Development Economics Glossary - C to D

Glossary of some key terms in development economics - C to D

Capital accumulation

Using investment to build capital assets such as roads, ports, buildings

Capital deepening

A development process involving a transition from traditional agriculture, which is labour-intensive, to more capital-intensive modern manufacturing. It leads to an increase in the capital stock per worker employed

Capital flight

The rapid movement of large sums of money out of a country. There could be several possible reasons - lack of confidence in a country's economy and/or its currency and political turmoil. Capital flight occurs when owners of liquid assets move them to other countries perceived as safe havens or as offering better returns. It can be legal or illegal

Capital flows

Movements of capital between countries. Outward capital flows are movements of domestically-owned capital abroad; inward capital flows are movement of foreign-owned capital to the domestic economy

Capital output ratio

The value of a nation’s capital stock relative to the size of national output (GDP). Capital-output ratios are usually around 2 or 3—that is, the capital stock is about 2 to 3 times annual economic output. Poor countries have lower capital-output ratios because they have less capital-intensive economies.

Capital stock

The total amount of physical capital available in the economy

Carbon tax

A carbon tax is a tax on the consumption or production of goods and services, which cause carbon emissions

Carbon trading

Pollution control that uses the market mechanism to change relative prices and the incentives of producers and consumers

Carry trade

A strategy in which an investor borrows money at a low interest rate in order to invest in an asset that is likely to provide a higher return.

Cash crops

A crop produced for its commercial revenue and profit rather than for use by the grower

Catch-up effect

This occurs when countries that start off poor tend to grow more rapidly than countries that start off rich. The result is some convergence in the standard of living as measured by per capita GDP

Child mortality rate

The probability that a newborn baby will die before reaching age five. Expressed as a number per 1,000 live births

Chronic hunger

The chronically hungry are undernourished. They don’t eat enough to get the energy they need to lead active lives. Their undernourishment makes it hard to study, work or otherwise perform physical activities

Chronic poverty

Those who never get out of absolute poverty


A group of high growth emerging countries comprising - Columbia – Indonesia – Vietnam – Egypt – Turkey – South Africa

Clean float

A currency that floats according to market forces, free from government intervention

Comparative advantage

Comparative advantage refers to the relative advantage that one country or producer has over another. Countries can benefit from specializing in and exporting the product(s) for which it has the lowest opportunity cost of supply

Competitive devaluation 

When a country tries to devalue its currency to increase its international competitiveness. However, this often encourages other countries to also devalue leading to only temporary increases in the competitiveness of exports

Concessional lending

Loans that are given by through the International Development Association (IDA). IDA provides long-term loans at zero interest to the poorest of the developing countries.

Conditional cash transfers

Attempts to cut poverty by giving cash transfers to households in need; and by tying these transfers to certain conditions, such as sending children to school


When donors require their developing country partners to do something in order to receive aid. If the condition is not fulfilled it will generally lead to aid being interrupted or suspended


The abuse of entrusted power for private gain, government failure

Corruption Perceptions Index

This index ranks countries/territories based on how corrupt their public sector is perceived to be. It is a composite index, a combination of polls, drawing on corruption-related data collected by a variety of reputable institutions

Cost benefit analysis

A technique designed to determine the feasibility of a project or plan by quantifying costs and benefits

Countervailing tariffs

Tariffs (duties) that are imposed by a country to counteract subsidies provided to a foreign producer

Creditor nations

Those nations that have a balance of payments surplus

Creeping protectionism

A period of time where import tariff rates rise and where countries introduce quotas and barriers to the mobility of labour and capital

Currency union

A group of countries (or regions) using a common currency – for example the 16 countries that have entered the single European currency

Current account deficit

The amount by which money relating to trade, investment etc going out of a country is more than the amount coming in

Debt burden

Debt that a business or country has normally expressed as a share of GDP

Debt deflation

High levels of debt leading to falling asset prices

Debt forgiveness

The cancelling by a creditor of a debt to a country or a company

Debt relief

Cancellation, rescheduling, refinancing of a nation’s external debts

Debt servicing

The repayment of interest and principle to external creditors

Debt sustainability

Debt sustainability is the ability to manage debts so they do not grow and impede economic stability and growth.

Debtor nations

Those nations that have a balance of payments deficit


Where output rises and environmental impacts fall

Demographic dividend

The demographic dividend happens when most of a country’s population is in the 15-to-64 working-age range. This increases productivity if supported by policies that promote health, family, labour and financial and human capital

Demographic transition

Changes in population growth rates over time due to changes in birth and death rates

Dependency ratio

The ratio of dependent population (the young and the elderly) to the working age population


Deprivation takes into account whether people have access to things essential for a basic standard of living. These include: clean drinking water, electricity, clean fuel for cooking, education, toilet facilities, basic transport with a bicycle, basic communication with a radio and basic income and wealth (measured by whether a household belongs to the poorest 20% in the country)

Development diamonds

Development diamonds show four key indicators in a country compared with its income-group average i.e. gross primary enrolment, access to safe water, GNP per capita and average life expectancy

Disguised unemployment

Also known as hidden unemployment, where part of the labour force is either left without work or is working in a redundant manner where worker productivity is essentially zero

Domestic remittances

Money received from family members or friends living in a different city of their own country

Domestic savings

Savings accumulated by domestic households, businesses and government

Dual exchange rate

A system where there is a fixed official exchange rate and an illegal market determined parallel exchange rate


When a producer in one country exports a product to another country at a price which is either below the price it charges in its home market or is below its costs of production

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