Economic Growth and Development

MLS 2B – Group 8Baldevieso, Balagosa, Langreo, Lusaya, Sotiar,

Lao

Is an increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice.

Referred to as the quantitative and qualitative changes in an existing economy.

The most accurate method of measuring development is the Human Development Index which takes into account the literacy rates & life expectancy 

Economic Development

Economic Development Economic Growth

Implications

Economic development implies changes in income, savings and investment along with progressive changes in socio-economic structure of country (institutional and technological changes).

Economic growth refers to an increase in the real output of goods and services in the country.

Measurement

Qualitative.HDI (Human Development Index), gender- related index (GDI), Human poverty index (HPI), infant mortality, literacy rate etc.

Quantitative. Increases in real GDP.

Difference Between Economic and Development

Economic Development Economic Growth

Effect

Brings qualitative and quantitative changes in the economy

Brings quantitative changes in the economy

Relevance

Economic development is more relevant to measure progress and quality of life in developing nations.

Economic growth is a more relevant metric for progress in developed countries. But it's widely used in all countries because growth is a necessary condition for development.

Scope

Concerned with structural changes in the economy

Growth is concerned with increase in the economy's output

Stages of Economic Growth and

Development

Is an increase in a country's real level of national output which can be caused by an increase in the quality of resources (by education etc.), increase in the quantity of resources & improvements in technology or in another way an increase in the value of goods and services produced by every sector of the economy.

It can be measured by an increase in a country's GDP (gross domestic product).

Economic Growth

2.) Pre-conditions: -Development of

mining industries-Increase in capital use in agriculture-Necessity of external funding-Some growth in savings and investment

1.) Traditional Society-subsistence economy

-output not traded or recorded -existence of barter -high levels of agriculture and labor intensive agriculture

3. ) Take off-Increasing industrialization-Further growth in savings and investment-Some regional growth-Number employed in agriculture declines

Rostow’s Model

In 1960, the American Economic Historian, W.W. Rostow suggested that countries must pass through 5 stages to become developed.

4. )Drive to Maturity-Growth becomes self-sustaining -Wealth generation enables further investment in value adding industry and development-Industry more diversified-Increase in levels of technology utilized

5.) High mass consumption-High output levels-Mass consumption of consumer durables-High proportion of employment in service sector

Market Based Development is determined by

the extent to which the market is able to allocate resources 

The price signal acts to allocate scarce resources

Governments limit interference in the working of the economy

Government role is to encourage enterprise and to reduce regulation and inefficiencies in free markets and establish ownership of property rights

Formula to Compute

Economic Growth

Gross Domestic Product (GDP) is an estimated value of the total worth of a country’s production and services, within its boundary, by its nationals and foreigners, calculated over the course on one year.

GNP = GDP + NR – NP

Or

GNP= GDP + Net factor income from abroad

Gross National Product (GNP) is an estimated value of the total worth of production and services, by citizens of a country, on its land or on foreign land, calculated over the course on one year.

GNP= Gross National ProductsGDP= Gross Domestic ProductNR= Net income inflow from assets abroad or Net Income ReceiptsNP= Net payment outflow to foreign assets

Methods Used to Assess Economic Development

20

Human Development Index (HDI)

A tool developed by the United Nations to measure and rank countries' levels of social and economic development based on:◦ Longevity, measured by life expectancy at birth◦ Knowledge,  measured by adult literacy and

number of years children are enrolled at school◦ Standard of living,  measured by real GDP

per capita

21

A scale from 0 (lowest human development) to 1 (highest human development).

An index of 0 – 0.49 means low development

An index of 0.5 – 0.69 means medium development 

An index of 0.7 to 0.79 means high development

Above 0.8 means very high development 

Inequality-adjusted Human Development Index (IHDI)

adjusts the Human Development Index (HDI) for inequality in the distribution of each dimension across the population.

IHDI accounts for inequalities in HDI dimensions by ‘discounting’ each dimension’s average value according to its level of inequality.

The IHDI equals the HDI when there is no inequality across people but falls below the HDI as inequality rises. In this sense, the IHDI is the level of human development when inequality is accounted for

Gender Inequality Index (GII)

 reflects women’s disadvantage in three dimensions:◦ reproductive health◦ empowerment◦ labor market

The index shows the loss in human development due to inequality between female and male achievements in these dimensions. It ranges from 0, which indicates that women and men fare equally, to 1, which indicates that women fare as poorly as possible in all measured dimensions.

Multidimensional Poverty Index (MPI)

identifies multiple deprivations at the household level in education, health and standard of living.

complements monetary measures of poverty by considering overlapping deprivations suffered by people at the same time.

index identifies deprivations across the same three dimensions as the HDI and shows the number of people who are multi-dimensionally poor and the number of deprivations with which poor households typically contend with.

It can be deconstructed by region, ethnicity and other groupings as well as by dimension, making it an apt tool for policymakers. 

Issues and Problems of Economic Growth

Lifestyle Losses Generational Transfers Population Consumption Garbage Pollution

Congestion Natural resource depletion Corruption Economic Growth is unstable Environmental problems

Low Inflation Cheap imports Growing export market Financial surplus Depletion of the global resource base and

the impact of global warming.

Huge expansion of waste and pollution

Over population Species extinction leading to a loss of bio-diversity.

List of Countries According to Economic

Growth

WORLD

ASIA

Top 10 Richest Countries in the

World(based on GDP per Capita)

10. Netherlands

GDP (PPP) per capita: $40,973

http://www.forbes.com/pictures/egim45egde/10-netherlands/

9. Switzerland

GDP (PPP) per capita: $41,950

http://www.forbes.com/pictures/egim45egde/9-switzerland/

8. Hong Kong

GDP (PPP) per capita: $45,944

http://www.forbes.com/pictures/egim45egde/8-hong-kong/

7. United States of America GDP (PPP) per

capita: $46,860

http://www.forbes.com/pictures/egim45egde/7-united-states/

6. United Arab Emirates

GDP (PPP) per capita: $47,439

http://www.forbes.com/pictures/egim45egde/6-united-arab-emirates/

5. Brunei

GDP (PPP) per capita: $48,333

http://www.forbes.com/pictures/egim45egde/5-brunei/

4. Norway

GDP (PPP) per capita: $51,959

http://www.forbes.com/pictures/egim45egde/4-norway/

3. Singapore

GDP (PPP) per capita: $56,694

http://www.forbes.com/pictures/egim45egde/3-singapore/

2. Luxembourg

GDP (PPP) per capita: $81,466

http://www.forbes.com/pictures/egim45egde/2-luxembourg/

1. Qatar

GDP (PPP) per capita: $88,222

http://www.forbes.com/pictures/egim45egde/1-qatar/

Top 10 Poorest Countries in

2014(based on GDP per capita)

https://www.gfmag.com/global-data/economic-data/the-poorest-countries-in-the-world

http://www.gov.ph/report/gdp/

Human Development

Index around the world

Human Development Index in the Philippines

http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/PHL.pdf

http://www.manilatimes.net/70th-117th-saga-decline/118782/