DevelopmentDevelopment

DevelopmentDevelopment Definition:Definition:

The process of improving the The process of improving the material condition of people material condition of people through growth and diffusion of through growth and diffusion of technology and knowledgetechnology and knowledge Every place, regardless of size, Every place, regardless of size,

exists at some level of exists at some level of developmentdevelopment

MDCsMDCs More developed countriesMore developed countries

On wealthier side of On wealthier side of development spectrumdevelopment spectrum

LDCsLDCs Less developed countriesLess developed countries

On the economically poorer On the economically poorer side of the development side of the development spectrumspectrum

Measuring developmentMeasuring development

There are several ways to There are several ways to measure developmentmeasure development Different factors:Different factors:

Gross Domestic Product (GDP)Gross Domestic Product (GDP) Value of total outputs of goods Value of total outputs of goods

and services produced in a and services produced in a country, usually over one yearcountry, usually over one year

Gross National Product (GNP)Gross National Product (GNP) Includes all goods and Includes all goods and

services owned and produced services owned and produced by a country overseasby a country overseas

Purchasing Power Parity Purchasing Power Parity (PPP)(PPP)

Measurement tool for each Measurement tool for each currency to buy an equal currency to buy an equal amount of goodsamount of goods

Allows economists to make Allows economists to make “apple to apple” “apple to apple” comparisons comparisons

Informal SectorInformal Sector Includes all business Includes all business

transactions that were not transactions that were not reported by the governmentreported by the government

Not calculated in GDPNot calculated in GDP Exists for several reasonsExists for several reasons

Human Development IndexHuman Development Index

Formula used to measure a Formula used to measure a country’s development level country’s development level and compare it to other regions and compare it to other regions and countries on the rank-and countries on the rank-ordered list of countriesordered list of countries

Country’s level of development Country’s level of development can be distinguished by three can be distinguished by three factors:factors: EconomicEconomic SocialSocial DemographicDemographic

HDI examines all three factorsHDI examines all three factors

HDI created by United HDI created by United NationsNations

Created by selecting:Created by selecting: One economic factor (Gross One economic factor (Gross

Domestic Product)Domestic Product) Two social factors (literacy Two social factors (literacy

rate, education)rate, education) One demographic factor (life One demographic factor (life

expectancy)expectancy) Highest HDI is a 1.000, or Highest HDI is a 1.000, or

100%100% Lowest score is a 0.000, or Lowest score is a 0.000, or

0%0%

Map of Map of HDI

Economic Indicator: GDPEconomic Indicator: GDP

Gross Domestic Product per Gross Domestic Product per capitacapita

GDPGDP Definition: Definition:

value of the total output of goods value of the total output of goods and services produced in a and services produced in a country, normally during a yearcountry, normally during a year

Divide GDP by total population to Divide GDP by total population to get the average contribution from get the average contribution from individualsindividuals

For example:For example: The GDP for the U.S. in The GDP for the U.S. in

2009 was $14 trillion2009 was $14 trillion Divided by pop of 307 Divided by pop of 307

million= $46,600million= $46,600

In MDCs GDP per capita In MDCs GDP per capita exceeds $30,000exceeds $30,000 In LDCs less than $3,000In LDCs less than $3,000

The higher the per capita The higher the per capita GDP, the greater the GDP, the greater the potential for ensuring that all potential for ensuring that all citizens enjoy comfortable lifecitizens enjoy comfortable life

GDP does not perfectly GDP does not perfectly measure country’s measure country’s developmentdevelopment GDP measures average (or GDP measures average (or

mean) wealth, not its mean) wealth, not its distributiondistribution

GDP per CapitaGDP per Capita

Three other Economic IndicatorsThree other Economic Indicators

The other economic indicators The other economic indicators useful in distinguishing useful in distinguishing between MDCs and LDCsbetween MDCs and LDCs Types of jobsTypes of jobs Worker productivityWorker productivity Availability of consumer goodsAvailability of consumer goods

Types of JobsTypes of Jobs

Five categoriesFive categories PrimaryPrimary

Directly extract resources Directly extract resources from earthfrom earth

SecondarySecondary ManufacturingManufacturing

TertiaryTertiary Provision of goods and Provision of goods and

servicesservices QuaternaryQuaternary

Creation and transfer of Creation and transfer of informationinformation

QuinaryQuinary Highest level decision makingHighest level decision making

Distribution of jobs among Distribution of jobs among workers differs greatly workers differs greatly between MDCs and LDCsbetween MDCs and LDCs % of primary jobs in LDCs % of primary jobs in LDCs

is 60%, MDCs is less than is 60%, MDCs is less than 5%5%

High agricultural % means High agricultural % means people producing food for people producing food for mainly survival, not salemainly survival, not sale

ProductivityProductivity

Definition:Definition: Value of a particular Value of a particular

product compared to the product compared to the amount of labor needed to amount of labor needed to make itmake it Workers in MDCs are more Workers in MDCs are more

productive than LDCsproductive than LDCs

Productivity can be measured Productivity can be measured by the value added per capitaby the value added per capita

Value added: gross value of the Value added: gross value of the product minus the costs of raw product minus the costs of raw materials and energymaterials and energy

$5,000 in U.S., $7,000 in $5,000 in U.S., $7,000 in JapanJapan

$500 in China, $100 in India$500 in China, $100 in India

MDCsMDCs Workers produce more Workers produce more

with less effort due to with less effort due to technology (machines, technology (machines, tools, equipment)tools, equipment) LDCs rely solely on human LDCs rely solely on human

labor and animal powerlabor and animal power

Larger per capita GDP Larger per capita GDP in MDCs in part pays for in MDCs in part pays for the manufacture and the manufacture and purchase of machinerypurchase of machinery Which in turn makes Which in turn makes

workers more productive workers more productive and generate more wealthand generate more wealth

Consumer GoodsConsumer Goods

Part of the wealth generated in Part of the wealth generated in MDCs is used to purchase goods MDCs is used to purchase goods and servicesand services Especially important are goods and Especially important are goods and

services related to transportation services related to transportation and communicationsand communications

Including motor vehicles, telephones, Including motor vehicles, telephones, and computersand computers

Products that promote better Products that promote better transportation and communications transportation and communications are accessible to virtually all are accessible to virtually all residents in MDCsresidents in MDCs Vital to the economy’s function and Vital to the economy’s function and

growthgrowth In LDCs, these products do not play a In LDCs, these products do not play a

major role in daily lifemajor role in daily life

LDCs, most people can not LDCs, most people can not afford themafford them Most people familiar with goods, see Most people familiar with goods, see

them as symbol of developmentthem as symbol of development Possession of consumer goods is Possession of consumer goods is

not universal in LDCsnot universal in LDCs ““haves” and “have-nots”haves” and “have-nots”

Technological change may help Technological change may help to reduce the gap in access to to reduce the gap in access to communications betweens communications betweens MDCs and LDCsMDCs and LDCs Cell phone ownership rapidly Cell phone ownership rapidly

expandingexpanding Don’t require costly investment of Don’t require costly investment of

installation of wiresinstallation of wires

Social Indicators of DevelopmentSocial Indicators of Development

MDCs use part of their wealth MDCs use part of their wealth to provide schools, hospitals, to provide schools, hospitals, and welfare servicesand welfare services Result= people are better Result= people are better

educated, healthier, and better educated, healthier, and better protected from hardshipsprotected from hardships

Infants more likely to survive, Infants more likely to survive, adults live longeradults live longer

In turn, well-educated, healthy, In turn, well-educated, healthy, and secure population can be and secure population can be more economically productivemore economically productive

Social IndicatorsSocial Indicators Education/ LiteracyEducation/ Literacy Health/ WelfareHealth/ Welfare

Education and LiteracyEducation and Literacy

In general:In general: Higher the level of development = Higher the level of development =

greater quantity and quality of a greater quantity and quality of a country’s educationcountry’s education

Quality of education is Quality of education is measured in two ways:measured in two ways: Student/teacher ratioStudent/teacher ratio

LDCs more students per LDCs more students per teacherteacher

= less personalized instruction= less personalized instruction

Literacy rateLiteracy rate Percentage of a country’s Percentage of a country’s

people who can read and writepeople who can read and write 98% + in MDCs, 60% in 98% + in MDCs, 60% in LDCs

Health and WelfareHealth and Welfare People are healthier in MDCs than People are healthier in MDCs than

LDCsLDCs

Health influenced by dietHealth influenced by diet MDCs:MDCs:

eat more calories and proteineat more calories and protein

LDCs: LDCs: receive less than the daily minimum receive less than the daily minimum

allowance of calories and proteinsallowance of calories and proteins

MDCs health care is a public serviceMDCs health care is a public service Available at little to no costAvailable at little to no cost

Government programs pay for more Government programs pay for more than 70% of healthcare costs in than 70% of healthcare costs in European countriesEuropean countries

Exception U.S. where private Exception U.S. where private individuals are required to pay an individuals are required to pay an average of 55% health care costs, average of 55% health care costs, more similar to LDCsmore similar to LDCs

MDCs use part of their wealth to MDCs use part of their wealth to protect people that cannot workprotect people that cannot work Public assistance for sick, elderly, Public assistance for sick, elderly,

poor, disabled, orphaned, veterans poor, disabled, orphaned, veterans of war, widows, unemployed, or of war, widows, unemployed, or single parents single parents

Countries in NW Europe Countries in NW Europe provide highest level of public-provide highest level of public-assistanceassistance Denmark, Norway, SwedenDenmark, Norway, Sweden

Today MDCs are having Today MDCs are having difficulty maintaining these difficulty maintaining these programsprograms

Demographic Indicators of Demographic Indicators of DevelopmentDevelopment

MDCs display demographic MDCs display demographic differences from LDCsdifferences from LDCs

Demographic IndicatorsDemographic Indicators Used by UN’s HDI:Used by UN’s HDI:

Life expectancyLife expectancy Other:Other:

Infant mortality rateInfant mortality rate Natural increase rateNatural increase rate Crude birth ratesCrude birth rates

Demographic IndicatorsDemographic Indicators Life expectancyLife expectancy

Better healthcare and welfare in MDCs Better healthcare and welfare in MDCs permit people to live longerpermit people to live longer

Babies born today can expect to live into Babies born today can expect to live into their 60s in LDCs, 70s in MDCstheir 60s in LDCs, 70s in MDCs

Gap in LE greater for females than Gap in LE greater for females than malesmales

Females – 13 years longer in MDCsFemales – 13 years longer in MDCs Males- 10 years longer in MDCsMales- 10 years longer in MDCs

MDCs have a higher % of older MDCs have a higher % of older people people

= high dependency ratio= high dependency ratio

Infant Mortality RateInfant Mortality Rate Better health allows more infants to Better health allows more infants to

survive in MDCssurvive in MDCs 6% die in LDCs, less than 1% in MDCs6% die in LDCs, less than 1% in MDCs Greater in LDCs because:Greater in LDCs because:

Babies die from malnutrition, lack of Babies die from malnutrition, lack of medical attention, dehydration, poor medical attention, dehydration, poor medical practicesmedical practices

Natural Increase RateNatural Increase Rate LDCs having more babies!LDCs having more babies!

Averages 1.5% in LDCsAverages 1.5% in LDCs Averages 0.2% in MDCsAverages 0.2% in MDCs

Natural increase strains a country’s Natural increase strains a country’s ability to provide hospitals, schools, ability to provide hospitals, schools, jobs, and other services make its jobs, and other services make its people healthier and more productivepeople healthier and more productive

LDCs must allocate resources for expanding LDCs must allocate resources for expanding population rather than improve care for current population rather than improve care for current populationpopulation

Crude Birth RateCrude Birth Rate LDCs have higher NIRs because they LDCs have higher NIRs because they

have a higher CBRhave a higher CBR LDCs= 23 per 1,000 LDCs= 23 per 1,000 MDCs= 12 per 1,000MDCs= 12 per 1,000

CBR does not indicate a society’s level CBR does not indicate a society’s level of developmentof development

High # of old people in MDCsHigh # of old people in MDCs

Distribution of MDCs and LDCsDistribution of MDCs and LDCs

Countries of the world can be Countries of the world can be categorized into nine major categorized into nine major regions according to their level regions according to their level of developmentof development

More Developed RegionsMore Developed Regions North AmericaNorth America EuropeEurope RussiaRussia JapanJapan OceaniaOceania

Less Developed RegionsLess Developed Regions Latin AmericaLatin America East AsiaEast Asia Southwest Asia/ N. AfricaSouthwest Asia/ N. Africa Southeast AsiaSoutheast Asia Central AsiaCentral Asia South AsiaSouth Asia Sub-Saharan AfricaSub-Saharan Africa

The Development GapThe Development Gap

Definition:Definition: Widening difference between Widening difference between

development levels in MDCs development levels in MDCs and LDCsand LDCs

MDCs are improving in their MDCs are improving in their development levels faster development levels faster than are LDCsthan are LDCs In the last decade, the GDP In the last decade, the GDP

nearly tripled in MDCs but nearly tripled in MDCs but only doubled in LDCsonly doubled in LDCs

The rate of population The rate of population increase fell by nearly 85% in increase fell by nearly 85% in MDCs, but by less than 5% MDCs, but by less than 5% in LDCsin LDCs

North-South GapNorth-South Gap Refers to the pattern that Refers to the pattern that

MDCs are primarily located MDCs are primarily located in the Northern Hemispherein the Northern Hemisphere LDCs are mainly located in LDCs are mainly located in

the Southern Hemispherethe Southern Hemisphere

Gender InequalityGender Inequality

A country’s overall level of A country’s overall level of development masks development masks inequalities in the status of inequalities in the status of men and womenmen and women

Gender inequality exists in Gender inequality exists in every country of the worldevery country of the world No country in the world where No country in the world where

women are treated as well as women are treated as well as menmen

To measure extent of To measure extent of each country’s gender each country’s gender inequality the UN has inequality the UN has created two indexes:created two indexes: Gender-related Gender-related

development index (GDI)development index (GDI) Compares level of women’s Compares level of women’s

development with that of development with that of both sexesboth sexes

Gender Empowerment Gender Empowerment Measure (GEM)Measure (GEM)

Compares the ability of Compares the ability of women and men to women and men to participate in economic and participate in economic and political decision makingpolitical decision making

Gender-Related Development Index Gender-Related Development Index (GDI)(GDI)

Constructed similar to the Constructed similar to the HDIHDI Economic indicatorsEconomic indicators

Per capita female income Per capita female income as a % of per capita male as a % of per capita male incomeincome

Social indicatorsSocial indicators # of females enrolled in # of females enrolled in

schools compared to # of schools compared to # of malesmales

% of literate females % of literate females compare to malescompare to males

Demographic indicatorsDemographic indicators LE of females compared to LE of females compared to

malesmales

The GDI penalizes a country The GDI penalizes a country for having a large disparity for having a large disparity between the well-being men between the well-being men and womenand women Example: Hungary and Saudi Example: Hungary and Saudi

ArabiaArabia

A country with complete A country with complete gender equality would have gender equality would have a GDI of 1.0a GDI of 1.0 A high GDI means that both A high GDI means that both

men and women have men and women have achieved a high level of achieved a high level of developmentdevelopment

A low GDI means that women A low GDI means that women have a low level of development have a low level of development compared to mencompared to men

Gender Empowerment Measure (GEM)Gender Empowerment Measure (GEM)

GEM measures the ability of GEM measures the ability of women to participate in the women to participate in the process o achieving process o achieving improvements in their statusimprovements in their status Political and economic powerPolitical and economic power

GEM is calculated using:GEM is calculated using: EconomicEconomic

Per capita female income as a % of Per capita female income as a % of per capita male incomeper capita male income

% of professional and technical jobs % of professional and technical jobs held by womenheld by women

PoliticalPolitical % of administrative jobs held by % of administrative jobs held by

womenwomen % of members of the national % of members of the national

parliament who are womenparliament who are women

Highest score= 1.0Highest score= 1.0

Regions with highest Regions with highest GEMs are:GEMs are: North AmericaNorth America Northern EuropeNorthern Europe OceaniaOceania

Regions with lowest GEMS Regions with lowest GEMS are:are: AfricaAfrica AsiaAsia