Economic development Essay Example | Topics and Well Written Essays - 1750 words

Economic development - Essay Example However, the lower half of the isoquant is continuous reflecting that the given total output level can be achieved at all combinations of inputs provided 1st world inputs are used lower than a certain level (X2*) and the intensity of using 3rd world inputs is greater than a certain level (X1*). This situation can be interpreted as a depiction of the fact that instead of combining a greater amount of first world inputs which presumably can be interpreted as the magnitude of aid, if a lesser amount of such inputs are used in tandem with relatively higher amounts of 3rd world inputs, the possibility of attaining a certain amount of global output increases. This has a close semblance to Easterly’s idea that instead of providing huge lump sum aids to poorer nations, smaller piecemeal transfers that actually generate incentives for the population in such nations to become efficient in their participations lead to increased national incomes for such nations. For instance, Easterly cites the example of free provision of mosquito nets to prevent malaria in poor nations. He points out that not only does this create a black market for such nets; the nets are diverted into other uses. On the other hand, it is shown that through charging a miniscule amount for providing the nets, proper utilization has been increased thereby implying such low price provisions to be better solutions. He also cites the example of patients fully utilizing doctors’ services in cases they have to pay for them rather than when the services have been provided freely. Therefore, the transfer of any arbitrary amount of aid, financial or in kind actually may not lead to higher incomes, a situation reflected in the dashed segment of the isoquant where these aids, as inputs combined with third world inputs fail to yield any output in the disjoint portions. The better option is thus to use a ‘search’ strategy to locate the amounts of 1st world inputs that combined with a given amounts of 3rd