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ECO 102 Development Economics. Aisha Khan Summer 2009 Section G & I Lecture Three. Diverse Structures and Common Characteristics. Chapter Two. Structural diversity. Consider the following: The size of the country Its historical and colonial background
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ECO 102 Development Economics Aisha Khan Summer 2009 Section G & I Lecture Three
Diverse Structures and Common Characteristics • Chapter Two
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
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
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
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)
HDI • Income index = • Life expectancy index =
HDI • Education index = 2/3 (adult literacy index) +1/3(gross enrollment index) • Adult literacy index = • Gross enrollment index =
HDI = + +
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)
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
Relative growth rates • Slower GNP growth rates than developed nations
Distribution of National income • Every nation shows income inequality • Common measures of income inequality is the GINI coefficient
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
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
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)
Education • Meager spread of education opportunities • Cultural reasons for lack of education
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)