1.

Do you think that there is a strong relationship among health, labor productivity, and income
levels? Explain your answer.

Work is important to most of us on many levels. Doing a job we enjoy and find satisfying can provide a
meaningful focus for our lives, as well as bringing in an income. Our standard of living hinges on the
money we make, while employment often contributes to our self-image and self-esteem. Work-related
problems can affect our physical, emotional and mental health. Common issues include job
dissatisfaction, workplace injury, stress, discrimination and bullying, violence, accidental death and
retirement. Job loss, retrenchment or unexpected loss of income can also cause distress and hardship.
Health is a strong factor as good health enhances labor productivity by increasing their capability (both
mental and physical). If the labor is suffering ill health on a continuous pace, then much of their income
gets consumed in treatments and they might lose their job. This makes them fall prey to poverty.
However, the facilities that can help the labor to enjoy health benefits comes when they are earning
reasonable good to afford these health facilities like balanced diet nutritious diet, safe drinking water,
sanitation and hospitals. Thus, we see how these variables are dependent on each other.

2. Explain the many ways in which developing countries may differ in their economic, social, and
political structures.

Differences in real GDP across countries can come from differences in population, physical capital,
human capital, and technology. After controlling for differences in labor, physical capital, and human
capital, a significant difference in real GDP across countries remains. Changes in social
structures occurring during the process of economic growth can be considered direct consequences of
this process, while other changes are caused by factors such as technological progress, that
affect simultaneously social structures and growth. The political economy of a country refers to its
political and economic systems, together. The political system includes the set of formal and informal
legal institutions and structures that comprise the government or state and its sovereignty over a
territory or people.

3. What are good economic institutions, why do so many developing countries lack them, and
what can developing countries do to get them? Justify your answer

Institutions strongly affect the economic development of countries and act in society at all levels by
determining the frameworks in which economic exchange occurs. They determine the volume of
interactions available, the benefits from economic exchange and the form which they can take.
Changing trends in a country's economy associated with the lack of education, high divorce rate, a
culture of poverty, illiteracy, overpopulation, epidemic diseases such as AIDS and malaria and
environmental problems such as lack of rainfall. Extreme weather may be a cause a lot of damages in
developing countries. This is made worse when governments spend money in the capitals instead of the
poorest areas which need it most, some ways that can developing nation can do is to produce crops that
suit their geographical location with the latest technology. The gap between rich and poor can be
bridged by allowing access to education, health facilities and others to the poor section of the society.
When the next generation among poor gets educated, they have access to good salaried jobs that will
raise their standard of living.

4. Which measure shows more equality among countries around the world—GNI calculated at
exchange rates or GNI calculated at purchasing power parity? Explain.

The GNI calculated at purchasing power parity since it measures how much a currency can buy in terms
of an international benchmark (usually dollars), since the cost of goods and services differs between
countries. PPP is below the value of a US dollar in countries where the general price index is lower than
in the US (as is the case for all five Caspian states, to varying extents), and above it where the prices are
higher. A dollar thus buys much more in the Caspian countries than in the US, which only marginally
compensates for the much lower income per person.

5. State five characteristics of the developing world. Discuss diversity within the developing world
on these characteristics in relation to the developed world.
1) Low Per Capita Income - The low levels of per capita income and poverty in developing countries is
due to low levels of productivity in various fields of production. The low levels of productivity in the
developing economies has been caused by dominance of low-productivity agriculture and informal
sectors in their economies, low levels of capital formation – both physical and human (education,
health), lack of technological progress, rapid population growth which are in fact the very
characteristics of the underdeveloped nature of the developing economies. By utilizing their natural
resources accelerating rate of capital formation and making progress in technology they can
increase their levels of productivity and income and break the vicious circle of poverty operating in
them. It may however be noted that after the Second World War and with getting political freedom
from colonial rule, in a good number of the underdeveloped countries the process of growth has
been started and their gross domestic product (GDP) and per capita income are increasing.
2) Excessive Dependence on Agriculture - The dominance of agriculture in developing countries can be
known from the distribution of their workforce by sectors. According to estimates made by ILO given
in Table 4.1 on an average 61 per cent of workforce of low-income developing countries was
employed in agriculture whereas only 19 per cent in industry and 20 per cent in services. On the
contrary, in high income, that is, developed countries only 4 per cent of their workforce is employed
in agriculture, while 26 per cent of their workforce is employed in industry and 70 per cent in
services.
3) Low Level of Capital Formation - The low level of capital formation in a developing country is due
both to the weakness of the inducement to invest and to the low propensity and capacity to save.
The rate of saving in developing countries is low primarily because of the low level of national
 income. In such an economy, the low level of per capita income limits the size of the market
demand for manufacturing output which weakens the inducement to invest. 
4) Rapid Population Growth and Disguised Unemployment - The diversity among developing
economies is perhaps nowhere to be seen so much in evidence as in respect of the facts of their
population in respect of its size, density and growth. However, there appears to be a common
feature, namely, a rapid rate of population growth. This rate has been rising still more in recent
years, thanks to the advances in medical sciences which have greatly reduced the death rate due to
epidemics and diseases. While the death rate has fallen sharply, but there has been no
commensurate decline in birth rate so that the natural survival rate has become much larger. The
great threat of this rapid population growth rate is that it sets at sought all attempts at development
in as much as much of the increased output is swallowed up by the increased population.
5) Lower Levels of Human Capital - education, health and skills – are of crucial importance for
economic development. In our analysis of human development index (HDI) we noted that there is
great disparity in human capital among the developing and developed countries. The developing
countries lack in human capital that is responsible for low productivity of labor and capital in them.
Lack of education manifests itself in lower enrollment rate in primary, secondary and tertiary
educational institutions which impact knowledge and skills of the people. Lower levels of education
and skills are not conducive for the development of new industries and for absorbing new
technologies to achieve higher levels of production. Besides, lack of education and skills makes
people less adaptable to change and lowers the ability to organized and manage industrial
enterprises. Further, in countries like India, advantage of demographic dividend can be taken only if
the younger persons can be educated, healthy and equipped with appropriate skills so that they can
be employed in productive activities.