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Development
Development
 Definition:
 The process of improving the
material condition of people
through growth and diffusion
of technology and knowledge
 Every place, regardless of size,
exists at some level of
development
 MDCs
 More developed countries
 On wealthier side of
development spectrum
 LDCs
 Less developed countries
 On the economically poorer
side of the development
spectrum
Measuring development
 There are several ways to
measure development
 Different factors:
 Gross Domestic Product (GDP)
 Value of total outputs of goods
and services produced in a
country, usually over one year
 Gross National Product (GNP)
 Includes all goods and
services owned and produced
by a country overseas
 Purchasing Power Parity
(PPP)
 Measurement tool for each
currency to buy an equal
amount of goods
 Allows economists to make
“apple to apple”
comparisons
 Informal Sector
 Includes all business
transactions that were not
reported by the government
 Not calculated in GDP
 Exists for several reasons
Human Development Index
 Formula used to measure a
country’s development level
and compare it to other regions
and countries on the rankordered list of countries
 Country’s level of development
can be distinguished by three
factors:
 Economic
 Social
 Demographic
 HDI examines all three factors
 HDI created by United
Nations
 Created by selecting:
 One economic factor (Gross
Domestic Product)
 Two social factors (literacy
rate, education)
 One demographic factor (life
expectancy)
 Highest HDI is a 1.000, or
100%
 Lowest score is a 0.000, or
0%
Map of HDI
Economic Indicator: GDP
 Gross Domestic Product per
capita
 In MDCs GDP per capita
exceeds $30,000
 In LDCs less than $3,000
 GDP
 Definition:
 value of the total output of goods
and services produced in a
country, normally during a year
 Divide GDP by total population to
get the average contribution from
individuals
 For example:
 The GDP for the U.S. in
2009 was $14 trillion
 Divided by pop of 307
million= $46,600
 The higher the per capita
GDP, the greater the
potential for ensuring that all
citizens enjoy comfortable life
 GDP does not perfectly
measure country’s
development
 GDP measures average (or
mean) wealth, not its
distribution
GDP per Capita
Three other Economic Indicators
 The other economic indicators
useful in distinguishing
between MDCs and LDCs
 Types of jobs
 Worker productivity
 Availability of consumer goods
Types of Jobs
 Five categories
 Primary
 Directly extract resources from
earth
 Secondary
 Manufacturing
 Tertiary
 Provision of goods and
services
 Quaternary
 Creation and transfer of
information
 Quinary
 Highest level decision making
 Distribution of jobs among
workers differs greatly
between MDCs and LDCs
 % of primary jobs in LDCs
is 60%, MDCs is less than
5%
 High agricultural % means
people producing food for
mainly survival, not sale
Productivity
 Definition:
 Value of a particular
product compared to the
amount of labor needed to
make it
 Workers in MDCs are more
productive than LDCs
 Productivity can be measured
by the value added per capita
 Value added: gross value of the
product minus the costs of raw
materials and energy
 $5,000 in U.S., $7,000 in
Japan
 $500 in China, $100 in India
 MDCs
 Workers produce more
with less effort due to
technology (machines,
tools, equipment)
 LDCs rely solely on human
labor and animal power
 Larger per capita GDP
in MDCs in part pays for
the manufacture and
purchase of machinery
 Which in turn makes
workers more productive
and generate more wealth
Consumer Goods
 Part of the wealth generated in
MDCs is used to purchase goods
and services
 Especially important are goods and
services related to transportation
and communications
 Including motor vehicles, telephones,
and computers
 Products that promote better
transportation and communications
are accessible to virtually all
residents in MDCs
 Vital to the economy’s function and
growth
 In LDCs, these products do not play a
major role in daily life
 LDCs, most people can not
afford them
 Most people familiar with goods, see
them as symbol of development
 Possession of consumer goods is
not universal in LDCs
 “haves” and “have-nots”
 Technological change may help
to reduce the gap in access to
communications betweens
MDCs and LDCs
 Cell phone ownership rapidly
expanding
 Don’t require costly investment of
installation of wires
Social Indicators of Development
 MDCs use part of their wealth
to provide schools, hospitals,
and welfare services
 Result= people are better
educated, healthier, and better
protected from hardships
 Infants more likely to survive,
adults live longer
 In turn, well-educated, healthy,
and secure population can be
more economically productive
 Social Indicators
 Education/ Literacy
 Health/ Welfare
Education and Literacy
 In general:
 Higher the level of development =
greater quantity and quality of a
country’s education
 Quality of education is
measured in two ways:
 Student/teacher ratio
 LDCs more students per
teacher
 = less personalized instruction
 Literacy rate
 Percentage of a country’s
people who can read and write
 98% + in MDCs, 60% in LDCs
Health and Welfare
 People are healthier in MDCs than
LDCs
 Health influenced by diet
 MDCs:
 MDCs use part of their wealth to
protect people that cannot work
 Public assistance for sick, elderly,
poor, disabled, orphaned, veterans
of war, widows, unemployed, or
single parents
 eat more calories and protein
 LDCs:
 receive less than the daily minimum
allowance of calories and proteins
 Countries in NW Europe
provide highest level of publicassistance
 Denmark, Norway, Sweden
 MDCs health care is a public service
 Available at little to no cost
 Government programs pay for more
than 70% of healthcare costs in
European countries
 Exception U.S. where private
individuals are required to pay an
average of 55% health care costs,
more similar to LDCs
 Today MDCs are having
difficulty maintaining these
programs
Demographic Indicators of Development
 MDCs display demographic
differences from LDCs
 Demographic Indicators
 Used by UN’s HDI:
 Life expectancy
 Other:
 Infant mortality rate
 Natural increase rate
 Crude birth rates
Demographic Indicators
 Life expectancy
 Better healthcare and welfare in MDCs
permit people to live longer
 Babies born today can expect to live into
their 60s in LDCs, 70s in MDCs
 Gap in LE greater for females than
males
 Females – 13 years longer in MDCs
 Males- 10 years longer in MDCs
 MDCs have a higher % of older
people
 Natural Increase Rate
 LDCs having more babies!


 Natural increase strains a country’s
ability to provide hospitals, schools,
jobs, and other services make its
people healthier and more
productive

 = high dependency ratio
 Infant Mortality Rate
 Better health allows more infants to
survive in MDCs
 6% die in LDCs, less than 1% in MDCs
 Greater in LDCs because:
 Babies die from malnutrition, lack of
medical attention, dehydration, poor
medical practices
Averages 1.5% in LDCs
Averages 0.2% in MDCs
LDCs must allocate resources for
expanding population rather than improve
care for current population
 Crude Birth Rate
 LDCs have higher NIRs because
they have a higher CBR


LDCs= 23 per 1,000
MDCs= 12 per 1,000
 CBR does not indicate a society’s
level of development

High # of old people in MDCs
Distribution of MDCs and LDCs
 Countries of the world can be
categorized into nine major
regions according to their level
of development
 More Developed Regions

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North America
Europe
Russia
Japan
Oceania
 Less Developed Regions

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



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Latin America
East Asia
Southwest Asia/ N. Africa
Southeast Asia
Central Asia
South Asia
Sub-Saharan Africa
The Development Gap
 Definition:
 Widening difference between
development levels in MDCs
and LDCs
 MDCs are improving in their
development levels faster
than are LDCs
 In the last decade, the GDP
nearly tripled in MDCs but
only doubled in LDCs
 The rate of population
increase fell by nearly 85% in
MDCs, but by less than 5%
in LDCs
 North-South Gap
 Refers to the pattern that
MDCs are primarily located
in the Northern Hemisphere
 LDCs are mainly located in
the Southern Hemisphere
Gender Inequality
 A country’s overall level of
development masks
inequalities in the status of
men and women
 Gender inequality exists in
every country of the world
 No country in the world where
women are treated as well as
men
 To measure extent of
each country’s gender
inequality the UN has
created two indexes:
 Gender-related
development index (GDI)
 Compares level of women’s
development with that of
both sexes
 Gender Empowerment
Measure (GEM)
 Compares the ability of
women and men to
participate in economic and
political decision making
Gender-Related Development Index (GDI)
 Constructed similar to the
HDI
 Economic indicators
 Per capita female income
as a % of per capita male
income
 Social indicators
 # of females enrolled in
schools compared to # of
males
 % of literate females
compare to males
 Demographic indicators
 LE of females compared to
males
 The GDI penalizes a country
for having a large disparity
between the well-being men
and women
 Example: Hungary and Saudi
Arabia
 A country with complete
gender equality would have
a GDI of 1.0
 A high GDI means that both
men and women have
achieved a high level of
development
 A low GDI means that women
have a low level of development
compared to men
Gender Empowerment Measure (GEM)
 GEM measures the ability of
women to participate in the
process o achieving
improvements in their status
 Political and economic power
 GEM is calculated using:
 Highest score= 1.0
 Regions with highest
GEMs are:
 North America
 Northern Europe
 Oceania
 Economic
 Per capita female income as a % of
per capita male income
 % of professional and technical jobs
held by women
 Political
 % of administrative jobs held by
women
 % of members of the national
parliament who are women
 Regions with lowest GEMS
are:
 Africa
 Asia