Differences in economic development between countries — practice question

Oil accounts for a third of Ecuador’s exports. Ecuador has, however, chosen to produce less oil and a wider range of other goods and services. This choice has changed the way output is made in Ecuador. For instance, luxury textile output, such as luxury scarves and jumpers, uses fewer capital goods than oil production. Tourism depends on natural resources, including sunshine and beaches. One reason the Ecuadorian government has pushed for less dependence on oil is the large swings that often occur in the oil market. From 2014 to 2016, demand for Ecuador’s exports dropped, which caused a major fall in export revenue. This fall, together with a reduction in government spending, led to a decline in the country’s output. From 2016 to 2019, Ecuador’s economy improved a little. Incomes and household spending rose and more cars were bought. Table 1.1 shows GDP per head ($) and car ownership (per 1000 people) in selected countries in 2019. Ecuador’s government borrowed from China in order to pay for the construction of more roads. Building these roads increased employment and was expected to affect transport costs in the long run. From 2016 to 2019, Ecuador’s textile industry gained from the better road network. Even with tough competition from foreign textile firms, Ecuador’s textile firms increased the scale of production. Wages in the textile industry did not rise much. A very small wage increase can influence trade union activity and immigration. Some Ecuadorian workers leave the country to look for jobs elsewhere, especially in Italy, Spain and the US. These workers have a variety of skills and are employed in many different jobs overseas, some of which offer training. Many, though not all, workers send money back to their families.