Introduction to Development Flashcards
Economic Growth
Increase in real output over time, measured as a % increase of GDP
GDP = total value of all goods and services produced by a country in a given amount of time
IBO = multidimensional nature
Economic Development
Improved welfare and quality of life through:
- Freedom
- Reduced poverty
- Better living standards
- Education
- Healthcare
- Equality
- Employment
Sources of Economic Growth
- Natural Factors
- Increase in human capital
- Increase in physical capital
- Technological factors
- Institutional changes
What is capital?
- Things used to make other things
- Gives its owner value or advantage
e.g. factory and its equipment
Capital goods
Goods that are used to produce something else
Human Capital
People, their skills, their productive capacity (the knowledge, skills, and health that people invest in and accumulate throughout their lives)
Physical Capital
factories, machines, vehicles, roads, etc (assets, such as building, machinery, and vehicles, which are owned and employed by an organisation)
Financial Capital
Money, credit, (saved-up financial wealth, especially that used in order to start or maintain a business)
What is the relationship between Economic Growth and Development?
Limited economic development is possible without growth, but long-term development typically requires economic growth.
Under certain circumstances economic growth may not lead to economic development
Sources of Economic Development
When does Economic Growth lead to Economic Development?
- Higher incomes
- Improved economic indicators of welfare
- Higher government revenues
- Removal of inequality
- Fewer externalities
- Sustainability
Using appropriate diagrams, explain how it is possible to have both economic growth and development and how it is possible to have just economic growth without development.
PPC:
- PPC shifting outwards → Economic growth → Economic growth increases potential, economics development improves output quality
LRAS
AD/AS
What is sustainability? (sustainable development)
Development that meets present needs without compromising future generations
Uneconomic Growth
Production increases at a greater cost to resources and well-being than the value created
Relationship between sustainability and poverty (HL)
- Poor people need to rely on natural resources (wood, water) → harm the environment (e.g. cutting down trees) → unsustainable → resources decrease → people are stuck in poverty due to lack of resources
- Poor people can’t own good land → bad land → doesn’t grow much food → can’t make enough from the land to improve their lives
LDC
LDC - Least Developed Country
A country that is still in the process of development and:
- In poverty = has not yet reached an arbitrary per capita living standard (GNI is less than US$1085 per year in 2021)
- Suffers from human resource weakness (nutrition, health, literacy)
- Suffers from economic vulnerability (unstable agriculture or exports, economic importance of non-traditional activities, natural disasters, etc)
LEDC
LEDC - Lesser Economically Developed Countries
A country with a less developed industrial base and low HDI
Low/middle/high income
- Low income countries (LIC) = GNI per capita = US$1,085 or less.
- Lower middle income countries (LMIC) = GNI per capita = US$1,086 - US$4,255.
- Upper middle income countries (UMIC) = GNI per capita = US$4,256 - US$13,205.
- High income countries (HIC) = GNI per capita > US$13,206.
Common characteristics of LICs/LEDCs
- Low standard of living: income inequality, poor health, inadequate education, low incomes, savings, and investment.
- Low productivity
- High dependency burdens: rapid population growth and size. Dependency ratio = (% under 15 + % over 65) / % aged 16-64.
- High unemployment/underemployment.
- Reliance on primary products (agriculture).
- Imperfect markets: lacking banks, infrastructure, legal systems, and accurate information; large informal sectors.
- Dependence and vulnerability in international relations.
- Low investment, savings, poor capital-labour ratio, and underdeveloped financial infrastructure.
NICs
New Industrialised Countries (e.g. China, Brazil, India)
Transitional economies
From central planning to market system (e.g. Vietnam, China)
BRICS
(Brazil, Russia, India, China, South Africa) - very strong middle income countries, countries with strong economies
EAGLEs
Emerging and growth-led economies - they are expected to lead global growth over the coming decade.
Informal sector
- Unrecorded or illegal economic activity not taxed by the government
- Often referred to as parallel markets, shadow economy, or clandestine markets
Sustainable Development Goals (SDGs)
What is purchasing power parity? (PPP)
An exchange rate that attempts to remove a distortion of values in market rates.
GDP - evaluation and analysis - Advantages
Data on GDP is easy to get for most countries.
GDP - evaluation and analysis - Disadvantages
GDP per capita does not consider how income is distributed but it is an average.
What’s the problem of using GDP (per capita) as a measure of welfare?
- Does not include informal economy
- Difficult to measure the market value of public and capital goods
- Includes military spending → does not contribute to welfare
- Doesn’t take into consideration of negative externalities
- Doesn’t measure quality of life
Single Indicators
- GDP/GNI per person (per capita) at PPP
- Health and education indicators
- Economic/social inequality indicators
- Energy indicators
- Environmental indicators
Health indicators
- Infant mortality rate
- Life expectancy (at birth)
- Calories per day
- Protein per day
- Population per doctor
- Population per hospital bed
Education indicators
- Literacy rate
- Expected years of schooling
- Mean years of schooling
- Primary education enrollment
- Secondary and tertiary enrollment
- % Children out of school
- Spending on education as % GDP
- Years of schooling for teachers
Economic/social inequality indicators
- Income and wealth distribution
- Pay inequality
- Asset ownership
- Access to credit
- Gini index
Energy indicators
- Energy poverty
- Access to electricity
- Ability to maintain a home of adequate temperature
- Share of households/population without electricity
- Energy use per capita
- Renewable energy share in energy and electricity
Energy poverty
Lack of energy for adequate home temperature and living conditions.
Environmental indicators
- Ocean temperature
- Level of greenhouse gas emission
- Clean water availability
Composite indicators
- Human Development Index (HDI)
- Gender Inequality Index (GII)
- Inequality adjusted Human Development Index (IHDI)
- Happy Planet Index
What are some limitations for HDI?
- No externalities are included (bad habit, polution)
- No differences within countries
- No gender value
HDI
measured using three different factors:
- Health: Life expectancy at birth.
- Education: Mean and expected years of schooling.
- Living standard: GNI per capita (USD PPP).
Gender Inequality Index (GII)
Inequality adjusted Human Development Index (IHDI)
- All figures of HDI are adjusted downward with relation to Inequality.
- If a country had perfect equality, IHDI = HDI.
Happy Planet Index
An index of well-being and environmental impact based on:
- life satisfaction
- life expectancy
- ecological footprint
