1. Poverty Cycles / Poverty Traps
1.1. Low incomes --> Low savings --> Low investment --> Low productivity --> low income
1.2. Absolute poverty: inability to just meet basic physical human necessities/needs of food/nutrition, clothing, health and shelter in order to survive
1.3. Relative poverty: a poverty measure based on a poor standard of living/low income compared to the rest of society
2. Social and cultural factors
2.1. Population birth and death rate
2.1.1. There is a correlation between high birth rates and low GDP per capita
2.2. Agriculture & Rural Urban Migration
2.2.1. Many of the most severe development problems arise from a weak agricultural sector
2.3. Urban Unemployment
2.3.1. The problem occurs if the urban sector is small relative to the large rural sector and there is not enough capacity to absorb the surplus labour
3. Institutional and political structure
3.1. Ineffective taxation structure
3.1.1. little tax revenue in LEDCs, government impose export tariff which inevitably reduce income of rural people because of raw materials and agriculture
3.1.2. non-proper income tax system cannot provide fairness between government (revenue) and people (inequality)
3.2. Political instability
3.2.1. unstable economic condition,
3.2.2. reduce FDI
3.3. Unequal distribution of income
3.3.1. inequality
3.3.2. unequal distribution of land, natural resources and capital
3.3.3. children from elite have greater access to education and get the best job
4. International financial barriers
4.1. International finance & indebtedness
4.1.1. Economic development has been promoted since 1960 as the best route for LEDCs to follow, justifying borrowing from banks to spend on projects:
4.1.2. The risky nature of lending to LEDCs requires: higher interest rates, much more expensive than the rate charged by the World Bank or aid agencies
4.1.3. Stock of debt: the ratio of debts to exports has averaged 125% to 150%
4.1.4. Debt servicing flow: includes interest payments and repayments of principal, and often exceeds 40% of exports for certain poorer LEDCs
4.2. Non-convertible currencies
4.2.1. A non-convertible currency is one that is used primarily for domestic transactions and is not openly traded in the forex (FX) market. This is usually the result of government restrictions, which prevent it from being exchanged for foreign currencies. A non-convertible currency is commonly known as a "blocked currency."
4.3. Capital flight/brain drain
4.3.1. Capital flight is where investors and businesses remove their money and assets from one country. It can occur due to economic or political factors such as economic recessions or unstable governments. Either way, it encourages investors and businesses alike to transfer their capital away and towards other nations.
5. International Trade Barriers
5.1. overdependence on primary products
5.1.1. Discourages investment in other aspects of the economy. Concentrating on primary products does not always help the long-term development of an economy because it can contribute towards a lack of investment in other aspects such as education and industrial production.
5.2. consequences of adverse terms of trade
5.2.1. if import prices rise relative to export prices, we say there has been a deterioration in the terms of trade. Generally, this leads to a decline in living standards as foreign currency earnings are relatively less and imported consumer goods more expensive.
5.3. consequences of a narrow range of exports
5.3.1. Many developing economies produce mainly primary exports and tend to specialise in a relatively small range of these products. This leaves them heavily reliant on the world prices of relatively few products, and this can be a real barrier to further development.
5.4. protectionism in international trade
5.4.1. Trade barriers such as tariffs raise prices and reduce available quantities of goods and services for U.S. businesses and consumers, which results in lower income, reduced employment, and lower economic output.