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    Group 5

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    RJ 1
    Economic development CBM

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    Group 5

    Uploaded by

    RJ 1
    7 views33 pages
    Economic development CBM

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    GROUP-5

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    Economic development CBM

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    7 views33 pages

    Group 5

    Uploaded by

    RJ 1
    Economic development CBM

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 33

    CAPITAL

    FORMATION AND
    ECONOMIC
    DEVELOPMENT
    SAVINGS AND
    INVESTMENT:
    MECHANISMS FOR
    CAPITAL
    ACCUMULATION
    SAVINGS
    Savings are the portions of income that are not immediately spent but are
    instead saved away for future consumption or investment. It represents the
    act of abstaining from immediate spending in favor of growing assets or
    riches over time. Savings can be made by individuals, households,
    businesses, or governments.
    SAVINGS

    Household Savings

    CORPORATE SAVINGS

    GOVERNMENT SAVINGS
    INVESTMENT
    Investment refers to the usage of saved resources into productive assets or
    activities with the goal of generating future income or capital appreciation.
    It involves investments in physical capital (such as machinery and
    infrastructure), human capital (such as education and training), and
    technological innovation.
    INVESTMENT

    Physical Capital Investment

    Human Capital Investment

    Financial Capital Investment

    Technological Investment
    CAPITAL
    ACCUMULATION
    Financial Intermediation
    Financial institutions (banks, credit unions, etc.) play an important role in
    mobilizing household savings and directing them toward productive investments.
    They help firms and entrepreneurs allocate resources more efficiently by giving them
    with loans and financial services.

    Capital Markets
    Stock markets, bond markets, and other financial markets allow both businesses
    and governments to raise funds by issuing stocks, bonds, and other securities.
    Investors, both individual and institutional, contribute savings to these markets,
    which are then employed for productive investments.
    CAPITAL
    ACCUMULATION
    Infrastructure Investment
    Governments and business organizations engage in infrastructure projects such as
    transportation systems, utilities (water and electricity), and telecommunications. These
    investments promote economic efficiency, commerce, and living standards, all of which
    contribute to economic growth and capital accumulation.

    Foreign Direct Investment (FDI)


    International companies that participate in domestic projects and businesses are referred
    to as foreign direct investors. In host nations, foreign direct investment (FDI) stimulates
    economic growth, improves productivity, and facilitates capital accumulation by bringing
    capital, technology, and management knowledge.
    CAPITAL
    ACCUMULATION
    Human Capital Development
    Investing in healthcare, education, and skill development increases staff productivity
    and capacities. Innovation, economic growth, and luring investments all depend on having
    a trained and well-maintained labor force.

    Research and Development (R&D):


    Research and development (R&D) investments promote industry competitiveness,
    innovation, and technical progress. New industries, processes, and products are created as
    a result of them, and increased productivity and competitiveness promote capital
    accumulation and economic expansion.
    FINANCIAL
    INSTITUTIONS:
    ROLE OF BANKS
    AND
    MICROFINANCE
    FINANCIAL
    INSTITUTIONS

    a Financial Institution is a company that provides a range of financial


    services to individuals, businesses, and governments. These services
    encompass managing funds, facilitating transactions, providing loans, and
    offering investment opportunities.
    TYPES OF
    FINANCIAL
    INSTITUTIONS
    COMMERCIAL BANKS
    provide a range of financial services including checking and savings
    accounts, accept deposits, and extend loans for personal and business
    purposes, as well as for profitable investments.
    CREDIT UNION

    are nonprofit cooperative financial institutions owned by their members. They


    offer services similar to commercial banks but focus on serving specific groups
    or communities.
    INSURANCE COMPANY
    provide financial services such as checking and savings accounts,
    accept deposits, and may offer loans for personal use. They primarily
    specialize in risk management through various insurance products.
    INVESTMENT BANKS
    offer specialized services to corporations and individuals seeking to raise
    capital, undertake acquisitions, and participate in complex financial
    transactions. They act as intermediaries in intricate business deals.
    ROLE OF BANKS IN ECONOMIC
    DEVELOPMENT

    Facilitate savings and Promote financial


    investment stability and security

    Support economic
    growth and Provide access to
    infrastructure credit and financing
    development
    MICROFINANCE
    INSTITUTIONS
    Provides financial services to low-income individuals or organizations that lack
    access to traditional banking services due to their financial circumstances or
    joblessness.
    ROLE OF MICROFINANCE
    INSTITUTION (MFI) IN
    ECONOMIC DEVELOPMENT

    Helps the poor achieve a more stable, predictable, and secure


    financial position, ultimately aiding in their efforts to escape
    poverty.
    MFIs play a crucial role in stabilizing and securing the
    financial positions of the poor, leading to broader economic
    and social benefits.
    THEORIES: SOLOW
    GROWTH MODEL &
    PUBLIC CHOICE
    THEORY ON
    DECISION-MAKING
    ROBERT M. SOLOW
    is an American economist renowned for his
    contributions to the field of economic
    growth. Solow is best known for
    developing the Solow Growth Model, also
    known as the Solow-Swan Model, which
    he introduced in a seminal paper titled "A
    Contribution to the Theory of Economic
    Growth," published in 1956. of growth
    processes.
    The Solow growth model is a fundamental
    SOLOW framework in macroeconomics that explains

    GROWTH long-run economic growth. It incorporates three


    key components: technology, capital
    MODEL accumulation, and saving.
    The Solow growth model is a neoclassical model
    of economic growth that explains the long-run
    SOLOW dynamics of economic growth. An economic

    GROWTH model focused on long-run economic growth


    through capital accumulation, labor or
    MODEL population growth, and increases in productivity,
    mostly due to technological progress.
    SOLOW GROWTH MODEL
    SOLOW GROWTH MODEL
    In summary, as capital increases, diminishing returns implies
    that production and investment increase less and less, but
    depreciation increases by the same amount. Eventually, net
    investment is zero and the economy rests in a steady state.
    Thus, there is no long-run economic growth in the Solow
    model.
    SOLOW GROWTH MODEL

    Therefore, capital accumulation is not the engine of long-run


    growth. Saving and investment are beneficial in the short run,
    but diminishing returns to capital do not sustain long-run
    growth. In other words, after we reach the steady state, there is
    no long run growth in output.
    JAMES BUCHANAN
    & GORDON TULLOCK
    are seminal figures in the development of
    Public Choice Theory. Buchanan, a Nobel
    laureate in Economics, and Tullock, a legal
    scholar, co-authored "The Calculus of
    Consent" (1962), a foundational text in
    Public Choice Theory. Their work laid the
    groundwork for understanding political
    processes through an economic lens.
    PUBLIC CHOICE THEORY
    is an interdisciplinary framework that applies
    economic principles and methods to the study of
    political behavior. It provides a systematic
    analysis of how decisions are made in public
    settings, such as governments and public
    institutions, by considering the behavior and
    motivations of individuals involved in these
    processes.
    PUBLIC CHOICE THEORY

    It assumes that individuals act based on rational choice. This


    means they pursue actions that they believe will maximize their
    personal utility or benefit. Whether they are voters, politicians,
    or bureaucrats, people make decisions by weighing the costs
    and benefits to themselves. Rational choice models political
    behavior similarly to market behavior in economics.
    PUBLIC CHOICE THEORY
    PUBLIC CHOICE THEORY

    In the context of collective decision-making. Public Choice


    Theory examines how individual preferences and actions
    aggregate to produce collective outcomes. It studies voting
    systems, electoral processes, and other mechanisms through
    which public decisions are made. The theory highlights how
    different voting rules and institutional arrangements can influence
    the aggregation of preferences and the resultant policies.
    PUBLIC CHOICE THEORY
    also analyzes government behavior by viewing government officials as
    self-interested agents. It challenges the traditional notion that public
    servants inherently act in the public interest. Instead, it suggests that
    politicians and bureaucrats are motivated by personal incentives such as
    re-election, budget maximization, and career advancement. This
    perspective leads to insights about phenomena like rent-seeking,
    regulatory capture, and bureaucratic inefficiency. For example, politicians
    might support policies that benefit a well-organized interest group at the
    expense of the general public because it helps them secure votes or
    campaign contributions.
    THANK YOU
    FOR LISTENING

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