International Economics

This zine will be based on the study of economics and its appliances in the world economy.

Poverty and Productivity by Cristian Lacayo Miselem

Written by CristianLacayo on

There are many different determinants of productivity that when not kept constant may tend to prohibit or limit a poor country’s ability to catch up with rich ones. In most poor country’s people tend to save very little to invest later in capital due to the low wages of most workers that tend to be so low as to be barely enough to meet the necessities of life as opposed to rich countries who tend to have incentives by the government to save. Since saving and investment plays such an important role in economic growth, this in fact slows down economic growth. The next reason of this phenomenon is that poor countries lack the resources available to increase the amount of capital needed to increase productivity and thus increase the country’s GDP as opposed to rich countries who tend to have abundant resources of capital stock. Poor countries also tend to be very unattractive to investors as opposed to rich countries. Since this plays an important role in increasing a country’s standard of living, it tends to slow down GDP and therefore slow down a possible gradual increase in living standards. Education also plays a big role in determining a country’s productivity and thus its standard of living. Since poor countries tend to have lower education rates and quality than rich countries, poor countries tend to have less productive workers than rich countries. Health and nutrition also plays a huge role in worker productivity. Since, just like education, poor countries tend to have lower levels of health and nutrition because of the low wages and low standards of living, they also tend to have less productive workers as opposed to richer countries that tend to have better nurtured workers and thus more productive workers. As it is evident in today’s world poor countries are more likely to have weaker political stability and less protection of property rights as opposed to strong political institutions in rich countries. This explains why poor countries have less investment than richer ones because investors have less incentive to invest their money than in a “safer economy” in rich countries. Rich countries also tend to have more outward-oriented policies than poor ones. This in turn produces less incentive in poor countries to trade in the world market, which in turn affects its productivity and its GDP growth. Research and development also tends to be lower in poor countries because people have less education and less incentive to provide their knowledge to society’s pool of knowledge than in rich countries. This tends to slow GDP growth and thus growth in the country’s standard of living. Population growth also plays a big role in slowing down a poor country’s GDP growth. This is because poor countries tend to have a higher population growth than rich countries, thus limiting its natural resources per person and diluting the capital stock. This also tends to slow GDP growth in poor countries and thus slow a possible increase in living standards.

Cristian Lacayo Miselem

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