Economic development, employment and globalisation
This domain tests structural change, the quality of employment, and how trade, investment and global production affect development. Questions ask you to interpret employment structure, evaluate whether globalisation helps a named group, and use trade data such as the terms of trade.
Structural change and employment
- Economies typically shift from primary (agriculture, mining) to secondary (manufacturing) to tertiary (services); some add quaternary (knowledge) activity.
- Formal employment offers contracts, social protection and tax revenue; the informal sector often dominates in low-income countries, providing income but no protection and little tax base.
- Distinguish unemployment (without work and actively seeking it) from underemployment (too few hours, or work below skill level) and from vulnerable employment (own-account and family workers).
- The Lewis dual-sector model explains labour moving from low-productivity rural work to higher-productivity urban work, provided the surplus is reinvested.
Trade and globalisation
- Comparative advantage says countries gain by specialising where their opportunity cost is lowest - but gains assume mobility of resources and adjustment support.
- Trade barriers include tariffs, quotas and subsidies; non-tariff barriers and standards increasingly matter.
- Transnational corporations and foreign direct investment bring capital, technology and jobs, but profits may be repatriated, tax incentives may erode revenue, and linkages to local firms may be thin.
- Global value chains spread production; export processing zones offer jobs, often with weak bargaining power.
Worked example
A country's export price index is 120 and its import price index is 150 (base year = 100). Terms of trade = 120 ÷ 150 × 100 = 80, a 20% deterioration against the base year. The country must export more to buy the same imports, which pressures the trade balance and household incomes. State the direction and meaning, not just the number.
Traps that cost marks
Treating FDI inflows as a net benefit without checking repatriation and incentives; reading GDP growth as job creation; reporting low unemployment when most work is informal or underemployed; confusing absolute and comparative advantage.