What this lesson teaches
I can explain the causes and effects of differences between countries in income, productivity, population, sectors, saving, education, health and resources.
Syllabus K343, 5.4.1. Causes and consequences of international differences: differences in: income, productivity, population growth, size of primary, secondary and tertiary sectors, saving and investment, education, healthcare, natural resources
Make a guess
A country discovers large oil reserves. Will it become highly developed?
- Yes. Natural resources always bring development.
- Only if the oil income is invested well.
- No. Oil never helps a country develop.
Show the answer
Only if the oil income is invested well.
Resources help when their income is spent on schools, health and roads. Relying on one resource leaves a country exposed when its price falls.
Fast population growth, weak education and healthcare hold development back; natural resources help only when their income is used well.
This lesson covers the other four differences the syllabus lists: population growth, education, healthcare and natural resources. For each one, explain the chain to income per head and living standards.
Population growth. When the population grows fast, output has to grow just as fast for income per head to stay the same. Many children also means a large share of dependants, so each worker supports more people and families can save less. The government must spend more on schools and clinics just to keep up, leaving less for roads and power.
Education and healthcare. Education gives workers skills, so they can do more productive jobs and earn more. Healthcare keeps workers well, so they miss fewer days of work and live longer working lives. Both are investment in people. Countries that cannot afford them stay less productive, and that keeps them poor, so the gap widens.
Natural resources. Oil, minerals and fertile land can earn a country a lot of export income. But a country that relies on one resource suffers when its world price falls. Many oil exporters found this when oil prices fell in 2014. Singapore shows the other side: it has almost no natural resources, but it became rich by investing in its people and its ports.
- Population growth and development
- Fast growth holds down income per head and raises the share of dependants.
- Education and healthcare
- Investment in people: more skilled, healthier workers produce more.
- Natural resources
- Help only if the income is invested; reliance on one resource is risky.
Worked example: Comparing two countries with illustrative data
Suppose Country A and Country B have the same total output, but different population growth and schooling.
- Country A: population grows 3% a year, and most adults finished only primary school.
- Country B: population grows 0.5% a year, and most adults finished secondary school.
- If output grows 3% a year in both, income per head stays flat in A but rises about 2.5% a year in B.
- B's better-educated workers can also move into higher-paid jobs, so its lead is likely to grow.
Watch out for this
A country with plenty of natural resources will always be highly developed.
Resources help only if their income is invested well, for example in schools, health and roads. A country that relies on one resource suffers when its price falls, and some resource-rich countries remain poor.
Check your understanding
Why can fast population growth slow a country's development?
- A larger population always lowers a country's total output
- Output must grow as fast to keep income per head steady
- More people always means fewer workers in the whole economy
Show the answer
Output must grow as fast to keep income per head steady
Right. Income per head is output divided by population, so a fast-growing population holds it down.
Check your understanding
Real output grows by 3% a year in a country whose population also grows by 3% a year. What happens to real output per head?
- It stays about the same
- It grows by about 6% a year
- It grows by about 3% a year
- It falls by about 3% a year
Show the answer
It stays about the same
Right. Output and population grow at the same rate, so output per person barely changes.