Kabir's Econ Blog

January 17, 2010

Ecuador Source of economic growth/development

Filed under: Uncategorized — kabir1892 @ 5:47 am



Natural: Because of the large amount of land available for agriculture, economic growth will increase. However, due to scarce resources. the bush land converted to agricultural land is limited. This allows us to have an opportunity cost.

The law of diminishing returns also comes to play since a growing population causes scarcity of land. To prevent this from happening, land must be improved through technology.

Human Factors: Increase young people = increase in supply of labor = increase in economic growth. It can also cause an increase in market demand, increasing production.

GDP  and GDP per capita will fall if population grows at faster rate

Physical capital and technological factors

Quality of labor leads to economic growth (education)

Population: Labor supply affects quantity of labor.

Changes due to population

6 factors:

1) supply of food

2) environment

3) Government and birth rate

4) Education

5) Role of women in society

6) Migration

Physical capital and technological factors:

-Directly productive capital: plant and equipment (factories)

-Indirect productivity: infrastructure/facilitating capital (roads and railways)

acquiring capital = investment = opportunity cost

Institutional factors: Need good quality infrastructure = suitable financial, legal and social institutional framework.

Important factors:

1) banking system

2) Education system

3) Health care

4) Infrastructure

5) Political stability


Natural: Petroleum, Fish, Timber, Hydropower

oil: Oil was a big help to the economy because it lead to a rapid economic development. In the beginning of 2008, the y had 4.5 billion barrels of oil, mostly located in the Amazon region.

Human Factors: Employment conditions vary greatly in Ecuador according to type of work, individual management styles, and susceptibility to government inspection. Inefficient government enforcement of labor codes and informal employment have created an insecure working environment where labor laws are violated. Also, child labor is common, despite legislation that bans children under 14 from working.



Population growth is expected to slow slightly to an annual rate of 1.6 percent between 2000 and 2010, bringing the population to 14.9 million by 2010.

Sustaining the population is one of the Ecuadorian government’s primary national concerns. Article 39 of the Ecuadorian Constitution addresses the issue of population, guaranteeing individuals the right to determine how many children they will have, while noting the accountability of the state to inform and educate individuals about the responsibilities that accompany this right. Because of Ecuador’s strong Catholic influence with its emphasis on family, population control is a sensitive topic, and the government is reluctant to make strong statements on the issue. To ameliorate poor crop production and slow rural to urban migration, the government offers small grants to individuals to subsidize their farming practices.

The Ecuadorian people are one of the more diverse groups in Latin America. The Ameridians, descendants of the groups who inhabited the area before Spanish colonization of the Americas, make up 30 percent of the population. The other ethnic groups include the mestizo (mixed Spanish and indigenous descent), Spanish, and black and account for 60 percent, 7 percent, and 3 percent of the population.

Physical capital and technological factors:

In the last few years, the Ecuadorian export community has stumbled upon a nontraditional export product: information services, particularly software.

The growing industry is also proving to be an important economic benefit to the country. The same study showed that software development generated $1.2 million in 1998; this figure is estimated to double in 2002. Clearly, software development in Ecuador is a growing industry that should prove to be a valuable investment opportunity.

institutional factors: Education has been tied to the banking system in Ecuador and a good deal of development has occurred through this joint venture with the Bank ofEcuador, the World Bank, and the Inter-American Development Bank. The Inter-American Development Bank reviews the economic reforms in Ecuador in relation to earlier efforts, sequencing, structural reform and stabilization, sustainability, and priority. A new understanding of the role of highereducationin development has brought the beginnings of systemic reform and a new conceptualization of the potential roles in development education can play.

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