Indicators of economic development

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Growth versus Development
Economic growth may be one aspect of economic development

but is not the same
Economic growth:
A measure of the value of output of goods and services within a time period
Economic Development:
A measure of the welfare of humans in a society

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Economic Growth
Using measures of economic growth can give distorted pictures of

the level of income in a country – the income distribution is not taken into account.
A small proportion of the population can own a large amount of the wealth in a country. The level of human welfare for the majority could therefore be very limited.

But this could be just around the corner!
Copyright: chinagrove, http://www.sxc.hu

This might be a common picture……
Copyright: unseenob, http://www.sxc.hu

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Growth

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Economic Growth
Using measures of economic performance in terms of the value

of income, expenditure and output
GDP – Gross Domestic Product
The value of output produced within a country during a time period
GNP – Gross National Product
The value of output produced within a country plus net property income from abroad
GDP/GNP per head/per capita
Takes account of the size of the population
Real GDP/GNP
Accounts for differences in price levels in different countries

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Economic Growth
High economic growth fuelled through capital spending can hide a

number of underlying economic problems – how is the income and wealth distributed? Who is doing the spending and will it ‘trickle down’ to the poor?

Shopping Mall in Saudi Arabia
Copyright : Christo Pacheco, http://www.sxc.hu

Dubai Skyline
Copyright: zchizzerz, http://www.sxc.hu

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National Income – Problems with using GDP/GNP
Reliability of data?
How accurate is

the data that is collected?
Distribution of income?
How is the income distributed – does a small proportion of the population earn a high percentage of the income or is income more evenly spread?

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National Income – Problems with using GDP/GNP
Quality of life?
Can changes in

economic growth measure changes in the quality of life?
Does additional earnings power bring with it additional stress, increases in working hours, increased health and family problems?
Impact of exchange rate?
Difference in exchange rates can distort the comparisons – need to express in one currency, but which one and at what value?

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National Income – Problems with using GDP/GNP
Black/informal economy?
Some economic activity not

recorded – subsistence farming and barter activity, for example
Some economic activity is carried out illegally – building work ‘cash in hand’, drug dealing, etc.
Work of the non-paid may not be considered but may contribute to welfare – charity work, housework, etc.

It might not be pleasant, but what he finds among the refuse could be all he has.
Title: Sierra Leone Liberia. Copyright: Photolibrary Group

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Development

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Development
Development incorporates the notion of a measure/measures of human welfare
As such

it is a normative concept – open to interpretation and subjectivity
What should it include?

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Development
Levels of poverty
Absolute poverty
Relative poverty
Inequality
Progress – what constitutes progress?
Our definitions of

progress may be highly subjective. What has progress brought to native tribes people across the globe?
Title: Navajos refuse casino riches. Copyright: Stock.Xchng

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What is Poverty?
Poverty is a ‘relative’ term
Romanian gypsies – is this

man living in poverty?
Copyright: ghitulescu radu, http://www.sxc.hu

Or is this villager in rural China?
Copyright: Mark Forman, http://www.sxc.hu

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Development
Other considerations of human welfare:
Political freedoms?
Sustenance?
Sustainable development?
Self esteem?
Proportion of activity in

different sectors of the economy:
Primary
Secondary
Tertiary

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Development
Iraqis have supposedly been given their freedom following the American led

‘Operation freedom’ but has it improved welfare?

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Human Development Index

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Human Development Index (HDI)
HDI – A socio-economic measure
Focus on three dimensions

of human welfare:
Longevity – Life expectancy
Knowledge – Access to education, literacy rates
Standard of living – GDP per capita: Purchasing Power Parity (PPP)

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Other Measures?

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Other Measures?
How far do these other measures reflect levels of human

welfare?

Indicators of economic development

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