Group 5 Developmental Economics (1).pptx

Development Economic

1. Development Economics Group 5 Juan Dela Cruz

2. Outline of Presentation Urbanization and Rural-Urban Migration: Theory and Policy Human Capital: Education and Health in Economic Development Agricultural Transformation and Rural Development

3. Urbanization and Rural-Urban Migration: Theory and Policy Rachel K. Hangdaan Carolyn S. Logatoc Topic 8

4. The Migration and Urbanization Dilemma As a pattern of development, the more developed the economy, the more urbanized it becomes. But many argue that developing countries are often excessively urbanized or too-rapidly urbanizing. Today’s poorest countries are far more urbanized than today’s developed countries were when they were at a comparable level of development. This combination suggests the migration and urbanization dilemma.

5. Urbanization: Trends and Projections Urbanization - is refers to the process where an increasing proportion of a population lives in urban areas (towns and cities) rather than rural areas. Urbanization is occurring everywhere at high and low levels of income whether growth is positive or negative.

6. Proportion of Urban Population by Region, 1950-2050

7. Megacities: Cities with Ten Million or More Inhabitants

8. Estimated and Projected Urban and Rural Population of the More and Less Developed Regions, 1950-2050

9. Migration and Urbanization Dilemma How can LDC cities cope- economically, socially, environmentally, and politically- with such acute concentrations of people? -Problems with basic amenities such as water, electricity, sewer systems. -Also housing and access to health and educational facilities. Rapid urbanization (population growth and rural- urban migration) and urban bias in development strategies have led to growth of huge slums and shantytowns. -Geographic imbalance in economic opportunities. Rural migrants constitute 35-60% of recorded urban population growth.

10. Growth of Urban and Slum Populations, 1990-2001 Migrant workers move to nearby towns and large cities, and especially the capital city They reside in slums and shanty towns where low cost housing is available

11. The Role of Cities What explains the strong association between urbanization and development? Agglomeration economies– cities provide cost advantages to producers and consumers -Urbanization (general) economies -Localization (industry or sector) economies - Saving on firm-to-firm, firm-to-consumer transportation -Firms locating near workers with skills they need -Workers locating near firms that need their skills -Firms benefit from specialized infrastructure -Firms benefit from knowledge spillovers in their and related industries.

12. Urbanization Costs and Efficient Urban Scale But, cities also entail “congestion costs” - Higher real estate costs, longer commutes and higher transportation costs, higher costs for infrastructure such as water and sewer systems, pollution, etc. -Trade-off between economies and diseconomies determines optimal city size.

13. The Urban Giantism Problem Cities are capital intensive so may expect large cities commonly located in developed countries. But urbanization in developing countries has taken place at unexpectedly rapid pace resulting in urban bias in development. -Tendency for economic activity to be concentrated in one or 2 big cities May be inefficient from social point of view -by diversifying the location of firms & economic activities one can reduce cost of production and commuting as well as congestion.

14. The Urban Giantism Problem Large fraction of workers outside formal sector - Huge informal sector in shantytowns Much urban growth is in mid-size cities, but urban bias remains a serious issue in many developing countries There may be First-City Bias (favoring largest city) - Receives disproportionately large share of public investment - Largest city often several times bigger than 2nd largest and non primate cities - Some empirical findings show that several indicators of the quality of life are adversely affected by the share of primate city in a country’s urban population; eg. Child mortality and percentage of households with access to potable water.

15. The Urban Informal Sector A striking feature of urbanization in developing countries is the presence of a large informal sector. Between 30-70% of urban labor force works in the informal sector. Main characteristics of urban informal sector jobs -low skill -low productivity -self-employment -lack of complementary inputs particularly capital -small scale measured in terms of sales, assets, employment, etc. -favored by recent migrants.

16. Importance of Informal Employment in Selected Cities

17. The Urban Informal Sector Urban informal sector viewed as residual sector- a reflection of limited industrial development -With industrialization and development this sector will disappear Another view envisages more positive role for urban informal sector -sector allows excess rural labor to escape from extreme rural poverty and underemployment. -A cheap source of inputs and services for the formal sector (backward linkage). -By increasing income of poor it increases demand for goods and services produced by formal sector. Over time second view has gained popularity and the urban informal sector is now considered to be vital for reducing poverty and inequality of income.

18. Why promote the urban informal sector? -Generates surplus despite hostile environment -Creating jobs due to low capital intensity -Access to (informal) training, and apprenticeships -Creates demand for less- or un-skilled workers -Uses appropriate technologies, local resources -Recycling of waste materials to produce basic commodities for the poor -Benefits the poor, especially women who are concentrated in the informal sector. Disadvantages of Encouraging Urban Informal Sector -Increased migration and aggravating the problem of urban giantism -Increased urban unemployment -Discrimination against formal sector bad in the long run.

19. Policies for the Urban Informal Sector -Remove policies which discourage informal sector -Provide information and training facilities -Increased access to capital and credit. Women in the Informal Sector -Often constitute bulk of informal sector -Legalization and economic promotion of informal-sector activities could greatly improve women’s financial flexibility and the productivity of their ventures.

20. Migration and Development

21. Migration and Development

22. Toward an Economic Theory of Rural-Urban Migration

23. Policy Implications

24. Key Elements of a Comprehensive Urbanization, Migration, and Employment Strategy

25. 25 Human Capital: Education and Health in Economic Development 25 Carolyn S. Logatoc Angelo L. Terrel Lorianne G. Garcia

26. The Central Roles of Education and Health 26

27. Investing in Education and Health: The Human Capital Approach 27

28. Child Labor 28

29. The Gender Gap: Discrimination in Education and Health 29

30. Educational Systems and Development TITLE HERE Lorem Ipsum Text Lorem Ipsum Text Lorem Ipsum Text Lorem Ipsum Text Lorem Ipsum Text Lorem Ipsum Text 30

31. Health Measurement and Disease Burden 31

32. Health, Productivity, and Policy 32 Health and Productivity •The devastating effects of poor health on child mortality are clear enough. • But do poor health conditions in developing countries also harm the productivity of adults? The answer appears to be yes. •Studies show that healthier people earn higher wages. Example: daily wage rates in Cote d’Ivoire have been estimated to be about 19% lower among men whose health status makes them likely to lose a day of work per month because of illness than daily wage rates of healthier men. •The Nobel laureate Robert Fogel has found that citizens of developed countries are substantially taller today than they were two centuries aga and has argued that stature is a useful index of the health and general well-being of a population. If height is an indicator of general health status, to the extent that increases in health lead to a higher productivity, taller people should earn more (unless height also proxies other productivity characteristics.

33. Health, Productivity, and Policy 33 What is a Health System •In the WHO’s definition, a health system is all the activities whose primary purpose is to promote, restore, or maintain health. •Include the components of public health departments, hospitals and clinics, and offices of doctors and paramedics. Some developing countries’ health systems are far more effective than others in achieving health goals. •Outside this formal system is an informal network used by many poorer citizens , which includes traditional healers, who may use somewhat effective herbal remedies or other methods that provide some medical benefits, such as acupuncture, but who also may employ techniques for which there is no evidence of effectiveness beyond the place of effect.

34. Health, Productivity, and Policy 34 What is a Health System •In the WHO’s definition, a health system is all the activities whose primary purpose is to promote, restore, or maintain health. •Include the components of public health departments, hospitals and clinics, and offices of doctors and paramedics. Some developing countries’ health systems are far more effective than others in achieving health goals. •Outside this formal system is an informal network used by many poorer citizens , which includes traditional healers, who may use somewhat effective herbal remedies or other methods that provide some medical benefits, such as acupuncture, but who also may employ techniques for which there is no evidence of effectiveness beyond the place of effect. •The WHO compared health systems around the world, revealing great variability in the performance of health system at each income level.

35. Agricultural Transformation and Rural Development Lorianne G. Garcia Sarah B. Dalumpines

36. The Imperative of Agricultural Progress and Rural Development Agricultural development is now seen as an important part of any development strategy Three complementary elements of an agriculture and employment based strategy: o Accelerated output growth o Rising domestic demand for agricultural output o Non-agricultural, labor intensive rural development activities that are supported by the farming community Over two-thirds of the world's poorest people are also located in rural areas and engaged primarily in subsistence agriculture The core problems of widespread poverty, growing inequality, and rapid population growth all originate in the stagnation and often retrogression of economic life in rural areas. Traditional concept: Agriculture plays a passive and supportive role. Its primary purpose is to provide sufficient low-priced food and manpower to the expanding industrial economy, which is thought to be the dynamic “leading sector” in any overall strategy of economic development.

37. Although agriculture employs the majority of the developing country labor force, it accounts for a much lower share of total output Agricultural production is rising but unevenly Malnutrition and famine inspire calls for a new green revolution* focused on Africa. Food price spike of 2007-2008 partly due to short term factors but long-term factors may herald return to persistently higher food prices in the years ahead. New upward spike of prices by early 2011 The presence of market failures - and poverty alleviation goals – create need for constructive government role in agriculture Agricultural Growth: Past Progress and Current Challenges According to World Bank estimates, the developing world experienced faster growth in the value of agricultural output (2.6% per year) than the developed world (0.9% per year) during the period 1980-2004. Correspondingly, developing countries’ share of global agricultural GDP rose from 56% to 65% in this period, far higher than their 21% share of world nonagricultural GDP.) Research by the International Food Policy Research Institute points up that a wide range of successful programs have reduced hunger while raising agricultural productivity.

38. Long Term Forces that will lead to high future food prices according to Nora Lustig: 1. Diversion of food to biofuels production 2. Increase in the demand for food due to higher incomes in China and elsewhere 3. The slowdown in productivity growth of agricultural commodities 4. Higher energy prices affecting agricultural input costs 5. Running out of new land to be brought into farming 6. Negative impact of climate change on developing country-food production Agricultural Growth: Past Progress and Current Challenges

39. major source of economic growth- although mainly because makes up such a large share of GDP most of world’s rural people, large % of poverty incidence found there, low contribution of agriculture to growth nearly half, or more, of the poor are found in the cities, and agriculture tends to contribute even less to output growth The Structure of Agrarian Systems in the Developing World Agrarian system - is t he pattern of land distribution, ownership, and management, and also the social and institutional structure of the agrarian economy. THREE SYSTEMS OF AGRICULTURE Agriculture-based countries Transforming countries Urbanized countries

40. The Structure of Agrarian Systems in the Developing World Peasant Agriculture in Latin America, Asia, and Africa: Progress and Remaining Challenges > The Latifundio–Minifundio dualistic pattern in Latin America Latifundio - a very large landholding found particularly in the Latin American agrarian system, capable of providing employment for more than 12 people, owned by a small number of landlords, and comprising a disproportionate share of total agricultural land. Minifundio - a landholding found particularly in the Latin American agrarian system considered too small to provide adequate employment for a single family.

41. The Structure of Agrarian Systems in the Developing World > The fragmented and heavily congested dwarf land holdings in Asia Three major interrelated forces that molded the traditional pattern of land ownership into its present fragmented condition (Nobel laureate Gunnar Myrdal) (1) the intervention of European rule, (2) the progressive introduction of monetized transactions and the rise in power of the moneylender, and (3) the rapid growth of Asian populations. Landlord - the proprietor of a freehold interest in land with rights to lease out to tenants in return for some form of compensation for the use of the land. Sharecropper - a tenant farmer whose crop has to be shared with the landlord, as the basis for the rental contract. Tenant farmer - one who farms on land held by a landlord and therefore lacks ownership rights and has to pay for the use of that land, for example, by giving a share of output to the owner.

42. The Structure of Agrarian Systems in the Developing World >Subsistence Agriculture and Extensive Cultivation in Africa Low productivity due to lack of technology Shifting Cultivation Seasonal demand for labor depending on rainy season High dependence on unimproved seeds sown on unfertilized, rain-fed fields Relatively high fraction of underutilized land High concern about climate change impact Need for an African new green revolution, there are hopeful signs that it is getting underway

43. > In 1970, Ester Boserup, a pioneering Danish economist, significantly influenced the field of women and development with her most notable contribution, the book "Woman's Role in Economic Development" . This groundbreaking work was the first to systematically analyze the impact of economic and social growth on women in developing countries. > It highlighted the significant contributions of women in agriculture, particularly in subsistence farming and shifting cultivation systems. African Context : • Women are central to subsistence farming. • Responsible for tasks such as sowing, planting, weeding, harvesting, and storing crops. • Women's agricultural work is often undervalued despite being crucial for household food security and economic stability. Asian Context : • Agricultural systems are typically male-dominated. • Men control land and major farming decisions. • Women perform labor-intensive tasks like weeding and harvesting but have limited control over land and resources. • Women's agricultural output is devalued, and their roles are often subordinate to men's.

44. The Microeconomics of Farmer Behavior and Agricultural Development

45. Core Requirements of a Strategy of Agricultural and Rural Development Key Causes of Agricultural Progress Technological Innovation Access to Markets Education and Training Infrastructure Development Government Policies and Support Basic Conditions Needed Stable Political and Economic Environment Access to Finance Land Tenure Security Research and Development Climate Resilence

46. Thank you! PCU MMPA-N