Term
Lec 2 Why does Agriculture growth lag behind industry? |
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Definition
| - Often taxed, restrictions (infrastructure, rural credit, export restrictions) - Innovations less frequent
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Term
Lecture 2 •Give specific reasons why Growth in Agriculture always slower than industry? |
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Definition
| -inherently profitable industrial opportunities agriculture is usually taxed - •-Overvalued exchange rate •-Taxation of ag output via regulated p, direct tax, export tax, input taxes •-Lower priority for investment projects and infrastructure •-Rural Credit •-Labour mobility restricted for rural people (China, Vietnam) •-Lack of applied agricultural research investments |
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Term
| Lec 2 Where should you invest? Ag or Industry? |
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Definition
Depends if want balanced or unbalanced growth |
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Term
Lec 2 Why invest in balanced growth? |
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Definition
•Ag Sector also capable of high growth –-Contributes to aggregate growth –-Equitable in terms of reducing poverty directly –-Inv in industry + ignoring agriculture and rural areas does not appear to be sufficient –-More politically sustainable |
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Term
Lec 2 Why invest in unbalaced? |
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Definition
| More potential for higher growth in industry than agriculture |
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Term
Lec 2 How to get rapid growth from Ag sector?
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Definition
–-Remove taxation –-Invest in ag research –-Maintain/create competitive markets for inputs, outputs –-Remove bottlenecks such as infrastructure –-Privatize SOEs in Agriculture –-Create appropriate exchange rate –-Allow easy and unrestricted migration from rural areas •-Invest in Rural Areas also –Education, health, infrastructure, local government finances, local government autonomy*, competition |
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Term
| Lec 3 What is Economic Growth? |
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Definition
| process of sustained increases in income due to efficient improvements in the economy |
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Term
Lec 3 What causes efficient improvements in an economy? |
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Definition
| new knowledge, new resources, inputs, processes, marketing arrangemts, asset tenure arrangemts |
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Term
Lec 3 What do we look for when accumulating new investments? |
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Definition
•Accumulating new “investments” with higher-than-average rates of return; not necessarily financial investmts • Such investments can come from any source, region, industry; impossible to predict source of such investments – Not necessarily from agriculture, industry, natural resources, from private or public sector |
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Term
Lec 3 According to Shultz what is growth a process of? |
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Definition
| Growth is process of accumulating “inexpensive income streams” (or high payoff investments) |
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Term
Lec 3 What does Cheaper income streams in terms or returns to investments? |
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Definition
•higher rate of return on the investment •-If the investment earns 10%/year, you would need an investment amount (principal) of $1000. • -If the investment earns 20%/yr, you would need an investment amount of $500 |
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Term
| Lec 3 When is rate of return higher than average? |
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Definition
•Investments that have NPV>0 or Internal Rate of Return (IRR) > opportunity cost of capital (adjusted for risk) • Also Policy Changes where benefits>costs (calculated using welfare cost analysis); e.g., where competition enhanced, public goods production enhanced, taxes on farmers reduced, subsidies reduced, externalities reduced • Improvements in Institutions that are efficient (less costly, deliver larger benefits) • Improved decisions or procedures in any of these three areas will increase or enhance economic growth |
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Term
Lec 3 What is an insituttion and why is it important? |
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Definition
•Definition: agencies and rules and regulations that affect economic behaviour • -Too often forgotten or taken as given; they are important and they change • Development dependent on design and operation of economies institutions; growth enhanced by institutions that favour growth • Many missing institutions in ex-centrally planned economies: legal and contract systems, trade rules and organizations (e.g., customs), commercial arrangements, food safety and grading, police and security, land tenure, banking and financial mechanisms |
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Term
Lec 3 What's traditional agriculture like? |
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Definition
| no changes in technology, few other changes in institutions, social arrangements, slow rates of economic growth, overwhelming characteristic of equilibrium, little advantage in schooling, low rates of saving and low return to capital, low incomes |
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Term
Lec 3 modern agriculture? |
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Definition
•technology changes regularly, many changes in institutions, social arrangements and policies, rapid rates of growth, no sense of equilibrium, high returns to schooling and capital, etc. |
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Term
Lec 3 What policy areas important for growth? |
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Definition
•Agricultural and Industrial Policy • Environmental Policy • Trade Policy • Competition Policy • Labour Market Policy • Investment in People: Education and Health Policy • Financial and Banking Sector Policy • Foreign Investment, Capital and Debt Policy • Science and Technology Policy • Infrastructure Policy • Macro Policy: fiscal, monetary and exchange rate policy |
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Term
Lec 4 Three Areas of Potential for economic growth |
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Definition
•Investment Projects (Public Sector) –New Funds into Infrastructure (roads, transportation in general, communications), Research, Power, Irrigation • Government Policy –Taxes, subsidies, trade policies, regulations; all this usually through government departments • Public Institutions –Related to government but much broader set of organizations, rules and procedures, forms and details of arrangements |
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Term
Lec 3/4 Name some types of institutions |
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Definition
•Legal and contract systems •Trade rules and organizations –Also customs administration •Investment regulations, commercial arrangements •Food safety, animal and plant health regulations •Food grading systems •Land tenure •Banking and financial mechanisms –Rural credit agencies and suppliers (including but not only banks) •Police and security –Issue of bioterror and biosafety now more important •Local governance, democracy institutions |
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Term
Lec 4 •What pushes out the PPF frontier? |
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Definition
–-Increased supply of inputs – -Improved technology or know-how |
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Lec 4 •there are three sources of growth revealed by PPF, two by pushing out the frontier, one by moving closer to the frontier: what are they? |
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Definition
–Increased supplies of basic inputs (labour, savings or capital) – Improved technology or know-how of producing the commodities in question – Improving the efficiency of the economy (moving closer to the frontier) |
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Term
Lec 5 Suggested policy guidelines: industry |
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Definition
–No industry subsidies or specific industry taxation – Attention to Research & Development (Science Policy) – Minimal protection from Border policy – Attention to environmental policy and externalities |
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Term
Lec 5 Suggested policy guidelines: environment |
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Definition
–Identify externalities and choose/design best policies – Identify government policy that encourages degradation – Identify public good problems and devise best policies – |
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Term
Lec 5 Suggested Policy trade? |
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Definition
–Shift from NTBs to tariffs – Steady reduction in tariffs – Remove export subsidies (and taxes) – Minimize exceptions |
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Term
Lec 5 Suggested Policy Competition |
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Definition
| Enhance competition by anti-monopoly policies against monopoly practices, structure, monitoring mergers |
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Definition
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Lec 5 Suggested Policy: Labour Market Policy |
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Definition
| Minimize restrictions on competitive labour market; enhance mobility |
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Term
| Lec 5 Suggested Policy •Human Capital and Health Policies – – |
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Definition
–Invest in education broadly by level and region – Encourage shift to higher quality education – Details: up to country circumstances, with goal of widespread increase in enrollments and quality educatn – Health care investment broadly, in all regions – Details up to country situation: goals are good public health and basic standards, adequate hospital care, food safety |
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Term
Lec 5 Suggested Policy •Financial and Banking Sector – |
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Definition
•Financial and Banking Sector –Public regulations on prudential standards –Competition in sector; regulation re bank assets and solvency (good quality balance sheets); ability to withstand income downfalls, currency depreciations |
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Lec 5 Suggested Policy •Foreign Investment, Capital and Debt Policy – |
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Definition
•Foreign Investment, Capital and Debt Policy –Tricky balancing act to encourage foreign investment as source of capital, technology but form of Inv?, below… – Extent of foreign investment? Instability in capital flows, Debt structure of domestic and foreign firms, Fair taxation and collection |
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Lec 5 Suggested Policy •Science and Technology Policy – |
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Definition
•Science and Technology Policy –Adequate research and development, public sector and private sector –Related to Education policy for graduate study at Univ. –Gets into patents and intellectual property policies |
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Term
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Definition
•Infrastructure –Project funding –Private sector too (toll roads) –Maintenance and repair in addition to new investments |
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Lec 5 Policy Elements 6: Macro Policy |
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Definition
–Interest rates (monetary policy) – Economic growth (full employment goal, many tools both micro and macro) – Exchange rate: most important price in economy • Floating vs fixed or managed XR • When fixed or managed, overvaluation common • Implication: hurts agriculture. Why? Who benefits, who loses? • Traded good sector vs non-traded goods sector • Importance of Dutch disease • Importance of capital flows in addition to trade flows |
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