MR95
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india and china are growing at high rates , inflation increasing , more GDP however there is a big BUT ..
there infrastructure is quite poor
half the population are on low incomes
imports into the countries aren't as much as exporting
education system isn't the greatest
hospitals all private , pay if you can afford
so how is the economy growing ? its confusing ...
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cole-slaw
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(Original post by MR95)
india and china are growing at high rates , inflation increasing , more GDP however there is a big BUT ..
there infrastructure is quite poor
half the population are on low incomes
imports into the countries aren't as much as exporting
education system isn't the greatest
hospitals all private , pay if you can afford
so how is the economy growing ? its confusing ...

They're working hard and making lots of stuff that they then sell to the rest of the world. Thats what GDP measures.
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ddrrzzeerr
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(Original post by MR95)
india and china are growing at high rates , inflation increasing , more GDP however there is a big BUT ..
there infrastructure is quite poor
half the population are on low incomes
imports into the countries aren't as much as exporting
education system isn't the greatest
hospitals all private , pay if you can afford
so how is the economy growing ? its confusing ...
The fact they are poor makes it easier to grow at a faster rate. Because they have less capital per head in less developed countries, the MPK is higher in those countries because of diminishing marginal returns. Therefore, when they invest and increase their capital stock this increases their production by more than investment in a developed country.
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cole-slaw
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(Original post by Sternumator)
The fact they are poor makes it easier to grow at a faster rate. Because they have less capital per head in less developed countries, the MPK is higher in those countries because of diminishing marginal returns. Therefore, when they invest and increase their capital stock this increases their production by more than investment in a developed country.

so what you're saying is that its like Mariokart where the noobs at the back get all the decent power ups to try and help them catch up.
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ddrrzzeerr
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(Original post by cole-slaw)
so what you're saying is that its like Mariokart where the noobs at the back get all the decent power ups to try and help them catch up.
Yes in a way. In the simplest model, poor countries will catch up with rich. This can be used to explain how, for example, Japan and Germany who were devastated by WW2 have managed to catch up with America.

Obviously countries don't always catch up because of corruption and endless other things,
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cole-slaw
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(Original post by Sternumator)
Yes in a way. In the simplest model, poor countries will catch up with rich. This can be used to explain how, for example, Japan and Germany who were devastated by WW2 have managed to catch up with America.

Obviously countries don't always catch up because of corruption and endless other things,
Are you specifically referring to Solow-Swan or AK model here?
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ddrrzzeerr
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(Original post by cole-slaw)
Are you specifically referring to Solow-Swan or AK model here?
Solow
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Mike_123
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(Original post by MR95)
india and china are growing at high rates , inflation increasing , more GDP however there is a big BUT ..
there infrastructure is quite poor
half the population are on low incomes
imports into the countries aren't as much as exporting
education system isn't the greatest
hospitals all private , pay if you can afford
so how is the economy growing ? its confusing ...


  • Population growth is almost always higher in LDCs compared to MDCs, with MDCs experiencing an ageing population Stimuli into the economy is likely to have a greater multiplier effect due to population growth in LDCs.
  • Export-led growth strategy (mainly China) means that by attracting FDI, it is able to compensate for low domestic investment in the form of capital imports, which you are referring to (Harrod Domar model)
  • You're mistaken. The education systems are VERY good, notably in China. Even though they are emerging economies, they have an extremely high literacy rate due to massive government expenditure into this industry. This means that Chinese workers are productive, but more importantly still cheap. This is perfect for a perspective MNC considering investing in an LDC.
  • Public healthcare may be a barrier to inequality rather than growth. Education is the key here that provides an escape from the poverty trap. It is not a private sector industry in China, given that it is a communist state (http://www.tillvaxtanalys.se/downloa...se_2013_03.pdf)
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cole-slaw
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(Original post by Mike_123)
  • Population growth is almost always higher in LDCs compared to MDCs, with MDCs experiencing an ageing population Stimuli into the economy is likely to have a greater multiplier effect due to population growth in LDCs.
  • Export-led growth strategy (mainly China) means that by attracting FDI, it is able to compensate for low domestic investment in the form of capital imports, which you are referring to (Harrod Domar model)
  • You're mistaken. The education systems are VERY good, notably in China. Even though they are emerging economies, they have an extremely high literacy rate due to massive government expenditure into this industry. This means that Chinese workers are productive, but more importantly still cheap. This is perfect for a perspective MNC considering investing in an LDC.
  • Public healthcare may be a barrier to inequality rather than growth. Education is the key here that provides an escape from the poverty trap. It is not a private sector industry in China, given that it is a communist state (http://www.tillvaxtanalys.se/downloa...se_2013_03.pdf)

Well, actually their literacy rates are kinda mid-table with 95%, well behind western europe and more on a par with south america, see here: http://en.wikipedia.org/wiki/List_of..._literacy_rate


Also, they were cheap but they're getting more expensive enough now that we're seeing this phenomenon:
http://www.bbc.co.uk/news/business-26235707


There are even rumours of an economic crisis in China: http://www.businessinsider.com/chart...-unfold-2014-2
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Mike_123
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(Original post by cole-slaw)
Well, actually their literacy rates are kinda mid-table with 95%, well behind western europe and more on a par with south america, see here: http://en.wikipedia.org/wiki/List_of..._literacy_rate


Also, they were cheap but they're getting more expensive enough now that we're seeing this phenomenon:
http://www.bbc.co.uk/news/business-26235707


There are even rumours of an economic crisis in China: http://www.businessinsider.com/chart...-unfold-2014-2
These are all very good evaluations points, no doubt.

Compare the literacy rates of the emerging economies vs sub-Saharan Africa though.

Wage inflation is indeed a problem in China, and is an inevitable consequence of economic growth as the wealth trickles down.

China has coped pretty well with the financial crisis despite its growth model being export-led. It's massive government stimulus is something only the west can be envious about.
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