economics flashcards

All 20 cards

1. Card 1

   How is poverty viewed within the broader context of development economics?

   In development economics, poverty is not seen in isolation but as one component of a "triangle of development," which also includes growth and inequality. Achieving human wellbeing, a key aspect of development, requires addressing these interconnected elements.

2. Card 2

   Why is consumption often preferred over income as a monetary indicator for measuring wellbeing in developing countries?

   Consumption is frequently preferred over income for measuring wellbeing because it tends to be more stable over time, directly contributes to utility, and is often easier to measure accurately in developing countries where income sources can fluctuate significantly.

3. Card 3

   Define the concept of an absolute poverty line.

   An absolute poverty line is a threshold based on the monetary cost of meeting basic needs, such as the expense of a food basket that provides sufficient nutritional requirements. Individuals whose income or consumption falls below this line are considered to be in absolute poverty.

4. Card 4

   What is the current international absolute poverty line used by the World Bank, and what does it signify?

   The current international absolute poverty line used by the World Bank is $2.15 a day, measured at 2017 Purchasing Power Parity (PPP). This line serves as a global benchmark for identifying individuals living in extreme poverty based on their daily expenditure or income.

5. Card 5

   Explain what a poverty trap is and provide an example of a mechanism that can drive it.

   A poverty trap is a self-reinforcing mechanism where individuals who are poor tend to remain poor due to a cycle of disadvantage. An example is the nutrition-based trap, where low energy levels from inadequate nutrition lead to low productivity, which in turn perpetuates low income and poor nutrition.

6. Card 6

   How can credit constraints contribute to a poverty trap?

   Credit constraints contribute to a poverty trap by preventing poor individuals from accessing loans or financial capital. This inability to invest in productive assets, education, or businesses can hinder their capacity to increase income and escape poverty, thus reinforcing their poor economic status.

7. Card 7

   How does the initial level of inequality in a country relate to the effectiveness of growth in reducing poverty?

   The initial level of inequality in a country significantly influences how much economic growth actually translates into poverty reduction. High initial inequality can dilute the poverty-reducing effects of growth, as the benefits may disproportionately accrue to the wealthier segments of society.

8. Card 8

   Describe one way inequality can hinder long-term development through social instability.

   Inequality can hinder long-term development by fostering social instability. Significant disparities in wealth and opportunity can increase social unrest, tensions, and the risk of conflict, which disrupts economic activity and diverts resources from productive investments.

9. Card 9

   Distinguish between inequality of outcome and inequality of opportunity.

   Inequality of outcome refers to differences in final economic results, such as income or wealth, among individuals. In contrast, inequality of opportunity refers to differences in the "level playing field," meaning disparities in the initial circumstances or chances available to individuals, often due to factors beyond their control like birth into wealth.

10. Card 10

    How do social norms influence national approaches to poverty and redistribution?

    Social norms play a crucial role in shaping national approaches to poverty and redistribution by influencing societal tolerance for inequality. For instance, societies that prioritize merit and efficiency, like the U.S., may accept higher levels of inequality compared to those that emphasize egalitarianism, like Scandinavian countries.

11. Card 11

    Why is there an increasing emphasis on Impact Evaluation in development economics, particularly given global development aid projections?

    There is an increasing emphasis on Impact Evaluation because global development aid is projected to fall. This necessitates ensuring that limited budgets are spent effectively and that programs achieve their intended outcomes, making evidence-based policy crucial for maximizing aid impact.

12. Card 12

    What is the core challenge of impact evaluation in development economics?

    The core challenge of impact evaluation is establishing the counterfactual. This involves understanding what would have happened to a program participant if they had not received the intervention, which is essential for accurately attributing observed changes to the program itself rather than other factors.

13. Card 13

    Explain why Randomized Controlled Trials (RCTs) are considered a 'gold standard' in impact evaluation.

    Randomized Controlled Trials (RCTs) are considered a 'gold standard' because they eliminate bias by randomly assigning subjects to either a treatment group or a control group. This random assignment ensures that both groups have similar characteristics on average, making any observed differences in outcomes attributable to the program being evaluated.

14. Card 14

    When are Matching Methods typically used in impact evaluation?

    Matching Methods are typically used in impact evaluation when randomization is not feasible. These methods compare participants of a program to non-participants who share similar observable characteristics, attempting to construct a comparable control group ex-post.

15. Card 15

    How does the Difference-in-Difference (DiD) method measure program impact?

    The Difference-in-Difference (DiD) method measures program impact by comparing the change over time in an outcome for a treated group relative to the change over time for a control group. It essentially calculates the 'difference of the differences' to isolate the program's effect.

16. Card 16

    What are 'unfreedoms' in the context of achieving human wellbeing, according to development economics?

    'Unfreedoms' are various forms of deprivation and limitations that hinder human wellbeing. These can include social deprivation, poor economic opportunities, and systemic tyranny, all of which restrict individuals' capabilities and choices, preventing them from living a life they value.

17. Card 17

    What is a relative poverty line, and how is it typically defined?

    A relative poverty line defines individuals as poor if their income or consumption falls below a certain percentage of a society's median income, commonly 50-60%. Unlike absolute lines, it reflects poverty in relation to the overall economic standard of living within a specific society.

18. Card 18

    How can geographic barriers contribute to a poverty trap?

    Geographic barriers can contribute to a poverty trap by situating individuals in low-return locations where economic opportunities are scarce. High migration costs prevent them from moving to areas with better prospects, trapping them in persistent poverty due to their physical location.

19. Card 19

    Beyond simply asking 'Does it work?', what more nuanced questions do modern development economics impact evaluations aim to answer?

    Modern development economics impact evaluations move beyond a simple 'Does it work?' to ask more nuanced questions such as: Which intervention works best, why does it work, and under what specific conditions or contexts is it most effective?

20. Card 20

    What recent global events have highlighted the increased importance of evidence-based policy and precise measurement in development?

    Recent global crises, such as COVID-19, have highlighted the increased importance of evidence-based policy and precise measurement in development. These events have undone significant progress in poverty reduction, making it crucial to ensure that future development efforts are effective and data-driven.

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