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Chapter2

The document discusses the distinction between economic growth and economic development, emphasizing that the latter encompasses a broader range of factors affecting people's quality of life, such as poverty reduction and social well-being. It outlines various methods for measuring economic development, including real GNP, per capita income, Human Development Index (HDI), and Human Poverty Index (HPI), each with its strengths and weaknesses. The focus is on how these measurements reflect the actual living standards and capabilities of individuals in a society.

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6 views4 pages

Chapter2

The document discusses the distinction between economic growth and economic development, emphasizing that the latter encompasses a broader range of factors affecting people's quality of life, such as poverty reduction and social well-being. It outlines various methods for measuring economic development, including real GNP, per capita income, Human Development Index (HDI), and Human Poverty Index (HPI), each with its strengths and weaknesses. The focus is on how these measurements reflect the actual living standards and capabilities of individuals in a society.

Uploaded by

20237497
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Chapter

MEASUREMENT OF ECONOMIC DEVELOPMENT

Learning Outcomes:

1. Compare and Contrast economic growth and economic development in terms of scope, term,
measurement and effects.
2. Identify and explain the different measurement of economic development.
3. Discuss the strength and weaknesses of each measurement.

Lesson 1: Economic Growth vs. Economic Development

Economic development
-Development looks at a wider range of statistics than just GDP per capita. Development
is concerned with how people are actually affected. It looks at their actual living standards and the
freedom they have to enjoy a good standard of living.

Ø Economic development is the quantitative and qualitative change in an economy.


Ø Economic development refers to the reduction and elimination of poverty,
unemployment and inequality with the context of growing economy.
Ø Economic development means an improvement in the quality of life and living
standards, e.g. measures of literacy, life-expectancy and health care.
Ø Economic development includes process and policies by which a country improves
the social, economic and political well-being of its people.
Ø Economic development is multi-dimensional in nature as it focuses on both income
and improvement of living standards of the people.

Measures of economic development will look at:

• Real income per head – GDP per capita


• Levels of literacy and education standards
• Levels of healthcare e.g. number of doctors per 1000 population
• Quality and availability of housing
• Levels of environmental standards
• Life expectancy.
Economic Growth is a narrower concept than economic development. It is an increase in a country's
real level of national output which can be caused by an increase in the quality of resources
(by education etc.), increase in the quantity of resources & improvements in technology or in another way
an increase in the value of goods and services produced by every sector of the economy
(https://www.diffen.com)
Ø -Economic growth means an increase in real national income / national output.
Ø It refers to an increase over time in a country’s real output of goods and services (GNP) or
real output per capita income.
Ø Economic growth is single dimensional in nature as it only focuses on income of the
people.
Ø Earlier, economic growth was only measured in terms of Gross Domestic Product (GDP).
Ø At present, it is measured in terms of GDP, Gross National Income (GNI) and Per Capita
Income.
Ø It is for short term/short period.
Ø It is a material/physical concept.
Ø Economic growth is measured in certain time frame/period.

Lesson 2: Measurement of Economic Development

Different countries are classified to their level of social and economic development
There are following methods to measure the economic development:

(1) Increase in real GNP


-if real GNP increases over a long period of time,

(2) Increase in real per capita income,


-Some economists are of the view that if per capita income or real GNP per capita increases over
a long period of time, it will be accorded as economic development.

(3) Human Development Index (HDI)


-The HDI was created to emphasize that people and their capabilities should be the ultimate
criteria for assessing the development of a country, not economic growth alone. The HDI can
also be used to question national policy choices, asking how countries with the same level of GNI
per capita can end up with different human development outcomes. These contrasts can
stimulate debate about government policy priorities.
- The HDI is a summary measure of average achievement in key dimensions of human
development: a long and healthy life, being knowledgeable and have a decent standard of living
(http://hdr.undp.org).
(4) The human poverty index (HPI) was introduced by UN Development Programme (UNDP)

To measure rates of economic development for low-income countries it examines


education, life expectancy, rates of absolute poverty and access to health care and safe drinking
water.

(HPI-1) It involves combining:

1. Probability at birth of not surviving to age 40 (times 100)


2. Adult illiteracy rate
3. Arithmetic average of these three characteristics:

• The percentage of the population without access to safe water.


• The percentage of population without access to health services.
• The percentage of malnourished children under five.

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