HIST 151

Political Economy of Modern Asian Development

Week 3 Readings - review

Economic Sectors
An economy is broken down into different sectors.
- Primary - raw materials
- Secondary - manufacturing
- Tertiary - services
- Quarternary - information services
Breakout Groups

We will break into random groups today for a short breakout

session. Have one person from the group report your findings after
the breakout session.
Describe why the share of workers in the primary sector
declines as an economy develops and becomes more
advanced.
Economic Indicators

Defined: An economic indicator is a piece of economic data that is used

by analysts to interpret current or future investment possibilities. These
indicators also help to judge the overall health of an economy
3 types of economic indicators
Leading - predict the direction of the economy

Ex. Consumer confidence, purchasing managers index

Lagging - occur after a trend and can be used to confirm or refute prior leading
indicators

Ex. GDP, corporate profits, consumer price index

Coincident - occurs during a trend

Ex. Avg. hours worked, real earnings

What sort of indicators can be used for development?
Take a few minutes to discuss and we will return to share ideas.
Economic Models
Defined: An economic model is a simplified description of reality, designed to yield
hypotheses about economic behavior that can be tested.
1) Use economic theory to choose a variable to test
2) Form a hypothesis
3) Check with empirical data
Example:
1) Economic theory says more capital will lead to more efficient markets and efficiency
can be measured by productivity
2) If a country has more capital per worker, the GDP/capita should be higher
3) Find the data and run a test