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Introduction to Development Economics

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 ;

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Introduction to Development Economics

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  1. Introduction to Development Economics Topic 3.2

  2. Development is.. “A process where nations achieve higher standards of living, happiness and fulfilment often through economic growth.”

  3. The economic problem “One generation plants a tree; thenext generation getstheshade.” ChineseProverb You Tube

  4. Differences between economic growth and economic development Increase in GDP Improvement in quality of life Higher incomes Human Development Index Classic macro economic variables Unemployment Inflation Growth Access to education, healthcare Investment, capital, capacity Labour, wages Measured using range of variables Progress, Improvement in standard of living

  5. 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

  6. Ways to evaluate development? Happiness Index HIV Infection Rate Birth Rate Human Development Index Population Density Gross National Income per capita % employed in agriculture Human Freedom Index Unemployment Rate Infant Mortality Rate Access to clean water Internet Users per 1000 People per doctor Income Equality Average Wage (US$) per day Cars per 1000 people

  7. 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

  8. Japan = 0.956 8th in world USA = 0.944 10th in world Singapore = 0.918 28th in world Zambia = 0.394 167th in world NZ = 0.933 19h in world • Human Development Index (HDI) composite of • GNP per capita • Adult literacy rate • School enrolment rate • Life expectancy

  9. 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.

  10. What kind of disparities exist between Zambia and USA?

  11. What kind of disparities exist between Zambia and USA?

  12. Satisfaction with Life IndexZambia = 148th score 163 USA = 23rd score 246 green = happiestbluepurpleorangered = least happy

  13. Differences and Similarities Readings from McGee Pg 328 - 330

  14. Gross National ProductGNP Foreign owned companies in Japan Send income back to home country Japanese owned foreign companies abroad send income back to Japan Japan GDP Japan GNP = GDP plus income earned from assets abroad minus income paid to foreign companies producing in Japan

  15. 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

  16. Development • The Development topic looks at the sources of development and discusses why all countries have not developed to the same extent.

  17. Macro Economics & Opportunity CostsProduction Possibility Frontier (PPF) Apples Oranges

  18. Economic growth caused by increases in production possibilties (discovery of new resources, investment in new technology) Education B A Economic growth caused by reductions in unemployment and productive inefficieny B A Military Spending

  19. Education No improvement in standard of living Economic growth which does not lead to economic development (more military spending, but no more education) A B Military Spending

  20. improvement in standard of living Education B Economic growth, which leads to more economic development A Military Spending

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