Download Intro-Development-Indicators

Economic Development:
Intro to Indicators
• A measure of the quantity and quality of
economic growth within a country
Quantity: GDP / capita (GNI may be more telling)
Quality: access to resources
living standards
choices
sustainability of growth, etc.
Development economics requires some normative
thinking – value judgements and bias are
inevitable and must be identified
Developed vs. Developing Economies
• Developed: most people have access to
resources which satisfy their basic wants, the
opportunity to improve their living standards
(education, etc), the ability to make wider
economic choices (where to live, work, etc)
• Developing: access to the basic essentials of life
and choice for the majority of the population is
limited by the need to focus on individual
survival
Development Indicators – GDP/capita
• Total value of goods and services
produced within a country / population
• The most important indicator of
development – ↑incomes → ↑living stds
• GNI may be more informative and is often
used for developing countries
Advantages
Disadvantages
• Most gov’ts produce a
GDP figure using
internationally
recognised calculation
methods
• Accurate figures difficult to
obtain –unofficial activity
& fraud (black mkt,
subsistence farming,
corruption, etc.)
• Easy to compare
countries
• Cross comparison req’s
conversion to common
currency – exch. rate
distortion may occur
• Easy to calculate from
gov’t figures
• A good indicator of the
relative state of the
economy yr on yr
• Hides inequalities
• Just a snapshot – trends
more important
Development Indicators –
Measures of Poverty
Absolute: inability to acquire goods
necessary to satisfy basic human needs
(nutrition, shelter, etc)
• Eg. “% of people living on less than equiv.
$2 per day” – puts into terms developed
countries can understand
• Probs with measure: data, costs of living
vary vastly (climate, etc), income isn’t
everything
Develop’t Indicators – Measures of Poverty
• Relative Poverty: measures poverty in relation to the
average in the country
• Often defined as % of population below 60% of median
income
* Median income is the middle income in the country –
half the population has income above that level and half
has income below that level
• So, if a country has quite a sharp drop from that middle
income to the lowest incomes, there can be a high
percentage who are in ‘relative poverty’
Development Indicators - Life
Expectancy
• Over past 40 years, life exp. at birth in developing
countries has increased by 20%, but many countries
in sub-saharan Africa are now falling due to AIDS
• Many factors contribute to differences (stability of
food supply, incidence of war, disease, etc)
At the lowest levels of
income, huge gains in
life exp. can be made
with just a little extra
money
Life exp.
at birth
GDP/capita
Development Indicators - Literacy Rates
• The % of those aged 15 and above who are able
to read and write a short, simple statement on
their everyday life
• Zambia’s lit. rate is higher than Saudi Arabia
which has 14x higher GDP/capita
• More extensive definitions are available – eg.
functional literacy (tests ability to understand
printed text, interpret documents, and perform
basic arithmetic)
Advantages
Disadvantages
• Gives indication of
access to education
(many may not go to
school even if it is free
due to high opp. cost of
leaving the farm)
• Shows potential of a
workforce
• Takes no notice of other
skills – eg. knowledge of
farming techniques
• May be difficult to
measure – some cultural
bias
• Doesn’t indicate problems
of access, poor teaching,
cultural discouragement,
etc.
• May be gender
distribution issues
Development Indicators
– Infant Mortality
• Deaths of children aged 0 – 1 per
thousand of the total births
• Indicates state of health service, disease
problems, food & water quality,
accommodation, infrastructure, success of
aid packages, etc.
Advantages
Disadvantages
• An easy indicator to
understand
• Focuses on one of the
most basic aspects of
development
• Hard to get accurate
figure – births may be
unregistered
• Complexities of disease
may exist
• Hard to target / compare –
what exactly is causing
the deaths?
Development Indicators –
% Employed in Agriculture
• Absolute poverty usually found in agriculture
• 2/3 of labour force employed in ag. in Asia &
Africa
• Some theories on development linked to
industrialisation
• BUT, may be an advantage to be in ag. in certain
circumstances – live off the land (lots of poverty in
cities as well)
Other Development Indicators
• Big Mac Index: Ranks
countries according to how
long ave. person must work
to buy a Big Mac – gives
some idea of PPP and the
real exch. rate (Big Mac
costing $6.81 in Switzerland
is worth the same in GNI as
one costing $1.62 in India)
• Quality of Life: eg. # of
people per room, distance
travelled to clean water,
cars per person
Other Development Indicators
• Infrastructure: eg. paved roads as % of
total roads (can give insight into growth
potential)
• Disease: AIDS, TB, Malaria (indicates
future workforce potential, access to
drugs/healthcare, sanitation, etc) – may be
distorted due to data collection problems
Composite or Aggregate Indicators
• Human Development Index (HDI) – introduced by UN
to account for probs. of income based measures
• 3 components:
- longevity (life expectancy at birth)
- knowledge (number of years in school)
- std of living (real GNI/capita adjusted for local cost of
living, and PPP)
• Creates a league table of countries:
- very high = 0.8 – 1
- high = 0.7-0.8
- medium = 0.7 – 0.55
- low = below 0.55
• Amartya Sen video
Problems of HDI
• All incorporated figures may have flaws
• Does not account for differences in gender, religion,
region, etc.
Combining Indicators
• Subtract HDI rank from GNI rank – gives indicator of
standards of literacy and health without income
consideration
• Some countries are wealthy overall, but have poor
standards for the average person – or vice versa