exists withoutexternal aid
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comparative advantage
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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.
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Factor endowments
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capacities of country interms of capital and labor. rich countries=more capital developing= more labor
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tariffs versus quotas
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tariffs- taxes imposed on imported goods. Quotas- numerical limits on imported goods
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formal institutions
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officially established- governmental, have laws, business corporations, labor unions.
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informal institutions
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not officially established ex: institution of marriage societal institutions.
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asymmetric information
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transaction where one party has more info about a products quality than the other party
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moral hazard
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the possibility of unobservable actions one of the contracting parties can take that will hurt the interest of the other contracting party.
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the lemon market
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market where the seller knows more than the buyer. lemon = car that is found to be defective after the purchase.
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balanced growth
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all economic sectors grow at the same rate.
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unbalanced growth
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sectors grow at differentrates
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balanced vs unbalanced growth
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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.
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east asian miracle
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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.
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backward linkages vs forward linkages
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backward -effects on upstream sectors that are suppliers for a given sector. forward= effects on downstream sectors that are clients of a given sector.
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