Measures of Development Flashcards
What is Economic development about
About improvement in peoples living standards over time
What does development require
Structural changes such as industrialisation and advanced technology
Define economic growth
Increase in real output in an economy over a given time period
Why is economic growth an essential part of economic development
Development can not take place without an expansion of resources available in a society
But the resources must be used efficiently
Different measures of development
NI and Output measures (GDP per capita at PPP, GNI per capita at PPP)
HDI
IHDI (Inequality adjusted human development index)
Multidimensional poverty index
What does HDI measure
Health
Education
Income
HDI value for low level economic development
< 0.55
HDI value for medium level of economic development
0.55-0.699
HDI value for high level of economic development
0.7-0.799
HDI level of very high economic development
> 0.8
What did the HDI show there’s no automatic link between
Per capital income and human development
Advantages of HDI
Much clearer picture than GDP
Simple to calculate
Education and health indicators show how successful government policies are in providing access to important merit goods
Only uses quantitative indicators
Disadvantages of HDI
Does not take into account inequality and poverty
Does not take notice of the quality of life or quality and success of education
Corruption and environmental factors aren’t included
What is the IHDI
HDI adjusted for inequalities in the HDI (Health, education and income)
When will IHDI fall below HDI
When inequality rises
When will IHDI equal HDI
When there is no inequality
What is the MPI and what does it measure
Multidimensional Poverty Index
Measures the percentage of the population that are deemed poor and the degree of the poverty experienced by those households
What does the MPI use
Data for health, education and standard of living
What does the MPI highlight
Countries where some areas are extremely rich but where most of the population is not and focuses on poverty
But it can’t be calculated for all countries as data is not always available - doesn’t take into account the environment
What does the GPI measure
Improvement in economic welfare - costs associated with growth
Measures 26 indicators across 3 categories:
Economic
Environmental
Social
Advantages of GPI
GDP and HDI doesn’t take into account negative externalities
Encourages policing makers to think in broader terms of economic welfare
Encourages long term planning
Disadvantages of GPI
Takes too long to measure for it to be useful in policy decisions
Extremely difficult to collect accurate development - even more for LDCs
Measure non economic variables which are difficult to assign an economic value
Evaluation of GDP
GDP alone is inadequate measure of welfare/development
Better to use all development measures together
Difference between Economic Growth and Development
Economic Growth is concerned with an increase in a country’s productive potential
Economic Development is concerned with improvement in economic and social opportunities
