Measuring Measuring DevelopmentDevelopment

Econ growth & econ Econ growth & econ developmentdevelopment• Economic growth: increases in output Economic growth: increases in output

and incomes over time.and incomes over time.• Economic development: process Economic development: process

leading to improved standards of leading to improved standards of living for a population as a whole.living for a population as a whole.

• 1950-1960s: Econ. growth over long 1950-1960s: Econ. growth over long periods of time will provide economic periods of time will provide economic and social benefits for the entre and social benefits for the entre population. Trickle down theory: population. Trickle down theory: benefits of growth will be spread out benefits of growth will be spread out over the most people in an economy.over the most people in an economy.

• Late 1960s-early 70s: The income gap Late 1960s-early 70s: The income gap between rich and poor countries more between rich and poor countries more than double in the period 1970-75. than double in the period 1970-75. Economic growth did not always Economic growth did not always worked to eliminate widespread worked to eliminate widespread poverty.poverty.

• 1970s: Ec. Development as a process 1970s: Ec. Development as a process with many dimensions: with many dimensions: A process where increases in real per A process where increases in real per capita output and incomes are capita output and incomes are accompanied by improvements in accompanied by improvements in standards of living of the population and standards of living of the population and reductions in poverty, increased access to reductions in poverty, increased access to goods and services that satisfy basic goods and services that satisfy basic needs, decrease in unemployment and needs, decrease in unemployment and reductions of serious inequalities in reductions of serious inequalities in income and wealth.income and wealth.

• Human development. Due to Amartya Human development. Due to Amartya Sen, who sees improvements in Sen, who sees improvements in human well-being as arising from a human well-being as arising from a process of expanding freedoms:process of expanding freedoms:A process of expanding human freedoms: A process of expanding human freedoms: the freedom to satisfy hunger, to be the freedom to satisfy hunger, to be adequately fed, to be free of preventable adequately fed, to be free of preventable illnesses, to have adequate clothing and illnesses, to have adequate clothing and shelter, access to clean water and shelter, access to clean water and sanitation, to receive an appropriate sanitation, to receive an appropriate education, to be able to find work,…”education, to be able to find work,…”

Income poverty and human Income poverty and human povertypoverty• Income poverty: when income falls Income poverty: when income falls

below a nationally or internationally below a nationally or internationally determined poverty line.determined poverty line.

• Human poverty: deprivations and the Human poverty: deprivations and the lack of opportunities that allow lack of opportunities that allow individuals to lead a long, healthy individuals to lead a long, healthy creative life and to enjoy a decent creative life and to enjoy a decent standard of living, freedom, dignity, standard of living, freedom, dignity, self-esteem and the respect of others.self-esteem and the respect of others.

• The level of economic development The level of economic development cannot be reflected in any single cannot be reflected in any single measure.measure.

• An An indicatorindicator is a measurable variable is a measurable variable that indicates the state or level of that indicates the state or level of something that is being measured. For something that is being measured. For ex GDP per capita is an indicator of the ex GDP per capita is an indicator of the level of output or income per person.level of output or income per person.

• A A composite indicatorcomposite indicator is a summary is a summary measure of several dimensions or goals measure of several dimensions or goals of development.of development.

Individual IndicatorsIndividual Indicators• World Development Indicators (World World Development Indicators (World

Bank). 900 indicators providing Bank). 900 indicators providing information about:information about:– People: demography, labour, income,…People: demography, labour, income,…– EnvironmentEnvironment– Economy: national accounts, trade,…Economy: national accounts, trade,…– States and markets: tax & trade policies, States and markets: tax & trade policies,

information & technology,…information & technology,…– Global links: investment & trade, aid, Global links: investment & trade, aid,

financial flows,…financial flows,…

• MDGs and indicators. The Millenium MDGs and indicators. The Millenium Declaration established specific goals Declaration established specific goals and targets to be achieved within a and targets to be achieved within a period of 15 years and specifies period of 15 years and specifies indicators to be used to monitor indicators to be used to monitor country progress. Eight goals, 18 country progress. Eight goals, 18 targets, 48 indicators.targets, 48 indicators.

Indicators of level of incomeIndicators of level of income• GDP is an indicator of the value of output GDP is an indicator of the value of output

produced within a country.produced within a country.• GNI is an indicator of the income received GNI is an indicator of the income received

by the residents of a country.by the residents of a country.• Question: when will these two indicators Question: when will these two indicators

be similar? And when will they differ?be similar? And when will they differ?• GNI per capita is a better indicator of the GNI per capita is a better indicator of the

standards of living of a country because...standards of living of a country because...• GDP per capita is a better indicator of the GDP per capita is a better indicator of the

level of output per person produced in a level of output per person produced in a countrycountry

• Ireland’s GNI is about 81% of its GDP. Ireland’s GNI is about 81% of its GDP. Why? Which measure best reflects Why? Which measure best reflects standards of living in that country?standards of living in that country?

• Lesotho’s GNI is almost 50% larger Lesotho’s GNI is almost 50% larger than its GDP due to large amount of than its GDP due to large amount of worker remittances. Other cases worker remittances. Other cases where those play an important role: where those play an important role: Bangladesh, India, Mexico, Pakistan, Bangladesh, India, Mexico, Pakistan, Philippines. However, they are Philippines. However, they are balanced out by profit repatriation by balanced out by profit repatriation by multinational firms.multinational firms.

• GDP per capita in terms of PPPs.GDP per capita in terms of PPPs.• Different countries have different price Different countries have different price

levels. The same amount of money in a levels. The same amount of money in a low-price country has greater purchasing low-price country has greater purchasing power than in a high-price country.power than in a high-price country.

• Therefore, we need a method to convert Therefore, we need a method to convert currencies that takes into account price currencies that takes into account price level differences. level differences.

• Purchasing power paritiesPurchasing power parities (PPPs): the (PPPs): the amount of a country’s currency that is amount of a country’s currency that is needed to buy the same quantity of local needed to buy the same quantity of local g&s that can be bought with US$1 in the g&s that can be bought with US$1 in the US. It makes buying power of currencies US. It makes buying power of currencies equal to the buying power of US$1.equal to the buying power of US$1.

• For the poorer countries, GDP figures For the poorer countries, GDP figures based on PPPs are higher than those based on PPPs are higher than those based on exchange rates. For the based on exchange rates. For the wealthier countries, GDP figures wealthier countries, GDP figures based on PPPs are lower than those based on PPPs are lower than those based on exchange rates.based on exchange rates.

Health indicatorsHealth indicators• Health indicatorsHealth indicators measure attributes measure attributes

of populations related to health.of populations related to health.1.1. Life expectancy at birth (average number Life expectancy at birth (average number

of years of life in a population).of years of life in a population).– Highest in Japan: 82 yearsHighest in Japan: 82 years– Lowest in Zambia: 40 yearsLowest in Zambia: 40 years

2.2. Infant mortality (n. of deaths of infants Infant mortality (n. of deaths of infants until age of one, per 1000 live births).until age of one, per 1000 live births).

3.3. Maternal mortality (n. of women who die Maternal mortality (n. of women who die per year as a result of pregnancy –related per year as a result of pregnancy –related causes)causes)

• US stands out for its lower life US stands out for its lower life expectancy (78) and higher infant (6.7) expectancy (78) and higher infant (6.7) and maternal (11) mortalities compared and maternal (11) mortalities compared to other more developed countries.to other more developed countries.

• Sri Lanka, with GNI/cap less than one Sri Lanka, with GNI/cap less than one third of Russia’s, surpasses Russia in life third of Russia’s, surpasses Russia in life expectancy by six years.expectancy by six years.

• So, high GNI means healthier So, high GNI means healthier population?population?

• Is low GNI the most important cause of Is low GNI the most important cause of poor health outcomes?poor health outcomes?

Education IndicatorsEducation Indicators• They measure levels of educational They measure levels of educational

attainment.attainment.1.1. Adult literacy rate: % people aged 15 or Adult literacy rate: % people aged 15 or

more who can read and write.more who can read and write.2.2. Primary school enrolment: % of school Primary school enrolment: % of school

aged children who are enrolled in aged children who are enrolled in primary school.primary school.

3.3. Secondary school enrollment: % of Secondary school enrollment: % of children enrolled in secondary school.children enrolled in secondary school.

• In general, as income increases, all three In general, as income increases, all three indicators tend to increase. There are indicators tend to increase. There are exceptions (low incomes and high level exceptions (low incomes and high level of education) due to:of education) due to:1.1. Countries of the former Soviet Union and Countries of the former Soviet Union and

other former communist countries have other former communist countries have very good education outcomes because of very good education outcomes because of the high priority placed on education the high priority placed on education historically (Georgia, Moldova, Tajikistan…).historically (Georgia, Moldova, Tajikistan…).

2.2. Effort of some governments to provide Effort of some governments to provide education services to their populations: education services to their populations: Swaziland, Bolivia, Indonesia, Zambia, Swaziland, Bolivia, Indonesia, Zambia, Burundi, Uganda.Burundi, Uganda.

• Primary education is an important Primary education is an important precondition for economic growth precondition for economic growth and development. Due to scarce and development. Due to scarce resources, secondary education is resources, secondary education is less of a priority for low-income less of a priority for low-income countries. Therefore, countries with countries. Therefore, countries with very good achievements in primary very good achievements in primary education tend to lag behind in education tend to lag behind in secondary enrolment.secondary enrolment.

Composite indicatorsComposite indicatorsSince 1990, the United Nations Since 1990, the United Nations

Development Programme (UNDP) Development Programme (UNDP) publishes the Human Development publishes the Human Development Report, which includes four Report, which includes four composite indicators:composite indicators:

1.1. Human Development Index (HDI)Human Development Index (HDI)2.2. Human Poverty Index (HPI)Human Poverty Index (HPI)3.3. Gender-related Development Index Gender-related Development Index

(GDI)(GDI)4.4. Gender Empowerment Measure (GEM)Gender Empowerment Measure (GEM)

HDIHDI• It measures average achievement in It measures average achievement in

three dimensions:three dimensions:http://hdr.undp.org/en/statistics/hdi/

1.1. A long and healthy life, measured by life A long and healthy life, measured by life expectancy at birth.expectancy at birth.

2.2. Knowledge, measured by:Knowledge, measured by:• Mean of years of schooling for adults aged Mean of years of schooling for adults aged

25.25.• Expected years of schooling.Expected years of schooling.

3.3. A decent standard of living, measure by A decent standard of living, measure by GNI per capita (in US$ PPP).GNI per capita (in US$ PPP).

• Each dimension expressed as a value Each dimension expressed as a value between 0 (lowest possible value for between 0 (lowest possible value for the dimension) and 1 (highest).the dimension) and 1 (highest).

• The composite index is the average The composite index is the average over the three dimensions.over the three dimensions.

• Each country receives an HDI value Each country receives an HDI value from 0 to 1, and countries are ranked from 0 to 1, and countries are ranked according to their HDI values.according to their HDI values.