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1 WA ECOlODOA part I , sem 2 20l7.pdl , Adobe Aclolnt Reader DC 7 Xfile Edit Wow Window Help Home Tools WA ECO10004 part“. x ® Sign In [31613980. ©@ 3/7 k@®®1w%vfil§fi? 9/ [3, Export PDF vRead the following excerpt and answer the questions 6 and 7a Create PDF vMacroeconomics and Economic Development: Informal Work and Dead Capital‘3: Edit PDF”Dead capital” is Hernando de Soto’s term for an asset that cannot easily be bought, sold, valued ‘3 ,or used as an investment. Despite obvious poverty in the informal sector in Peril, de Soto’s work Comment shows that even those who live in slums possess far more capital than anyone realizes. In fact, theinformal economy is so large in Peru that almost 70 percent of the working population work ininformal arrangements. Possessions are not represented in such a way as to make themfungible (Le. easily exchangeable) assets. Dead capital cannot, therefore, create value for the poor.What you're really leaving behind is the world of legally enforceable transactions and propertyrights. The developed world has devised a formal property system of titles, title registries, andinclusive property law that includes real estate used for homes or businesses. De Soto shows thatthis is in a large part why some nations are rich while others remain in poverty. He says: *3 Combine Files V E: Organize Pages v R» Fill &Sign It- Send for Signature With titles, shares and property laws, people could suddenly go beyond looking attheir assets as they are — houses used for shelter — to thinking about what theycould be—things like security for credit to start or expand a business. Send 8( Track 6 4! More Tools The moment Westerners were able to focus on the title of a house and not just the house itself,they achieved a huge advantage over the rest of humanity. When purchasing a home, an openrecords system enables buyers and sellers not only to gauge the value of homes in nearby areas,but to set reasonable prices based on comparative values. Clear titles and title insurance givebuyers the confidence they need to complete a purchase. No clear title? No sale. The system alsogives banks the assurance they need to offer a mortgage. It represents a real house (house, land,afoctory, a car, etc.) Source: Excgpts from : “Informal Work and Dead Capital" . Retrieved on Fcbrua_ry 2 2106,fi'om http://www.thcpowerofihepoor.com/concepts/céphp Many of the owners of houses in ’shanti towns’ in the outskirts of Peru's capital Lima, arehappy that they do not have to pay land taxes, or municipal rates, as we do in Australia. Is this an advantageous sltuation to be in for the poor in Peru? Explain your answer. Would the informal economy hinder or promote economic growth in Peru? Explain youranswer. Hint: look at "New Growth Theory" and the case study on Botswana on p. 380381 toanswer this question. Store and share files in theDocument Cloud Learn More