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ECO 102 Development Economics

Explore the diverse structures and common characteristics in development economics, including factors like income levels, education, and human development indices. Criticisms of HDI and measures like Gini coefficient are discussed.

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ECO 102 Development Economics

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  1. ECO 102 Development Economics Aisha Khan Summer 2009 Section G & I Lecture Three

  2. Diverse Structures and Common Characteristics • Chapter Two

  3. Structural diversity • Consider the following: • The size of the country • Its historical and colonial background • Its endowments of physical and human resources • Its ethnic and religious composition • The relative importance of public and private sectors • Nature of industrial structure • Degree of dependence on external forces • Distribution of power within a nations

  4. Common characteristics • Low levels of living • Low levels of productivity • High rates of population growth and dependency burdens • Substantial dependence on agricultural production • Prevalence of imperfect markets and limited information • Dominance, dependence and vulnerability in IR

  5. Low levels of living • Quantitatively and qualitatively • Different measures allow a measurement or an idea of the levels of living • Per capita national income • Relative growth rates of national and per capital income • Distribution of national income • Extent of poverty • Health • Education • HDI

  6. Human Development Index • A holistic measure of living levels • Ranks between 0-1 based on three goals • Standard of living – per real capita income adjusted for PPP • Longevity – life expectancy at birth • Knowledge – weighted average of adult literacy (2/3rds) and mean years of schooling • Low human development (0-0.499) • Medium human development (0.5-0.799) • Low human development (0.8-1)

  7. HDI • Income index = • Life expectancy index =

  8. HDI • Education index = 2/3 (adult literacy index) +1/3(gross enrollment index) • Adult literacy index = • Gross enrollment index =

  9. HDI = + +

  10. Criticisms of HDI • Gross enrollment overstates the amount of schooling • Equal weightage of all three components doesn’t show on what value judgment it is based • No attention is given to the role of quality (life quality or schooling quality)

  11. Per capita national income • GNP PC / GDP PC • PPP conversion - • Exchange rates do measure the relative purchasing powers since many exchange rates are not floating exchange rates • PPP’s are used to convert into relative GDP and GNP • PPP = number of units of a foreign country's currency required to purchase the identical quantity of g&s in the local LDC market as $1 would buy • Thus PPP converted GDP/GNP is usually higher  due to lower prices of non-traded services in developing countries

  12. Relative growth rates • Slower GNP growth rates than developed nations

  13. Distribution of National income • Every nation shows income inequality • Common measures of income inequality is the GINI coefficient

  14. Gini coefficient

  15. Calculating the Gini Coefficient Although the Lorenz Curve is good visual indicator of distribution equality, the Gini Coefficient provides a clearer quantatitive value. A / B = Gini Values should lie between 0 (total integration) to 1 (total segregation). B Line of total integration Cumulative Wealth (PPP) A Cumulative Global Population

  16. Extent of poverty • Magnitude of poverty depends on • Average level of national income • Degree of inequality in its distribution • Absolute poverty: • represents the specific minimum level of income needed to satisfy basic physical needs for survival • These levels will vary from country to country • International poverty line – (constant US $370) • $1 a day

  17. Health • Constant battle against malnutrition, disease and ill health • Indicators: infant mortality rates • Least DC: 96/1000 live births • LDC: 64/1000 live births • Developed: 8/1000 live births • 67% of children in Bangladesh are underweight • Low population-to-physician ratio (672:1 in Kenya)

  18. Education • Meager spread of education opportunities • Cultural reasons for lack of education

  19. Dates to remember • Quiz 1 on the 14th of May 2009 • Quiz 2 on the 25th of May • Midterm exam- 4th of June (tentative) • Quiz 3 on the 15th of June • Quiz 4 on the 26th of June • Final exam week (July 6th – 11th)

  20. HDI task

  21. Case Study: Nigeria

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