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Introduction to Development
Economics
Topic 3.2
Development is..“A process where nations
achieve higher standards of living,
happiness and fulfilment often
through economic growth.”
The economic problem
“One generation plants a tree; the next generation gets the shade.”Chinese Proverb
You Tube
Differences between economic growth and economic development
Improvement in quality of life
Increase in GDP
Higher incomesHuman
Development IndexClassic macro
economic variables
UnemploymentInflationGrowth
Access to education, healthcare
Measured using range of variables
Investment, capital, capacityLabour, wages
Progress,Improvement in
standard of living
How do we measure Economic Development?
Quantitative Indicators – are based on objective and truthful pieces of information. Often collected in surveys or by in a census. eg GDP
Qualitative Indicators – are based on subjective feelings, impression and opinion. These provide a good indication of the social health of a country. Eg Happiness
Ways to evaluate development?
Population Density
Gross National Income per capita
Human Freedom
Index Unemployment RateInfant Mortality Rate
Access to clean water
Birth Rate
Happiness Index
Internet Users per 1000
HIV Infection Rate
Average Wage (US$) per day Cars per 1000 people
People per doctor
% employed in agriculture
Income Equality
Human Development Index
In what ways can development be measured?
Composite Indicators Human Development Index (HDI) composite of
GNP per capita Adult literacy rate School enrolment rate Life expectancy
A HDI between 1 and 0.8 is considered high, 0.8 and 0.6 is
considered medium and 0.6 to 0.4 is considered low
http://en.wikipedia.org/wiki/List_of_countries_by_Human_Development_Index
USA = 0.94410th in world
Zambia = 0.394167th in world
Human Development Index (HDI) composite of GNP per capita Adult literacy rate School enrolment rate Life expectancy
NZ = 0.93319h in world
Singapore = 0.91828th in world
Japan = 0.9568th in world
HomeworkDifference between Developing Nations
Using one page, compare two nations on their level of Development using appropriate statistics.
Use wikipedia – HDI to find countries to compare. Use websites to collect the data for comparison. Useful
websites include www.gapminder.org www.nationmaster.org www.oecd.org www.cia.org
Summary should be no more than one page, use Pg 320 of your text book as a guide on how to compare.
What kind of disparities exist between Zambia and USA?
Zambia United States of America
Human Development Index
0.434 (low)165th in world
0.951 (high)12th in world
% living below poverty line
86% 12%
GDP per capita (2004)
$900 $39,700
GDP growth rate (2004)
5.1% 4.4%
Average years of schooling (2004)
5.5 (58th in world) 12 (1st in world)
Adult Literacy rate 80% (145th in world) 97% (68th in world)
Tertiary enrolment(2000)
2.5% (129th in world) 72.6% (1st in world)
What kind of disparities exist between Zambia and USA?
Zambia United States of America
Forested Land 43.9% 24%
Arable Land 7% 19%
Irrigated Land (1998) 1,560 sq km 214,000 sq km
Living with AIDS (2003)
0.9 million 165 per 1000
0.9 million3.1 per 1000
Life expectancy 40 years 77 years
Labour force by occupation
agriculture: 22% industry: 29%
services: 48.9%
agriculture: 1% industry: 20.4%
services: 78.7%
Satisfaction with Life IndexZambia = 148th score 163 USA = 23rd score 246
green = happiestbluepurpleorangered = least happy
Differences and Similarities
Readings from McGee Pg 328 - 330
Gross National ProductGNP
Foreign owned companies in Japan
Send income back to home country
Japanese owned foreign companies abroad
send income back to Japan
= GDP Japan GNP
minus income paid to foreign companies producing in Japan
plus income earned from assets abroad
JapanGDP
Gross National Product and Gross Domestic Product
For some developing countries GDP will be overestimated due to the number of foreign owned companies producing in the country. GNP will be more accurate. GNP < GDP
For some nations with foreign interests in other parts of the world GNP will tend to be a more accurate measure. GNP > GDP
See notes on Pg 152 – 153 of IB Companion Text
Development
The Development topic looks at the sources of development and discusses why all countries have not developed to the same extent.
Macro Economics & Opportunity CostsProduction Possibility Frontier (PPF)
Apples
Oranges
Economic growth caused by reductions in
unemployment and productive inefficieny
Education
Military Spending
Economic growth caused by increases in production possibilties
(discovery of new resources, investment in new technology)
A
B
A
B
Economic growth which does not lead to economic
development (more military spending, but no more education)
Education
Military Spending
A B
No improvement in standard of living
Economic growth, which leads to more economic development
Education
Military Spending
A
B
improvement in standard of living
