Development Economics
Refers to the analysis of challenges and
opportuni4es in transforming an emerging
economy into a developed one. Its purpose
is to help developing na4ons iden4fy and
overcome hurdles in economic growth, such
as poverty, inequality, and market failure.
I. MARKET FAILURE
A situa4on where the free
market fails to efficiently
allocate goods and services
in a way that maximizes
society's welfare. It occurs
when the market does not
produce the op4mal level of
goods or services, or when
the distribu4on of goods and
services is not equitable.
TYPES OF MARKET FAILURES:
ExternaliAes- Occurs when the produc4on
or consump4on of a good or service has an
impact on a third party that is not
accounted for in the market price.
Example: Pollu4on from a factory affects
the health of people living nearby.
Imperfect compeAAon- Occurs when there
are few or no compe4tors in a market,
which can lead to higher prices and
reduced output.
Example: Monopolies and
oligopolies.
PUBLIC GOODS
Goods or services that are non-excludable
(difficult to exclude anyone from enjoying
the good) and non-rivalrous (one person's
consump4on does not reduce the
availability of the good for others).
Example: Public parks and na4onal defense.
Asymmetric informaAon- Occurs when one
party in a transac4on
has more informa4on than the other
party, which can lead to inefficiencies
in the market.
Example: A car dealer has more
informa4on about the car than the
buyer.
Imperfect CompeAAon- A market structure
in which there is some degree of
market power held by
individual firms or a
group of firms. In an
imperfectly compe44ve
market, firms have the
ability to influence the
market price of their
products or services.
TYPES OF IMPERFECT COMPETITIONS:
MONOPOLY- A single firm controls
the en4re market for
a product or service.
MONOPOLISTIC COMPETITION- A large
number of firms compe4ng in the market,
but each firm sells a
slightly differen4ated
product.
OLIGOPOLY- A small number of
large firms dominate the market.
MONOPSONY- Buyer side of imperfect
compe44on. There is only one
buyer or dominant buyer.
II. THEORIES OF DEVELOPMENT • import subs4tu4on
• maintain economic
1. MercanAlism- An economic theory that independence
was prevalent in Europe
between the 16th and 3. Linear Stages Of Growth
18th centuries. Model-Economic theory that explains how
The theory is based on the economies progress through five dis4nct
idea that the wealth and stages of growth: tradi4onal society,
power of a na4on depend precondi4ons for takeoff, takeoff, drive
on the amount of gold to maturity, and high mass
and silver it possesses, consump4on.
and that the This model was proposed by the
accumula4on of these economist Walt Rostow in 1960.
precious metals should be According to Rostow, economies progress
the primary goal of through these stages in a linear fashion,
economic policy. with each stage building on the previous
one.
POLICIES:
• maximizing exports over STAGES OF GROWTH:
imports
• increase gold and precious Stage 1: TradiAonal society- The economy is
metals reserves based
• use of protec4onist policies on agriculture, with
such as tariffs and most people engaged in
subsidies subsistence farming.
• colonies are sources of raw There is limited
materials technology and
• colonies are markets for produc4vity is low.
finished goods
Stage 2: PrecondiAons For Takeoff- A few
2. Economic NaAonalism- Poli4cal ideology sectors of the
and economic theory that economy begin to
emphasizes the develop, such as
importance of manufacturing and
protec4ng and infrastructure, which
promo4ng the lead to increased
domes4c economy, produc4vity and higher
oVen at the expense of living standards.
interna4onal trade and Investment in these
coopera4on. sectors is supported by
an increase in savings.
POLICIES:
• protect domes4c economy Stage 3: Takeoff-The economy
from foreign compe44on experiences rapid growth as the
manufacturing sector The Harrod-Domar
expands and new model says that:
industries emerge. Y= S/K
There is a shiV from where:
agriculture to industry as Y= Changes in na4onal
the primary driver of output
economic growth. S= Savings rate
K= Capital Investment
Stage 4: Drive To Maturity- The economy Produc4vity
con4nues to diversify and mature, with a
focus on developing new The Harrod-Domar
technologies and model says that:
improving efficiency. The G= I/C
service sector begins to where:
play a larger role in the G= Rate of growth of
economy. GDP
I= Investment Ra4o
Stage 5: High Mass ConsumpAon- The C= Capital Output Ra4o
economy reaches a stage of
maturity where consump4on of POLICIES:
goods and services becomes the • Increased level of savings (saving
primary driver of economic growth. rate= gross na4onal savings as %
The economy is characterized by of GDP)
high levels of wealth and a high NOTE: The higher the savings, the
standard of living. beger. But, countries can only
save too much.
4. Harrod-Domar Model- The Harrod- • Reduced capital output (the
Domar Growth Model is an amount of capital needed to
economic theory that explains the. generate output) ra4o
The rela4onship between NOTE: If the capital-output ra4o is
savings, investment, and low, an economy can produce a lot
economic growth. The model was of output from a ligle capital. If the
developed by economists Sir Roy capital-output ra4o is high then it
Harrod and Evsey Domar in the needs a lot of capital for
1940’s. produc4on, and it will not get as
According to the Harrod-Domar much value of output for the same
Growth Model, the rate of
economic growth in a country is SAMPLE COMPUTATIONS:
determined by two factors: the G= I/C
rate of savings and the capitaloutput ra4o. Rate of growth of GDP = Savings
The model assumes that investment is ra4o / Capital output ra4o
the main driver of economic growth, • If the savings rate is 10% and the
and that a high level of investment capital output ra4o is 2, then a
requires a high level of savings. country would grow at 5% per year.
• If the savings rate is 20% and the
capital output ra4o is 1.5, then a
country would grow at 13.3% per
year.
• If the savings rate is 8% and the
capital output ra4o is 4, then the
country would grow at 2% per year.
5. Solow Growth Model- The Solow Growth
Model, developed by
Nobel Prize-winning economist Robert
Solow, was the first neoclassical growth
model and was built upon the Keynesian
Harrod-Domar Model. The Solow model
is the basis for the modern theory of
economic growth.
The Solow Growth Model is an
exogenous model of economic
growth that analyzes changes in
the level of output in an economy
over 4me as a result of changes
in the popula4on (labor) growth
rate, the savings rate, and the
rate of technological progress.
Therefore, the produc4on func4on of
neoclassical
growth theory is used to measure the
growth and
equilibrium of an economy.
That func4on is Y = F (K, AN).
Y denotes an economy's gross domes4c
product (GDP)
K represents its share of capital
N describes the amount of unskilled labor in
an
economy
A represents a determinant level of
technology
or output is a func4on of Capital (K: from
savings=investment and effec4ve worker (A:
technological progress and N: Labor)
ASSUMPTIONS OF THE SOLOW GROWTH
MODEL:
1 . An increase in saving model
rate will lead to higher
growth of output per
worker for some 4me, but
not forever.
PRO
● saving rate determines the
level of output per worker in
the long run. Countries with
higher saving rate will achieve
higher output in the long run.
CON
● the economy cannot increase
saving rate forever.
2. Popula4on has a short run
posi4ve effect on economic growth,
but long run nega4ve impact
POSITIVE EFFECT
● popula4on growth increases the
size of the labor force, which leads
to an increase in output
NEGATIVE IMPACT
●as the labor force grows, the capital-labor
ra4o decreases, which leads to
diminishing returns to capital and
ul4mately lowers the rate of
economic growth.
3 . Improvement in
technology shiVs the
produc4on func4on
POSITIVE EFFECT
● improvement in
technology leads to an
increase in output per
worker.
● improvement in technology
reduces the number of
worker needed to achieve
given number of output.
Doubling technology (A) A
produces the same output
with half the labor (N).
● If the state of technology (A)
doubles, it is as if the
economy had twice as much
workers.
6. Structural Change Theory- Structural
change theory is a
framework in economics that
explains how economies
transform from being dominated
by agriculture to becoming
industrialized, and then
eventually transi4oning to a
service-based economy. The
theory emphasizes that
economic growth is driven
by shiVs in the structure of
an economy, as well as
changes in the composi4on of
output and employment
(technology and government
policies).
Phases of economic development
1. AGRICULTURE- Large por4on of
popula4on is engaged in farming
2. INDUSTRIAL- Manufacturing is the
dominant sector
3. Service-Based- Majority of workers are
employed in service related industries, such
as finance, educa4on,
and healthcare.
The structural change theory also
highlights the importance of
technological advancements
in driving economic growth
and structural change.
EXAMPLE: In the industrializa4on
phase, technological innova4ons
in machinery, transporta4on, and
communica4on facilitated the
growth of the manufacturing
sector, leading to increased
produc4vity and output.
Emphasizes the role of
policy interven4ons in
promo4ng structural
change.
EXAMPLE: Government
policies such as
investment in educa4on
and infrastructure can help
accelerate the transi4on
from an agricultural to an
industrial economy, and
later to a service-based
economy.
7. InternaAonal
Dependence Theory- A framework in
economics that
emphasizes the rela4onships
between developed and
developing countries, and
how these rela4onships
contribute to the economic
underdevelopment of the lager.
The theory suggests that the
global economic system is
structured in a way that
perpetuates the economic
dependency of developing
countries on developed
countries, thereby hindering
their economic growth and
development.
According to the theory, the
economic underdevelopment
of developing countries is
primarily due to their
reliance on expor4ng raw
materials and natural
resources to developed
countries, which in turn import
manufactured goods from
these developing countries.
This pagern of trade perpetuates
a cycle of economic
dependence, where developing
countries remain dependent on
developed countries for both
technology and manufactured
goods.
Argues that developed
countries have historically
benefited from exploi4ng
the resources and labor of
developing countries, leading
to persistent inequali4es in
wealth and power between the
two groups of countries. In this
context, the theory also
highlights the role of
imperialism and colonialism in
shaping the global economic
system.
III. ECONOMIC PLANNING
The process of
senng goals and
objec4ves for an
economy, and then
designing policies
and strategies to achieve those goals.
ECONOMIC PLANNING STRATEGIES:
1. Centralized Planning- The government
makes all
the decisions about how
resources will be
allocated and how goods
and services will be
produced and
distributed. This approach
has been used in countries
like China and the former
Soviet Union, but has
largely fallen out of favor
due to its inefficiency and
lack of incen4ves for
innova4on.
CENRALIZED PLANNING STRATEGIES
a. NaAonalizaAon
Involves the government taking
control of private industries
and making them state-owned.
This is oVen done to ensure that
key industries are controlled by the
government and can be used to
achieve specific economic goals.
b. Price Controls
The government set prices for
goods and services to ensure
that they are affordable for
everyone. This can be done
through subsidies or through
direct price controls.
c. RegulaAons
The government put in place strict
rules on who, what, how
businesses can enter the
market and what prices they
may change.
d. Plans
planning that was used in the
Soviet Union and other
communist countries. The government
would create a
plan for the next five years
that would outline produc4on
targets for various industries.
2. Market-Based Planning- Economic
planning
strategy and economic
system in which the
market, rather than
a central authority,
determines
produc4on,
distribu4on, and
pricing of goods and
services.
MARKET-BASED PLANNING STRATEGIES
a. Free Market- Individuals
and businesses
make their own decisions about
what to produce and consume, and
prices are set by supply and
demand. Government interven4on
in the market is minimal, with
limited regula4ons and no price
controls.
b. CompeAAon- Government
supports
compe44on among firms.
Compe44on is an essen4al
element of market-based
planning strategies. It incen4vizes
businesses to produce beger
products and services at lower
prices to win customers.
c. PrivaAzaAon- Priva4za4on involves
transferring
ownership and control of
public assets and services to
private individuals and
businesses. This can increase
efficiency and innova4on in the
provision of goods and services.
d. DeregulaAon- Deregula4on involves
reducing
or elimina4ng government
regula4ons on businesses and
industries. This can lead to
increased compe44on, lower
prices, and greater efficiency.
3. Mixed Economy Planning- In a mixed
economy,
the government
plays a role in
regula4ng and
guiding the
economy, but also
allows market forces
to operate. This
approach is used in
many countries around
the world, including
Canada and the United
Kingdom.
MIXED ECONOMY PLANNING STRATEGIES
a. Public Goods And Services- The
government provides public goods and
services such
as healthcare, educa4on, and
infrastructure. This ensures that
these essen4al services are
available to everyone, regardless
of their ability to pay.
b. Taxes And Subsidies- The government
uses taxes and subsidies to encourage or
discourage certain types of
economic ac4vity. For example,
taxes can be used to discourage
pollu4ng industries, while
subsidies can be used to
encourage the development of
renewable energy.
c. RegulaAon- Regula4ons
can be put in place
to ensure that businesses
operate in a way that benefits
society as a whole. For
example, regula4ons can be
put in place to limit pollu4on or
to ensure that workers are
treated fairly. Regula4on is
less strict than centralized
economies.
d. Private-Public Partnership- Involve
collabora4on between
the government and private
businesses to provide goods
and services. For example, the
government may partner with a
private company to build a new
transporta4on system.
4. Targeted Planning- The government sets
specific goals and
objec4ves for certain
sectors of the economy,
such as infrastructure or
educa4on. This approach is
oVen used in developing
countries where resources
are limited. This is used in
conjunc4on with
strategies in centralized,
market-based and mixed
economy planning
approaches.
TARGETED PLANNING STRATEGIES
a. Industrial Policies- Involves
government
support for specific
industries or sectors of the
economy. This can include
subsidies, tax incen4ves, or
other forms of support to
promote growth and
compe44veness.
b. Job CreaAon- Programs
are designed to
create new
job opportuni4es
for people who are
unemployed or
underemployed. This can
include targeted training
programs, subsidies for
businesses that hire new workers,
or public works projects that
create jobs.
c. Infrastructure Investment- Government
spending on
public infrastructure such as
roads, bridges, and public
transporta4on. This can create
jobs and s4mulate economic
growth, while also improving public
services and quality of life.
d. Social Safety Nets- Government sets
programs
designed to provide
assistance to people who are
facing financial hardship, such
as unemployment insurance, food
assistance, or housing subsidies.
e. Regional Development- development
programs are designed to promote
economic growth in specific
regions or areas that may be
struggling economically. This
can include targeted investments
in infrastructure, job crea4on
programs, or other forms of
support.
5. ParAcipatory Planning- The government
engages with
ci4zens and other
stakeholders to
develop policies and
strategies that are
inclusive and address
the needs and
concerns of all
segments of society.
This approach is used
in some countries,
including Brazil and
Bolivia.
PARTICIPATORY PLANNING STRATEGIES
a. DeliberaAve Democracy- Crea4ng
opportuni4es for
ci4zens to deliberate and
discuss public issues in a
structured and inclusive way. This
can involve ci4zen juries, public
forums, or other forms of
par4cipatory decision-making.
b. CollaboraAve decision-making- Bringing
together stakeholders from different
sectors, such as
government, business, and nonprofit
organiza4ons, to work
together on a common goal and
involved in decision-making. This
can help to ensure that all
perspec4ves are represented and
that decisions are made with a more
holis4c understanding of the issue.
c. ParAcipatory BudgeAng- Allowing
community members
to directly par4cipate in the
budge4ng process, by
proposing and vo4ng on
projects and ini4a4ves that will
be funded by public resources.
d. Empowerment- Giving
individuals and
communi4es more control
over the decisions that affect
their lives. This can involve
providing educa4on and
training, crea4ng
opportuni4es for
par4cipa4on, and building
capacity for collec4ve ac4on.
OTHER PLANNING APPROACHES
1. Green Planning- A planning
approach that aims to achieve sustainable
development by priori4zing
environmental considera4ons.
The goal is to balance economic
growth with the preserva4on and
enhancement of the natural
environment.
2. Decentralized Planning- Devolving
economic decision-making power to local or
regional governments, allowing
them to set priori4es and allocate
resources based on local needs and
circumstances. This approach is
oVen used in federal systems, such
as India and Brazil.
3. Export Oriented Planning- Approach that
focuses on the
produc4on and export of
specific goods or services, with
the aim of increasing foreign
exchange earnings and s4mula4ng
economic growth. This approach
has been used by many developing
countries, including South Korea
and Taiwan.
4. Import SubsAtuAon- Promo4ng the
domes4c produc4on of goods that are
currently being imported, with
the aim of reducing dependence on
foreign goods and promo4ng
economic self-sufficiency. This
approach has been used by many
developing countries, including India
and Brazil.
5. Human Capital Development- Inves4ng
in educa4on and
training in order to develop a
skilled workforce that can drive
innova4on and economic growth.
6. Rural Development- Promo4ng
agriculture and rural
industries in order to reduce
poverty and inequality in rural
areas.
7. Regional IntegraAon- Promo4ng
economic integra4on
and coopera4on among
neighboring countries in order
to achieve economies of scale and
greater regional stability.
8. Sustainable Development- Development
that aims to
ensure that the next genera4on
enjoy the resources we are
enjoying now.
IV. NATIONAL DEBT
Na4onal debt, also known as public
debt, refers to the total amount of
money owed by a country's central
government to its creditors. This debt
is accumulated over 4me through
borrowing to finance government
expenditures, such as infrastructure
projects, social programs, and defense.
Na4onal debt can be held domes4cally
or by foreign creditors, and typically
accrues interest payments over 4me.
The level of na4onal debt is typically
expressed as a percentage of a
country's GDP, which provides a
measure of the rela4ve size of the debt
to the size of the economy.
TYPES OF NATIONAL DEBT
a. Internal Debt- This is debt that is
owed to
creditors within the country,
such as domes4c banks,
pension funds, or individual
investors. Internal debt can be
denominated in the local currency,
making it easier for the
government to manage and
service the debt.
b. External Debt- This is
debt that owed to
foreign creditors, such as other
countries, interna4onal
organiza4ons, or foreign banks.
External debt can be denominated
in a foreign currency, which can
expose the government to exchange
rate risks if the value of the local
currency depreciates.
COMPONENTS OF NATIONAL DEBT
a. Government Bonds- Bonds are debt
securi4es issued
by governments to raise
capital. When investors buy
bonds, they are effec4vely lending
money to the issuer for a fixed
period of 4me, in exchange for
regular interest payments and the
return of the principal amount at
maturity.
b. Treasury Bills- Short-term debt securi4es
issued by a government,
typically with a maturity of less
than one year. They are typically
sold at a discount to their face value
and do not pay interest. Instead, the
investor earns a profit when they
redeem the bill at face value.
c. Loans- Governments may also take out
loans from interna4onal
organiza4ons or other
countries to finance their
expenditures. These loans are
typically issued with condi4ons
agached, such as economic
reforms or repayment schedules.
d. Sovereign Debt- Debt issued by a
country's
central government, as opposed
to debt issued by state or local
governments.
e. Unfunded ObligaAons- These are
obliga4ons that a
government has commiged to
paying in the future, such as
pension or healthcare
liabili4es. While not technically
debt, these obliga4ons can s4ll
impact a country's overall fiscal
posi4on.
f. ConAngent LiabiliAes
These are poten4al future liabili4es that
may arise from events such as natural
disasters
or bank failures. Governments
may be responsible for covering
some or all of these liabili4es, which
can impact their overall debt
posi4on.
V. Classifying Countries
1. Via Economic Growth
Gross Domes4c Product, Gross Na4onal
Product, Gross Na4onal Income
a. Developed vs. Undeveloped- An older
method that divided the countries into rich
developed countries and poor undeveloped
countries. This method did not allow for any
flexibility
b. Developed vs. Developing Countries
• Similar to the Developed/Undeveloped
Model, but this
one allows that countries can change over
4me
• Example, in 60 years South Korea went
from Developing
to Developed
• Grouped by economic development.
• System ignores culture. Countries such as
Brazil, China
and India have a very rich and highly
developed culture.
Developed Countries
• Highest level of economic and social
development
• Even the poorest in these countries live
well compared to those in
developing countries b. Industrialized and Newly Industrialized
• Economies are based on the service sector c. High Income vs. Low Income vs. New
– e.g. educa4on, health Emerging Economies
care, banking, transporta4on and info
technology a. First World vs. Second World vs. Third
• Manufacturing is less important World
• Primary industries (agriculture, fishing,
forestry) least important First World Countries
• 20% of the world’s popula4on • Industrialized, developed, capitalist
• Use most of the world’s resources countries
such as Canada, the United Kingdom, USA
Developing Countries and
• Lowest level of economic and social Japan.
growth • These countries are most oVen within the
• Economies dominated by primary sphere of American influence.
industries, • They share common poli4cal and
especially agriculture economic
• Few pay taxes so ligle money for interests.
government
services Second World Countries
• Relies on foreign aid • Former communist-socialist countries
with strong industrial and social
development.
One significant • Countries include Russia, Poland and
difference Hungary and China.
between developed and
developing countries lies in the Third World Countries
way they manage their garbage. • The underdeveloped countries of the
Several developed countries world,
have strict rules and procedures especially those with widespread poverty.
in place regarding garbage • Usually very poor (e.g., Mali).
disposal and violators are fined • Most oVen the countries are African,
heavily. Asian or
Proper management of garbage La4n American.
is a strong indicator of a
developed society. Communist Countries
considered Third World
• Cuba
2. Via Social Development • Laos
Level of Educa4on, Life Expectancy, Infant • Vietnam
Mortality • North Korea

a. First World vs. Second World vs. Third

World
b. Industrialized vs. Newly secondary industry.
Industrialized
LOW PER CAPITA INCOME
Industrialized Countries
• Countries that have a: A situa4on where people have
• mature and sophis4cated economy, inadequate access to basic
• advanced technological and physical necessi4es such as food,
infrastructure, and shelter, healthcare, and
• diverse industrial and service sectors. educa4on, leading to a poor
quality of life.
Newly Industrialized Countries Low levels of living can result
• Countries that are not yet “developed” from a combina4on of factors
but are such as poverty, lack of access
ding beger than “developing countries”. to resources, and inadequate
Usually, these countries: social safety nets.
• switch from agricultural to industrial
• increase open-market economy A situa4on where
• receive investments from foreign the average
countries. income earned by
each person in a
given popula4on
c. High Income vs. Low Income vs. Newly is rela4vely low.
Emerging This could be due to
A beger way to classify factors such as low
countries will Economies levels of
not just show wealth, but also how produc4vity, limited
quickly countries are developing. job opportuni4es, or
a low minimum
High Income wage.
Countries (HICs).
These SOCIAL SAFETY NET
have a high GNI per head and
a high quality of life. A collec4on of government
programs designed to provide
Low Income Countries financial and social assistance to
(LICs). These have a low individuals and families who are
GNI per head and a low struggling to meet their basic
quality of life. needs. The safety net is meant to
prevent or alleviate poverty, reduce
Newly Emerging inequality, and promote economic
Economies (NEEs): These and social stability.
are rapidly genng richer.
Their economy is moving
from primary industry to
a. FOOD ASSISTANCE PROGRAM
These programs provide direct
financial assistance to individuals
and families in need, such as
Temporary Assistance for Needy
Families (TANF), Supplemental
Security Income (SSI), and the
Earned Income Tax Credit (EITC).
These programs provide food and
nutri4onal support to individuals and
families, such as the Supplemental
Nutri4on Assistance Program (SNAP),
the Women, Infants, and Children
(WIC) program, and the Na4onal
School Lunch Program.
b. HOUSING ASSISTANCE PROGRAM
These programs help individuals
and families access safe and
affordable housing, such as the
Sec4on 8 Housing Choice Voucher
program and public housing.
c. HEALTHCARE PROGRAM
These programs provide access to
healthcare services, such as
Medicaid, Medicare, and the
Children's Health Insurance Program
(CHIP).
d. CASH ASSISTANCE PROGRAM
These programs help individuals acquire the
skills and educa4on they need to secure
beger-paying jobs and improve their
economic prospects, such as the Pell Grant
program and the Workforce Investment Act
(WIA).
e. CONDITIONAL CASH TRANSFER
PROGRAM
This program provides cash grants to poor
households, as long as they meet certain
condi4ons, such as ensuring that their
children
agend school and receive regular health
checkups.
Pantawid Pamilya Pilipino Program
The flagship program of the
Philippine government's social
safety net. It provides condi4onal
cash grants to extremely poor
households to help them meet their
basic needs and invest in their
future.
f. SOCIAL PENSION PROGRAM
This program provides a monthly
pension to indigent senior ci4zens
who are not covered by any social
pension program.
g. EXPANDED PUBLIC EMPLOYMENT
PROGRAM
This program provides
temporary employment
to the unemployed,
par4cularly in areas
affected by natural
disasters and other
emergencies.
INTERNAL DEBT the issuer pays back the principal amount of
the bond to the
The amount of money that investor.
a government owes to Bonds are considered a rela4vely low-risk
domes4c creditors, such investment, as they offer a
as individuals, banks, and fixed rate of return and are typically backed
other financial ins4tu4ons by the creditworthiness
within its own country. of the issuer.
Internal debt is typically
issued in the form of bonds or SECURITIES
securi4es, which are sold to Securi4es refer to financial
investors who are willing to instruments that represent
lend money to the ownership in a company, a creditor
government in exchange for rela4onship with a government or
interest payments. corpora4on, or a right to ownership in
a financial asset. Some examples of
EXTERNAL DEBT securi4es include stocks, shares or
equi4es that allows a person who
The amount of money holds it a share in profits.
that a government owes
to foreign creditors, such
as other governments, CAPITAL MARKETS
interna4onal financial
ins4tu4ons, and private Capital markets refer to financial
investors from other markets where long-term debt
countries. and equity securi4es are bought
External debt can be in the and sold. These markets enable
form of loans, bonds, or corpora4ons, governments, and other
other forms of credit, and is en44es to raise capital from investors
typically denominated in a by issuing stocks, bonds, and other
foreign currency. financial instruments.

POVERTY
BONDS A state of extreme depriva4on in which an
Bonds are debt instruments that are issued individual, household, or community lacks
by governments, access to basic necessi4es and resources
corpora4ons, or other organiza4ons as a needed for survival and well-being.
means of borrowing These may include food, water, shelter,
money from investors. Bonds are typically healthcare, educa4on, and other essen4al
sold in denomina4ons of goods and services.
$1,000 or more, and pay interest to the
bondholder at a specified
rate, typically on a semi-annual basis. At the
end of the bond's term,
ABSOLUTE POVERTY TRANSIENT POVERTY
A condi4on in which
an individual or A temporary period of
household lacks the poverty, which may occur
basic necessi4es of due to factors such as job
life, such as food, loss, illness, or a natural
shelter, and disaster. Transient poverty
clothing. People is typically short-lived,
living in absolute las4ng for a few months to
poverty oVen struggle a year or two.
to survive and may While it can be a
not have access to challenging period, people
clean water, experiencing transient
healthcare, or poverty oVen have the
educa4on. resources and capabili4es
to overcome it and return
RELATIVE POVERTY to their previous standard
A condi4on in which an of living.
individual or
household has a URBAN POVERTY
lower standard of Poverty that is
living than the concentrated in rural
average or median areas, where people oVen
standard of living in lack access to basic
their society. services such as
In other words, healthcare, educa4on, and
rela4ve poverty is clean water. Rural poverty
determined by is oVen exacerbated by
comparing a person's factors such as low
income or wealth to agricultural produc4vity,
that of others in their poor infrastructure, and
limited economic
CHRONIC POVERTY opportuni4es.
A condi4on in which an individual or
household has been living below URBAN POVERTY
the poverty line for an extended Poverty that is
period, typically for at least concentrated in
several years. Chronic poverty urban areas, where
oVen results from a combina4on people may face
of factors such as low income, challenges such as
limited access to basic services, high housing costs,
lack of educa4on and skills, and limited job
inadequate social protec4on. opportuni4es, and
inadequate access to
basic services such as
healthcare and
educa4on.
MULTIDIMENSION AL POVERTY
Mul4dimensional poverty takes into
account a range of factors that
contribute to poverty, including
income, health, educa4on, and
access to basic services.
This approach recognizes that poverty
is a complex phenomenon that
cannot be fully captured by income or
wealth alone.
THEORY OF MULTIDIMENSIONAL POVERTY
According to Sen, poverty is not only the
lack of income or
resources, but also the lack of capabili4es or
opportuni4es to lead a fulfilling life.
Sen's approach to poverty emphasizes the
importance of
understanding the different dimensions of
poverty, including
access to educa4on, healthcare, clean
water, sanita4on, and
other basic services. He argues that poverty
cannot be
reduced by addressing income or
consump4on alone, but must
also address the underlying factors that
prevent people from
living fulfilling lives.
Sen's approach to poverty is reflected in the
Human
Development Index (HDI), which is a
composite measure of
income, educa4on, and health developed by
the United
Na4ons Development Programme (UNDP).
The HDI is designed
to capture a more comprehensive view of
human well-being,
beyond economic indicators alone.
CHILD POVERTY
Child poverty refers to poverty that
affects children, who may
experience depriva4on in areas such
as educa4on, healthcare, nutri4on,
and housing. Child poverty can have
long-term consequences for children's
health, well-being, and future
opportuni4es.
FEMINIZATION OF POVERTY
A phenomenon in which women are
dispropor4onately represented among the
poor. It is characterized by the increasing
number
of women living in poverty compared to
men, as
well as the severity and dura4on of poverty
experienced by women.
There are several factors that contribute to
the
feminiza4on of poverty, including gender
discrimina4on, unequal access to educa4on
and employment opportuni4es, and
caregiving responsibili4es. Women oVen
face
lower wages, limited access to credit and
property
rights, and a higher burden of unpaid care
work,
all of which can make it more difficult for
them to
escape poverty.