narrow approach
DESCRIPTION
Narrow Approach. Lucas (1988) - PowerPoint PPT PresentationTRANSCRIPT
Lucas (1988)“By the problem of development I mean simply
the problem of accounting for the observed pattern, across countries and across time, in levels and rates of growth of per capita income. This may seem too narrow a definition, and perhaps it is, but thinking about income patterns will necessarily involve us in thinking about many other aspects of societies too, so I would suggest that we withhold judgment on the scope of this definition until we have a clearer idea of where it leads us.”
Streeten (1994)“[W]e should never lose sight of the ultimate
purpose of the exercise, to treat men and women as ends, to improve the human condition, to enlarge people’s choices…[A] unity of interests would exist if there were rigid links between economic production (as measured by income per head) and human development (reflected by human indicators such as life expectancy or literacy, or achievements such as self-respect, not easily measured). But these two sets of indicators are not very closely related.”
per-capita Gross National Product the per-head value of final goods and services produced by the people of a country over a given year
per capita Gross Domestic Product the per-head value of final goods and services produced within a nation’s boarders over a given year
The Exchange Rate Method: Each country’s currency is converted into a common currency (usually US$) and divided by the country’s population.
In World Bank Data: Data are converted from national currency to current U.S. $ using the World Bank Atlas method. ◦ This involves using a 3-year average of exchange rates to
smooth the effects of transitory exchange rate fluctuations. Problems: Underreported income or non-measurable income in LDCs Prices for many goods in all countries are not appropriately
reflected in exchange rates
Purchasing Power Parity (PPP): idea that similar foreign and domestic goods or (basket of goods) should have the same price in terms of the same currency. ◦ How much money is needed to purchase the same basket
of goods in 2 countries?◦ It is the Purchasing Power of a country’s currency
required to purchase the same basket of goods/services that a US$ will buy in the US.
◦ International prices are constructed for large baskets of goods & services (400-700 goods) by averaging prices (expressed, say in US$ - Phome/PUS) for each good over all countries. then averaged across categories to get 150 relative prices.
Purchasing Power Parity (PPP)◦ National Income is then estimated by valuing its output at
these international PPP prices.◦ Recall, since the price of non-traded goods are lower in
LDCs (since wages are lower), the PPP measurements of national income are higher than the exchange rate method.
GNI per capita(2010)
GNI per capita PPP (2010)
Ethiopia $390 $1,040
Switzerland $71,530 $50,170
182% difference 42% difference
World Development Indicators, Online
Start with Income Distribution
Source: UN Human Development Report, 2011
Source: World Development Indicators
Life Expectancy at birth
Expected years of
schooling
Mean years of
schooling
GNI per capita (2005
PPP)2000
Romania 70.5 12 9.9 6,759South Africa 54.8 13.1 8.2 7,338
2011Romania 74 14.9 10.4 11,046
South Africa 52.8 13.1 8.5 9,469
Per Capita GDP
(2005 PPP)
Share of poorest 20%
Share of richest 20%
Romania 6,845 8.0 38South Africa 7,641 3.0 63
Human Development Index (HDI)◦ Developed by the United Nations Development
Program (UNDP) HDI ranks all countries on a scale of 0 (lowest
human development) to 1 (highest development) (1/3) longevity: life expectancy at birth (1/3) knowledge: expected years of schooling and
mean years of schooling (1/3) standard of living: real per capita income
adjusted for the differing PPP of each country’s currency
Source: UN Human Development Report, 2011
Source: World Development Indicators
Life Expectancy at birth
Expected years of
schooling
Mean years of
schooling
GNI per capita (2005
PPP)
HDIValue
HDI Rank
2000Romania 70.5 12 9.9 6,759 .704
South Africa 54.8 13.1 8.2 7,338 .6162011
Romania 74 14.9 10.4 11,046 .779 50th
South Africa 52.8 13.1 8.5 9,469 .619 124th
Per Capita GDP
(2005 PPP)
Share of poorest 20%
Share of richest 20%
Romania 6,845 8.0 38South Africa 7,641 3 63
Source: UN Human Development Report, 2011
Indicator Low Income
Countries
Middle Income
Countries
High Income
Countries Agriculture as a % of GDP, 2010 25% 10% 1% Rural Population as a % of total, 2010
72% 51% 22%
Birth Rates (per 1000), 2009 33 19 12 Death Rates (per 1000), 2009 11 8 8 Adult Literacy Rates, 2009 61% 83% 98% Infant Mortality Rate (per 1000 live births), 2009
71 39 6
Raw Agricultural Materials as a % of Total Exports, 2010
9% (2006)
2% 2%
Source: World Development Indicators
Indicator Low Income
Countries
Middle Income
Countries
High Income
Countries Agriculture as a % of GDP, 2010 25% 10% 1% Rural Population as a % of total, 2010
72% 51% 22%
Birth Rates (per 1000), 2009 33 19 12 Death Rates (per 1000), 2009 11 8 8 Adult Literacy Rates, 2009 61% 83% 98% Infant Mortality Rate (per 1000 live births), 2009
71 39 6
Raw Agricultural Materials as a % of Total Exports, 2010
9% (2006)
2% 2%
Source: World Development Indicators
Indicator Low Income
Countries
Middle Income
Countries
High Income
Countries Agriculture as a % of GDP, 2010 25% 10% 1% Rural Population as a % of total, 2010
72% 51% 22%
Birth Rates (per 1000), 2009 33 19 12 Death Rates (per 1000), 2009 11 8 8 Adult Literacy Rates, 2009 61% 83% 98% Infant Mortality Rate (per 1000 live births), 2009
71 39 6
Raw Agricultural Materials as a % of Total Exports, 2010
9% (2006)
2% 2%
Source: World Development Indicators