econ 455/555 economic development. what is economic development?what is economic development?...

ECON 455/555Economic Development

• What is Economic Development?What is Economic Development?– Income and Growth?Income and Growth?– Poverty and Inequality?Poverty and Inequality?– Health and Happiness?Health and Happiness?– Market Economy?Market Economy?– Political Rights and Freedoms?Political Rights and Freedoms?

IntroductionIntroduction

Development EconomicsDevelopment Economics

• Four Essential Aspects of an Economic Four Essential Aspects of an Economic Development ClassDevelopment Class– Define development – to the extent possibleDefine development – to the extent possible– Describe different ways to measure Describe different ways to measure

developmentdevelopment– Describe theory to understand the Describe theory to understand the

mechanisms that make developing countries mechanisms that make developing countries differentdifferent

– Examine empirical evidence to see if theory Examine empirical evidence to see if theory is rightis right



• Ray, pages 8 & 9:Ray, pages 8 & 9:– We must be careful, no one would say development is defined as We must be careful, no one would say development is defined as

growth of income per capita. growth of income per capita. – But more universal features of economic development: health, life But more universal features of economic development: health, life

expectancy, literacy, etc., follow in a expectancy, literacy, etc., follow in a natural waynatural way from growth of from growth of income per capita.income per capita.

– Economics is all about trying to describe essential mechanisms that Economics is all about trying to describe essential mechanisms that underlie an observed phenomenon, in this case development. underlie an observed phenomenon, in this case development. Theory is about stripping away complexity to try and uncover truths Theory is about stripping away complexity to try and uncover truths about key economic forces at workabout key economic forces at work

– So studying growth is a natural starting point in a study of So studying growth is a natural starting point in a study of development.development.

– Later we shall begin to start to do two things: add more complexity Later we shall begin to start to do two things: add more complexity and begin to look more narrowly at particular aspects of and begin to look more narrowly at particular aspects of development. development.



• There are currently almost 6.7 billion people in the worldThere are currently almost 6.7 billion people in the world

– In developing countries it is estimated that (2003):In developing countries it is estimated that (2003):• 826 million people do not have enough food826 million people do not have enough food

• 1 billion people have no access to safe drinking water1 billion people have no access to safe drinking water

• 2.4 billion have no sanitation 2.4 billion have no sanitation

• 10,000 children die EVERY DAY from diseases caused by 10,000 children die EVERY DAY from diseases caused by contaminated watercontaminated water

Source: Weil (2003)Source: Weil (2003)

Introduction: Some FactsIntroduction: Some Facts


Development Economics

Introduction (cont)– Life expectancy at birth:

• 77 for 1.1 billion who live in UN classified ‘high human development countries’ (HDC)

• 67 for 4.05 billion in medium HDC• 53 for 840 million in low HDC


Introduction (cont)– Other indicators:

• High income: 443 cars per 1,000• Low income: 9 per 1,000



• Canada: 667 telephone lines per 1,000• Bangladesh: 4 telephone lines per 1,000.



• Continent of Africa: 13% of world’s population uses 2.9% of electricity

• USA: 5% of world’s population uses 25% of electricity.



• 20% of the world that lives in the richest countries have 62% of the wealth.

• 1.2 billion have incomes of less than $1 per day.• 2.5-3 billion have less than $2 per day.


Introduction (cont)– Differences within countries over time are just

as dramatic:• Life expectancy in Japan 1880: 35• Life expectancy in Japan today: 81

• Between 1775 and 1975 the average height of a male in Great Britain increased 3.6 inches from better nutrition.


Introduction (cont)– Differences within countries over time are just

as dramatic:• Since late 1800s in the United States the fraction

of income spent on recreation has tripled.• The fraction spent on food has decreased by 2/3.• In 1870 the average work week in US was 61

hours, now 34.


Introduction (cont)– Even poor countries are ‘rich’ by historical

standards:• Egypt, Indonesia and Brazil have higher life

expectancy then British nobility in 1900.


Introduction (cont)– Things are getting better? - perhaps:

• Fraction of people with incomes less than $1 fell by 1/3 from 1980 to 1998.

– But growth rate differences continue to be a problem.


Introduction (cont)– Growth rate differentials lead to quickly

increasing inequality

Institutional Features

• Higher population growth rates

• Higher percentage of agricultural production and rural residents

• Rapid rural to urban migration

• Large involvement in international trade, much of it in primary products and light manufactures

econ 455/555 economic development. what is economic development?what is economic development?...

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