Taqi Hassan
Research Methodology (ECO-351)
GDP and landlocked countries effects on exports.
Final research proposal
F2019-695
Instructor: Ma’am Izza Aftab
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Introduction:
A landlocked country is a country which does not have any connection to any ocean or coastline
but rather is surrounded by countries or claimed/unclaimed lands. Currently there are 44
countries landlocked where Kazakhastan in biggest land locked country, Austria and Serbia have
the greatest number of neighboring countries (8) among all and Ethiopia is the most populous
one. Practically speaking, not having access to international waterways results in certain political
and economic drawbacks. Because of this, nations and small have struggled throughout history
to acquire access to the sea, even at great cost to their resources, lives, and political capital.
However, United Nations counts these countries in their forum to maintain peace and fair trade.
Further subtopics article of the research will answer basic questions of land locked countries and
how they can possibly be resolved.
Literature review:
Land locked countries have to work that extra mile for achieving faster growth of
economy, however the idea has been long neglected that how does it has an impact on the county
and its respective gross domestic product . A total of 44 recognized landlocked countries have
been struggling to grow and be significant part of the world economy. Understanding the
relationship between landlocked countries and their growth is known to be linked with good
government policies and great terms with neighboring countries. Barriers to trade are main
concern of landlocked country, where they face high transportation costs which brings on higher
competition. Land locked countries holds 7 percent (510.9 million) of world population when
combined and 12 percent of combined land area yet 2 percent of world wealth (2.27 trillion
dollars). Moreover, the average GDP per capita is 9398.57 dollars in landlocked counties which
is 36 percent less than the global average GDP per capita.
Comparing a few countries helps understand better the effect of landlocked countries on
exports. A simple reason for landlock countries lacking behind costal ones is high trade
transactional costs which makes the countries to be dependent on the neighboring countries
which grows infrastructural constraints. Moreover, the neighboring countries have less incentive
to collaborate in trade with them (although international trade treaty encourages such
collaborations). The infrastructural constraints create limited regional integration and the chain
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of hardships for the landlocked countries continue where small problems add on to create big
ones which eventually higher the costs of trade. Africa has the greatest number of landlocked
countries which are majorly underdeveloped. On the other hand, landlocked countries in Europe
are more developed. Trade goods take additional time to reach landlock countries for example it
takes an additional 5 days for goods to reach countries like Uganda, Rwanda (world bank 2008),
reason being additional clearance ports and longer routes of trade.
Data in the graph above shows per capita exports and per capita GDP compared to
respective year. Landlocked countries have lagged due to their geographical location clearly as
proved by the graph. Exports of land locked countries also depends upon level of landlock on the
specific country i.e the number of countries on way from the coast or the distance from the coast
(the more the distance the higher the degree of landlock). The graph below shows how the level
of degree of landlock affects its GDP, higher degree has low average GDP and vice versa.
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Countries in sub-Saharan Africa include 16 landlocked countries with 13 of worst
performing economies in the world. Isolation from world markets and other factors of
redspective countries (genocide and civil war after effects in Rwanda ) have created trouble for
the countries however, government policies can change how the economies perform despite
being landlocked e.g Switzerland is landlocked yet ranks in developed nations and great
performing countries in the world. Speaking of facts about landlocked countries of sub Saharan
Africa comparative to countries with coast the average GDP is 3307$ and 6746$, the HIV
prevalence is 8.75% and 2.78%, the literacy rate is 61% and 68.8% and urban population is 28.2
% and 49% , respectively to landlocked and coastal countries(Info Africa 2017). All these factors
are indirectly or directly connected to exports and GDP. Exports can also be given by services
such as IT outbound jobs(work from home), which require no transportation but low literacy
rates but a barrier to that too. Every factor is inter connected and creates a chain reaction which
could be changed by the role of government. At the end GDP growth rates and GDP per capita
clearly define the estimated progress of the country.
Research question/Hypothesis:
Well it is clear that majority of land locked countries fall behind in GDP per capita with
comparison to the countries who have access to sea or coastlines but there are exceptions such as
Switzerland and Austria. But the question arises why and how have they maintained their growth
and why haven’t countries like Ethiopia or Niger haven’t proceeded in the same way. Seeking the
differences in the countries in the terms of human development index the growth index and
exports, what went wrong in the less developed nations. Creating a comparative analysis might
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answer these question well among two countries considering Switzerland and Ethiopia. With the
available evidence I will investigate the these answers under the question ; “why switzerland
being a LLC is way ahead of other LLC in GDP and exports? ”. the question will be viewed in
political and social aspects and how government intervention changes things
Methodology:
Using data from re owned sources would help create authenticity for this research.
Qualitative and quantitative methods of research are a great way to answer the questions of such
comparative analysis of the two countries i.e Ethiopia and Switzerland.
Switzerland uses some techniques and ways to avoid economic and political issues and
remove instability from its way by avoidance of war, taxation policies, direct democracy and free
trade. The Swiss government and people have exercised good judgement by avoiding the scourge
of war. An economy is entirely destroyed by war. In addition to absolute annihilation occurring
during the battle, the nation's reconstruction also results in significant damage. The Swiss were
wise to understand that conflict hurts or can kill the economy. They have stayed out of every
battle for this reason. They don't have any fervent political ties to any particular country as this
helps avoidance of any kind of war by carrying neutrality. Anyone who want to conduct business
with Switzerland will find the Swiss government to be friendly. Because of this, Switzerland has
continued on its path of growth while other European countries have seen problems and have
repeatedly had to rebuild their economies. It is important to realize that Switzerland does not
genuinely undervalue its defense. Everyone who lives there must enlist in the military. Their
military, however, solely serves defence needs. As opposed to other European nations, they do
not actively participate in war. Moving on to taxation, subsidy in taxation policies is gold for any
business man, Another important factor contributing to other switzerlands great performance is
their large socialist governments. Once more, the Swiss have been successful in limiting the size
of the government. When they can extort large sums of money from citizens in the form of taxes,
governments can expand. The likelihood of corruption rises as the amount of money held by the
federal government does. Therefore, ensuring that taxation is done locally is the greatest
approach to stop money from being embezzled from the hands of productive employees to the
hands of corrupt politicians. In Switzerland, the majority of the taxes are collected locally. The
federal government only gets involved if a municipal tax cannot be implemented. Such taxation
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has the advantage of giving locals more control over how their money is used. Corruption is less
likely because the tax is collected and used locally. Also prohibited is the game of regional
politics. The nation's tax revenue cannot be concentrated on a small number of provinces. The
Swiss economy is a prime example of balanced growth. It differs from many other countries in
the globe where one region is totally underprivileged and the other is extraordinarily wealthy and
there is a comparable minor difference in the neighboring economies of Switzerland. Voting is
needed for Swiss residents over the age of 18 on a number of subjects. Keep in mind that no
candidate was chosen in the vote. The votes are instead cast in order to decide on certain
problems. Because of this, Swiss citizens are required to cast ballots more than once every year.
People frequently have to vote up to four times a year on various matters of foreign and
economic policy. The option of voting by mail is also offered, ensuring that no one's valuable
time is lost throughout this process. This free democracy allows and gives government running
institutions an incentive to work. When the government is running well, the economy will do so
too, sooner or later. Some Swiss items are well-known throughout the world. For instance, Swiss
watches, swiss chocolate and Swiss cheese have their own niche markets around the world.
Customers are prepared to pay more for these goods since they are aware of their high quality.
It's crucial to understand that the Swiss government does not heavily impede trade. No
extra taxes have been imposed on imports of foreign goods. Switzerland has few resources
because it is a landlocked nation. It is reliant on imports from other countries. The Swiss people,
however, have not encountered any significant issues because free trade has been so successfully
managed. Since Swiss citizens do not object to the sale of other goods in their nation, their
products are widely used around the world.
Ethiopia is one of the poorest country in the world and has remained one since long ago,
reason being the government poilicies, relations with other countries, economic unstability and
civil wars. Ethiopia being most populous country in LLCs still fails to bring its GDP to high
levels. Except for its severity, Ethiopia's rural poverty's characteristics are not shocking. The
majority of social and human development metrics, including life expectancy, mortality, literacy,
enrollment in schools, child malnutrition, etc., rank among the lowest in the world. The research
points to a lack of significant disparities among the four main regions. There is no proof that
anything has gotten better during the past 20 years. some evidence of a recovery in the 1990s,
but only to levels encountered at the start of the 1980s, after a further deterioration throughout
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the late 1980s with an escalating civil conflict that was made worse by the drought and famine of
the mid-1980s. Despite their importance, economic incentives cannot replace political incentives,
and the lack of a sufficient system of political incentives creates a gap that cannot be filled by the
operation of economic inducement. Moreover, famine is another preventable issue Ethiopia is
facing as according to the research on democracy and famine, it is therefore possible to claim
that Ethiopia's continued vulnerability to famine stems in part from the absence of a functioning
multi-party democracy. There is no guarantee that the government will prioritise preventing
starvation in areas where independent media, civil society organizations, and alternative political
parties are prohibited from operating freely. A review of the African experience indicates that
poverty has increased in both adjusting and non-adjusting nations. Debt, global trade terms, and
internal political problems were only a few of the variables that contributed. The World Bank
and the IMF are criticized less for having policies that increased poverty than for having, despite
their claims, failed to stop this deterioration. It is highly challenging to argue that current global
trade is both free and fair; in fact, many people think that free trade is inherently unfair.
International financial institutions have a history of dictating economic policies to developing
nations, especially the "least" developed nations like Ethiopia. Agriculture in the industrialised
world is substantially supported and protected, while governments are compelled to shrink, avoid
meddling in the market, and open their doors. It appears that it is understood that comparative
advantage theories promote the division of "labour" on a global scale; whereas wealthy nations
produce finished goods and industrial items, developing nations have mostly been urged to keep
to agricultural output.
Collecting data from various sources will lead to the study of why Ethiopia is poorer than
switzeland which requires work from world bank, IMF and other conducted studies. Collectively,
the study will give a glance on the problems being faced by Ethiopia a s a country.
Data:
The collected data will help understand the economics of Ethiopia and Switzerland in
comparative analysis.
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The table above shows reasons for children to never attend school. As education is one way of
making nations to go grow, lack of education can lead to stagnant gdp growth or declined. Larger
households with a high dependency rate are typical of the impoverished. Despite having less
schooling, they nonetheless have children who are less likely to attend school.
Generally speaking, women are neither less wealthy or malnourished. The majority of data
indicates that households headed by women are generally not poorer.
However, due to regional factors and the reasons why some female-headed rural households are
female-headed, they may be in poorer positions than male-headed rural households. Women
typically have less possibilities since they are less educated and much less likely to attend school
than girls. Boys and girls alike are frequently excused from school to help with farm and
household chores. The majority of the impoverished rely on agriculture for their primary source
of income. Both the wealthy and the poor benefit financially from off-farm activity. The majority
of the poor rely on sporadic off-farm employment, enterprises that don't need training or working
capital, and general collecting and gathering chores like gathering firewood. All of the non-farm
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occupations that the poor are engaged in have relatively low returns.
The data above sourced from IMF and World bank shows GDP growth from 1989 to 1998 where
the rate of growth has decreased significantly.
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The graph above is Poverty headcount ratio at $2.15 a day (2017 PPP) (% of population)
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The graph above is a total population graph and its respective growth from 1960-2021
The graph above is of current GDP in USDInflation, consumer prices (annual %)
Inflation, consumer prices (annual %) is describes in graph above
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These graphs show a significant difference between two economies which can describe
the living standards in these countries. However despite these data there are similar studies
conducted of landlocked countries by Paul Collier and Jan Willem Gunning in “Why Has Africa
Grown Slowly?” which explains all the economic and political factors in detail to find what went
wrong and what exactly problems to Africa faces (including Ethiopia). Studying Africa as a
whole is very important as it helps understands the stability of neighboring countries of Ethiopia.
The more better off the countries will be the better will be the result of the primary country.
Another study “ETHIOPIA Poverty Assessment” Study by Stefan Dercon from May 1999 is an
important data reserve for this topic which can provide the needed relevnt data along with IMF
and world bank resource.
Conclusion:
Countries who specialize in a specific product have comparative advantage(swiss
watches/cheese/chocolates). It is important for LLCs to have good terms with their neighboring
countries. With the necessary institutional and legal frameworks in place, diversification must be
pursued as a long-term economic growth goal and be accomplished in both prosperous and
unprofitable global commodity market conditions. These economies must be linked to
international value networks which should be encouraged by UN. A thriving banking sector is
essential for assisting small and medium-sized businesses. The significance of human resource
development cannot be overstated. Free trade should be encouraged which allows LLCs to trade
via neighboring countries as it helps a lot in GDP and export. Moreover, it is important for a
country to have a stable and good government with friendly economic policies which encourage
necessary employment. Stable government (with no involvement in wars) along with friendly
relations are basic vitals of growing GDP of a country.
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References
Collier, Paul, Gunning, & willien, J. (1999, september). Why Has Africa Grown Slowly?
American Economic Association. Retrieved December 31, 2022, from
https://www.aeaweb.org/articles?id=10.1257/jep.13.3.3
Decron, S. (2001, SEPTEMBER 1). Economic reform, growth and the poor: Evidence from rural
Ethiopia. 4. https://doi.org/10.1016/j.jdeveco.2005.05.008
Dercon, S. (1999, may). ETHIOPIA Poverty Assessment Study. Poverty Dynamics in Africa, 67.
https://d1wqtxts1xzle7.cloudfront.net/6839266/ifad1-libre.pdf?1390848342=&response-c
ontent-disposition=inline%3B+filename%3DEthiopia_Poverty_Assessment_Study.pdf&
Expires=1672440336&Signature=gKpSDJPP1CnDznsFUGozH9lILDX9xYEkA6v2H9If
PKYxv64vT9pG5XJgzRG8VtUMV
Vadala, A. A. (2014, August 10). Understanding famine in Ethiopia: poverty, politics and human
rights. Understanding famine in Ethiopia: poverty, politics and human rights. Retrieved
December 18, 2022, from
https://www.ethiopanorama.com/wp-content/uploads/wp-post-to-pdf-enhanced-cache/1/u
nderstanding-famine-in-ethiopia-poverty-politics-and-human-rights.pdf
World bank (Ed.). (2018).
URL References;
● https://core.ac.uk/download/268389048.pdf
● RAMESH C. PAUDEL. ‘Export Performance in Developing Countries: A
comparative perspective’ from wp_econ_2014_26.pdf (2014)
● https://www.worldbank.org/en/news/feature/2008/06/16/landlocked-countries
-higher-transport-costs-delays-less-trade
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● https://www.un.org/ohrlls/sites/www.un.org.ohrlls/files/landlocked_developin
g_countries_factsheet.pdf
● https://www.un.org/ohrlls/sites/www.un.org.ohrlls/files/lldcs_publications/dev
-costs-of-landlockedness.pdf
● https://www.worldbank.org/en/news/feature/2008/06/16/landlocked-countries
-higher-transport-costs-delays-less-trade
● https://www.un.org/ohrlls/sites/www.un.org.ohrlls/files/landlocked_developin
g_countries_factsheet.pdf
● https://www.un.org/ohrlls/sites/www.un.org.ohrlls/files/lldcs_publications/dev
-costs-of-landlockedness.pdf
● https://www.worldbank.org/en/topic/trade/publication/landlocked-countries
● https://www.nationmaster.com/country-info/groups/Landlocked-countries
● https://thekeep.eiu.edu/cgi/viewcontent.cgi?article=5573&context=theses
● https://www.inonafrica.com/wp-content/uploads/2017/08/Landlocked-Countr
ies.jpg
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