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Human Development and Economic Growth

Human Development and Economic Growth. African Economic Development Feb 1 st 2007 – Renata Serra. Human Development. The ultimate aim of development Enlarge people’s capabilities and freedoms so they can lead longer, better and healthier lives

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Human Development and Economic Growth

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  1. Human Development and Economic Growth African Economic Development Feb 1st 2007 – Renata Serra

  2. Human Development • The ultimate aim of development • Enlarge people’s capabilities and freedoms so they can lead longer, better and healthier lives • Language is often enshrined in a human rights framework • Right to education • Right to good health • Etc.

  3. The Human Development Report and Index • The HDR was launched in 1990 by UNDP with the goals of: • Putting people back at the center of the development process • Going beyond income to assess people’s long-term well-being • The HDI is a summary measure of human development: it measures the average achievements in a country in three basic dimensions: • A long and healthy life: life expectancy at birth • Knowledge: adult literacy rate (with two-thirds weight) and the combined primary, secondary and tertiary gross enrolment ratio (with one-third weight) • A decent standard of living: GDP per capita (PPP US$)

  4. The construction of the HDI

  5. HDI gives more info than income alone: • Higher income may not translate into better human development (left panel) • Income may not be necessary for improved development (right panel)

  6. Uneven human development • Development has been uneven: progress for some but many have been left behind • 20 countries have experienced declines in HDI since 1990

  7. The pros and cons of the HDI • Advantages of HDI: • Ready calculability and possibility of quick comparison over time and space • Effectiveness in conveying the main message (dimensions of development may not be closely correlated) • Problems with HDI: • Simplifies notions of development • Uses arbitrary components and weights • Why not including access to water? Why the weight associated with education isn’t greater?

  8. Human development and economic growth • HD and EG affect each other Q1: What are the channels through which HD affects EG? Q2: What are the channels through which EG affects HD?

  9. From EG to HD • Higher EG leads to greater HD ceteris paribus • Botswana vs Sudan • Patterns of growth and its distributive effects • Lower inequality leads to higher HD • Intra-household distribution of resources and decision-making • Women’s control of income leads to greater HD • Level and distribution of public sector expenditures: PEx/GDP and HDEx/PEx • Kenya vs Malawi • Effectiveness in service delivery (efficient use of public resources) • Low corruption and wastages is good, but also choosing the sector and intervention with the highest returns

  10. From HD to EG • Education increases: earnings; labor productivity; adoption of technology in agriculture; firm’s technology, etc. • Health and nutrition increases: productivity, returns to schooling in children; etc. • Human capital is a fundamental factor in new growth theories (R&D) • HD lowers macro inequality and facilitates growth • Investment in HD affects factor endowment, boosts manufacturing exports and growth • Education lowers fertility rates and increases per-capita growth

  11. HD and EG trajectories • Evidence seems to show that HD should be emphasized from the start • EG lopsided strategy inevitably plunges a country into a vicious cycle • See http://hdr.undp.org/hdr2006/statistics/ for the most recent HD data and interactive information

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