Technological Differences Could Lead to

¶ … technological differences could lead to income differences across countries. Which stylized facts are consistent with your explanation? Give some reasons why technology might differ across countries? The world economy has been mostly influenced by political and technological reforms and transformation. The technological factor has played vital and significant part in this regard, and has contributed immensely towards the growth and expansion of the local, regional and international economy.

The positive economic growth translates into surging income of the local population, but this has limited scope, and possible only in the cases of employees related to the technological businesses only. Considering the example of an industry, which started off with manual procedures for the production of the activities, and later with the passage of time and technological advancement, the company incorporated the certain developed and efficient equipment to improve the production and overall efficiency of the company.

The company expanded, and its production goes rising, and at parallel the company enters the international market, and sought expansion internationally. The profits and revenues went on increasing, and of course the over all economic indexes was positive. But in the due course of time, the company had to layoff many of its employees either because of the dread of technological knowledge related to industrial applications.

The conclusion is that, the income of those people who can term themselves well verse in technological advancement will certainly succeed in securing and higher income, and all this is true for people across the world. It is incorrect to infer that a specific region which has achieved economic prosperity and has done on all expenses of people in other parts of the world.

We certainly observe that, all the local companies that were able to achieve success, expanded their network internationally, which resulted not only in rise of their profitability figure, but had positive impact on the international countries. Yes it is true that there is certainly a difference in the income level, which is because of the margin of profit that the employer wanted to achieve.

Secondly, the educational and technological background along with experience are other related factors which affect the disparity in the income level, it can be also due to difference in the living standards and inflation level. The difference in the income level is not because of single reason, but rather there are many other related aspects involved which have resulted in the income disparity across the world.

The difference in the technological progress from country to country is based on many factors, including, literacy rate of the country, the foreign investment within the country and the research and development schemes of the country.

Considering an account of countries like Saudi Arabia and Qatar, although these countries lack strongly in area of research and development, but it is the foreign investment in their country which is responsible for not only for the rise in their income level but also for the technological advancement of that region, where the local population still lag behind the foreign investors and employees in terms of knowledge and experience.

In the case of United States of America, the economy is based on local investment, and it is the research and development activities conducted within that continent which has resulted in the technological advancement of the country. We have seen little empirical evidence that foreign aid has a positive effect on economic growth. We have also seen many policymakers recommending foreign aid to developing countries in order to boost growth.

Should foreign aid have a positive effect on economic growth? If so, how do you reconcile the data? If not, what is it about foreign aid that seems not to function like policymakers say it will? Foreign investment and foreign aid are two different aspects. It is always desire to secure foreign investment instead of foreign aid.

In the current financial world International Monetary Fund, World Bank and Asian Development Bank are the different financial institutions which offer aids and economic assistance to the developing countries, so that those countries can strengthen their infrastructure. It has been encouraged that the foreign aid should be limited, and the developing country should utilize the sanctioned foreign aid towards development of infrastructure, and should the target foreign investment for the overall economic progress of the country.

There are certain factors that make it compulsory for the developing countries to approach and seek financial aid and assistance. Firstly, the country's economic viability is projected from the amount it holds in its foreign reserves, and the provided financial aid will definitely strengthen and improve the calculations of foreign reserves. Secondly, the sanction of foreign aids by leading financial institutions is an indicator of their appreciation of the economic course chosen by the developing countries.

Therefore, these two dominant factors have contributed immensely towards the approach and hope that the developing countries envisaged before opting for lending. However, the observation that can be derived from the past lending records of those financial institutions is not encouraging, the developing countries are held responsible for their corrupt practices at government level, and because of this much of the sanctioned aid is not truly utilized towards the core objective i.e. economic prosperity.

This has been a major issue, and countries like India, Pakistan, Nigeria, Sri Lanka and Ecuador have in past proved guilty for such accusations and charges. This is notable erroneous practice from the part of developing countries. The economic analysts are never positive about receive of financial aids from such financial companies or other international donors, because these financial lending institutes have certain conditions which are completely against the interest of the people of the region.

The International Monetary Fund and World Bank for highly criticized for their terms and conditions, in some of the cases their dictatorship. These financial institutes in past for responsible for high unemployment rates of the developing countries, where it recommended major layoff.

Privatization of national resources is the core of their policies and schemes, which according to some profitable government institutions might be favorable for the government in short run, as it increases the amount of foreign reserves, not this policy is not favorable in long run, because ultimately the state has no other options to increase taxes to earn, as its previously owned institutions have been already disowned. What are the essential features of poverty traps? Give an example of a poverty trap.

Discuss the empirical support for and against the theory that poverty traps are a good way to understand the differences in economic growth. Poverty trap can be temporary, and in some cases people can and do work their way out of poverty. But poverty becomes a trap when a vicious cycle undermines the efforts of the poor, in which conditions of poverty feed on themselves and create further conditions of poverty.

There are a number of major poverty traps that keep the poor enslaved to the vicious cycle of poverty, but there are also a number of programs working to address these issues. Family child labor traps: If parents are too unhealthy and unskilled to be productive enough to support their family, the children have to work. It has been estimated by the World Bank that, in 2003, more than 100 million children were unable to go to school due to their poverty. In this way, poverty is transmitted across generations.

Illiteracy traps: Even if the family cannot or will not send their children to work, parents may not send their children to school because they cannot afford transportation, school uniforms or a modest school fee. If a family could borrow this money, the higher incomes received a few years later by their then-literate children could pay back these loans easily. But if the poor lack access to credit, they may not be able to get loans to finance otherwise very productive schooling.

The lack of credit traps the poor in ways that were not understood until recently. (Costas Azariadis, John Stachurski. Poverty Traps. Handbook of Economic Growth. Department of Economic, the University of Melbourne) Debt bondage traps: While credit is needed, the wrong kind of debt from unscrupulous moneylenders can also be a trap. Colluding moneylenders calibrate loan amounts and interest payments to ensure that a family can never get out of debt.

Sometimes, the rate of pay for impoverished people working for their creditors is so low that it is insufficient even to pay back the interest they owe. Common property mismanagement traps: The poverty trap can rise due to problem with community management of common resources. Once a break down of property or resource occur, responsible use of shared resources is difficult to restore. Criminality traps: Youths without access to useful education and who see little future in legitimate work are drawn to gang membership and other cultures of criminality.

Emotional scars from the experience of violence reinforce this trend. The resulting fights, thefts and criminal activities then compound the community's poverty trap by destroying assets, diverting resources to provide for personal and property security, and even taking the lives of able-bodied young men. Most of the victims are innocent and most are poor. Worsening social and economic conditions draw more people into criminality, a vicious circle that reinforces poverty.

Working Capital traps: Micro-entrepreneurs can only afford a tiny inventory, so their sales are so meager that they are unable to purchase a larger inventory the next day, and secondly they do not find any feasible borrowing scheme from government. (Stephen C. Smith. Poverty Traps and Global Development. The Globalist. May 15, 2006) Poverty trap is more psychological impact as well and can be changed with changes in the culture and advertising, which will attract and turn the people hopeful.

Eighty percent of poor people become poorer when they gamble, but when wining seems the only hope, many poor people are prepared to take that risk, dazzled by the opulence of the rich. Poverty is increased when money-wealth is accumulated by means that do not increase national prosperity, and it can be dissolved if, there is increases in land values directed to benefit the whole public, not targeted speculators. It is also important for the government to insure justice, at low cost, with open access.

It is also important for the government to ensure that it has offered decent housing and rental conditions to its people. (Stephen C. Smith. Poverty Traps and Global Development. The Globalist. May 15, 2006) Would you recommend a policy that would limit population growth in order to raise economic growth? Why or why not? Population growth has been cause of grave concern for governing authorities of developing countries.

In case of developed countries the situation is much under controlled, and in many cases, countries like France, Germany, Australia and Canada, are much below the expected population level. In case of Africa, Pakistan, India, Bangladesh and China, the situation adverse, and require effective combat measures. It is therefore a viable option to introduce and implement a policy which imposes certain restrictions in the increase of family members, this preventive major has been taken and implemented by.