Measuring Development

Question 1

2 Ways Economic Development is Measured

Answer 1

Level of Country Income - GDP

Growth of Country Income -$

Question 2

GDP Definition

Answer 2

the total value of goods produced and services provided in a country during one year

Question 3

Standard of Living

Answer 3

the degree of wealth and material comfort available to a person or community

Question 4

Quality of Life

Answer 4

the standard of health, comfort, and happiness experienced by an individual or group

Question 5

GNP$ Definition

Answer 5

measures the total economic output of a country, including earnings from foreign investments.

Question 6

Infant Mortality Rate

Answer 6

counts the number of babies, per 1000 live births, who die under the age of one. This is 5 in the UK and 61 in Kenya.

Question 7

Best for GDP$, GDP Growth and GDP per Capita

Answer 7

GDP - US and China
GDP per Capita - US, Scandinavia, Small Middle-eastern nations - Oil
GDP Growth - Ethiopia, India, China, Philippines

Question 8

5 things doesn’t GDP take into account

Answer 8

Purchasing Power

Sustainability - damage of assets - middle east oil

Inequality

Changes in Time

3 Major Publishers all very different

Question 9

2 Limitation of GDP

Answer 9

Country capacity to estimate GDP – extremely difficult to know the value of all the data - very difficult for business, especially small businesses in countries with less organisation and infrastructure, to allow the government to estimate the total GDP

Just show economic

Question 10

HDI Definition

Answer 10

The Human Development Index HDI is defined as the composite statistics used to rank countries by levels of human development. The HDI is a measure of health, education and income.

Question 11

How is HDI calculated

Answer 11

Works out number between 0-1

Health - Life expectancy at birth
Education - measured by adult literacy and the combined primary, secondary and tertiary enrolment ratio
Income - measured by GDP per capita (PPP US$)

Question 12

Two main approaches to measuring poverty

Answer 12

Monetary Approach

Basic Needs or Human Development Approach

Question 13

Explain the Monetary Approach to measuring poverty

Answer 13

o Dollar-a-day originally
o Poverty is defined as inadequate income to cover basic requirements for survival – day to day survival, if anything goes wrong, your dead
o Requires a measure of household income
 Surveys of households is extremely difficult, informal business, or many jobs, or ownership of land – extremely hard to find out individual wealth of households
o Requires a poverty line
 $1.90 a day chosen as close to the national poverty lines of many countries in Purchasing Power Parity
 The needs of different areas change
 Doesn’t take into account what happens above the poverty line, how far are those above from being below

Question 14

What is PPP

Answer 14

Purchasing power parity means equalising the purchasing power of two currencies by taking into account these cost of living and inflation differences.

Question 15

What is the poverty line

Answer 15

$1.25 at 2005 purchasing-power parity (PPP). In October 2015, the World Bank updated the international poverty line to $1.90 a day.The new figure of $1.90 is based on ICP purchasing power parity (PPP) calculations and represent the international equivalent of what $1.90 could buy in the US in 2011.

Question 16

Explain the human development approach to measuring poverty

Answer 16

Multidimensional Poverty Index

o Poverty is defined across multiple dimensions of health, education and living standards
 Health: child mortality, nutrition
 Education: Average years of schooling for adults, school enrolment rates
 Living standards: quality characteristics of home: toilet, walls, water source – assets
o Each dimension receives a weight to construct the MP index

Question 17

Absolute Poverty

Answer 17

A person who lacks food, water, shelter, access to basic medical facilities, and clothing is poor.

Question 18

Relative Poverty

Answer 18

If you can afford less than everyone else around you, you’re poor.

Question 19

4 Challenges when measuring Poverty

Answer 19

1. Not having the resources to gather quality data - surveys are poor quality - Central Africa for example - schools arent built without knowing how many kids need it
2. The Informal economy - subsistence farming
3. Disparity between purchasing power of different currencies
4. Data might not tell you enough, different type of poverty - inequality

Question 20

Solution to data challenges

Answer 20

Significant investment in government capacity and infrastructure to collect and analyse data is needed for the so-called “data revolution”

Question 21

3 things wrong with poverty lines

Answer 21

UK defines as below 60% of the median income - therefore based on inequality which is likely to only increase given the nature of capitalism

Arbitrary - what is you earn $1.91 a day, then you are not poor and $1.90 is

Incentive to government to lift those on $1.80 to show they are getting people out of poverty, leaving those on $0.90 out

Question 22

Universality of Measuring Development

Answer 22

Measurement dictated by developed nations and may not reflect national contexts

Multidimensions are more relevant but must capture different priorities of each nations and is in tune with SDGs

Question 23

Inputs and Outputs

Answer 23

Input to System would be how many schools or employment levels

Output would be Quality of teaching or income/Quality of work

Question 24

Inequality in GDP?

Answer 24

Ahluwalia and Chenery (1974) have suggested that the growth rate of GNP in itself is a misleading indicator of development, since it is heavily weighted by the income shares of the rich.

Question 25

Show how GDP doesn't show informal economy

Answer 25

If subsistence farming is systematically underestimated, then as an economy moves out of subsistence, some of the apparent growth may be just a shift to something that is easier to capture with statistics.

Question 26

Show how changes in time are not shown in GDP

Answer 26

In the U.S. for example, a set of encyclopaedias in 1960 was expensive but held great value for families with studious kids. Now, thanks to the Internet, kids have access to far more information for free. How do you factor that into GDP?

Question 27

3 major publishers of GDP

Answer 27

Liberia = Penn World Table 2nd worst, Word Bank 7th, Maddison 22nd

Question 28

Hicks Reading major point

Answer 28

“Either it was assumed that economic growth has a tendency automatically to ‘trickle down’ to the poor, or it was thought that, where there was no automatic tendency for the benefits from growth to spread to the poor, governments would take corrective action.” – Inequality can still be vast with GDP

Question 29

Hicks criticism of GDP

Answer 29

Lifetime earnings instead of annual – who wants to earn loads if you don’t live long enough to spend it

Question 30

What Hicks wants to invest in?

Answer 30

We should invest more in ending the bads, instead of focusing on anti-bads – cure diseases instead of investing in hospitals for example

Question 31

Show how GNP doesn't always improve basic needs

Answer 31

Morawetz ( 1977) found that there was a weak correlation between the level of GNP and indicators of basic needs fulfilment, and even less correlation between the growth of GNP and improvements in basic needs indicators.

Question 32

MPI who and when

Answer 32

Developed in 2010 by the Oxford Poverty & Human Development Initiative and UNDP

Question 33

How can someone be multidimensionally poor

Answer 33

If someone is deprived in a third or more of ten (weighted) indicators, the global index identifies them as ‘MPI poor’, and the extent – or intensity – of their poverty is measured by the number of deprivations they are experiencing

Question 34

How many and where are people MPI

Answer 34

54% of people in the African countries analysed suffer from multidimensional poverty

Question 35

What does MPI include

Answer 35

1. Child Mortality – if any child has died in family in last 5 years 2. Nutrition – if any member’s growth has been stunted 3. Years of schooling– if no one from household has completed 6 years of schooling 4. School attendance – if any school-aged child is not attending past 8 5. Cooking fuel – wood, dung or charcoal 6. Toilet – poor sanitation 7. Water – more than 30 min round trip to safe water 8. Electricity – no electricity 9. Floor – dirt, sand, or dung floor 10. Assets - if the household doesn’t have one of: radio, TV, telephone, bike, motorbike or refrigerator

Question 36

Pros of GDP

Answer 36

Simple proxy for social and economic welfare

Question 37

5 Cons of GDP

Answer 37

Doesn’t include black market, domestic products, non- market activities Inequality Damage of Assets Changes in Time 3 major publishers show different results

Question 38

Purchasing Power Parity - what does it include

Answer 38

looks at how much it would cost to buy the same basket of goods and services in different countries, which helps economists adjust GDP to get better insight into living standards.

Question 39

3 Pros of PPP

Answer 39

Better insight into living standards. Relatively Stable Valid for both traded and non-trade goods

Question 40

2 Cons of PPP

Answer 40

Hard to measure Lumps items into broad classes, without quality check – just because you can buy shoes cheaper in Madagascar, that doesn’t mean they are of the same quality

Question 41

MPI Worst Nations

Answer 41

Algeria Chad Sudan

Question 42

4 Pros of MPI

Answer 42

Considers a vast range of issues Just because you may not have electricity, if you have all the other things you are still okay Shows across borders and within regions, not just a whole nation Shows inequality better

Question 43

2 Cons of MPI

Answer 43

A lot of data is hard to come by, especially for poorer nations Only includes 100 nations, doesn’t show development in developed nations

Question 44

Best and Worst HDI

Answer 44

Scandinavia Australia Germany Central A.R Niger Chad

Question 45

Pros of HDI

Answer 45

Extends on just economic mean to development

Question 46

6 Cons of HDI

Answer 46

Too similar to GDP per capita in the outcome of the country rankings The components (health, education and income) are weighted equally but do not necessarily equally contribute to human development The components are too narrow and do not contain indicators of freedom or political development, which many consider crucial to human development The indicators do not take into account inequalities within countries Sustainability is not considered No Target Forward, what if you reach 1?

Question 47

Happiness Index best and Worst

Answer 47

Scandinavia Australia Canada Central A.R Tanzania Syria

Question 48

2 Pros of Happiness Index

Answer 48

Happiness is arguably most important thing Considers freedom and choice

Question 49

3 Cons of Happiness Index

Answer 49

Vague Hard to Define Cannot Measure

Question 50

What is happiness index

Answer 50

The World Happiness Report is a landmark survey of the state of global happiness. The World Happiness Report 2017, which ranks 155 countries by their happiness levels, will be released today at the United Nations at an event celebrating International Day of Happiness.