measuring economic development

Question 1

What ways can economic development/inequality be measured??

Answer 1

HDI- a ranking system which ranks countries based off of GNI per capita, mean years of schooling and average life expectancy at birth
GDP per capita- looking at the average income of people/ families to suggest levels of development in a country
Lorenz curve- shows how unequally wealth is distributed between deciles in a population
Gini co efficient- looks at how income changes between a country, 0 where everyone earns the same and 1 where 1 person earns everything

Question 2

Benefits and drawbacks of HDI values for measuring economic growth

Answer 2

Benefits- places a greater emphasis on the quality of peoples lives compared to just GDP per capita, by looking at the education and healthcare development in a country to see how developed a country is

• does include economic growth but is not solely reliant on it
• higher economic growth ie higher GDP per capita may not represent inequality whereas HDI may better show inequality through health and education

drawbacks- HDI still doesn’t capture all of the information relevant to peoples welfare eg levels of crime, inequality, poverty, housing levels, leisure time, quality of life overall

best for drawing general conclusions about countries that aren’t very well developed compared to countries that clearly are developed with a high HDI value

Question 3

Benefits and drawbacks of using GDP per capita to measure economic development

Answer 3

Benefits- high levels of economic growth can have a positive link to high levels of economic development, as it suggests businesses are investing, the government are investing, and there are good levels of savings for everyone to Make purchases and investments, owing to a strong financial system

drawbacks- economic growth doesn’t capture inequality

• economic growth with lots of pollution is clearly worse than economic growth with no pollution
• economic development should capture the welfare of peoples lives, not just the income; the easterlin paradox suggests high economic growth is not linked to peoples happiness