International Business Chapter 3. National differences in economic development

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What is GNI?

The Gross National Income wish measures the anual income received by residents of a nation

What is the difference between the GNI and the GDP?

The Gross Domesti Produt is the GNI plus the net income received from overseas

Why GNI can be misleading?

Because they don't consider differences in the cost of living

How can you adjust the GNI?

With the Purchasing Power Parity (PPP). Tha base for the adjustment is the cost of living of the United States.

What was argued by the Nobel Prize winning economist Amartya Sen?

That development should be assessed less by the material output and more by the capabilities and opportunities that people enjoy.

Who took Amartya Sen's thesis and what it measures?

United Nations wit the Human Development Index (HDI) to measure the quality of human life.

In what 3 measures is based the HDI?

1)Life expectancy at birth (health care) 2) educationl attainment (adult literacy and enrollment) 3)Average incomes PPP

What are the engines of long-run economic growth?

Innovation and enteprenurial activity

What is needed to achieve this 3 engines of economic growth?

Market economy, strong property rights, political system (democracy may not be the cause but it seems to be a consequence of that progress)

What about legal system for economic development?

British common law might offer greater investor protection. Colonization also influences contract enforcement, labor market reg, etc

What has been spread beynd the countries in the last years?

Democracy and market based systems

What you need shift toward a market based economic system?

Deregulation and Privatization

What are the costs for a first mover?

Corruption in totalitarian regimes, differences in the purchasing power of citizens, + risks