Notesale: Turn your study into money

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4 Single indicators of economic development
Gathering of national data can serve as a baseline indicator to help set an agenda for progress, to see the development over time,
to adjust policies to improve performance, and to allow for cross country comparison
Data must be read cautiously, as it may misrepresent the actuality (incorrect or incomplete data)
Income indicators
GDP per capita is the starting point to understanding development

Per capita GDP vs per capita GNI
○ Per capita allows for more precise comparison
○ GDP higher, yet this is not all paid to FoP (in Luxembourg)
○ Sweden: higher GNI: they are being paid more than what their GDP states
■ Depends on outsourcing and others outsourcing into own country
➢ Purchasing power parity comparison
○ PPP eliminates difference in cost of living → looks at standard of living available for a given amount of
income in a nation (high costs of living → GDP overestimates standard of living and vice versa)
■ Allows for better comparison of actual GDP
Health indicators
➢ Data shows that birth rates and development correlate negatively
○ Questions if this is the cause or the result? Would a country develop if it had a smaller population
■ A deeper understanding of the nation is required
➢ Further data indicates that teenage fertility negatively correlates with longevity
○ Could indicate less development due to higher fertility rate, but could also be a symptom of something else,
such as malaria or high child mortality rate
Education indicators
➢ Education is an important factor as it increases productivity and improves human capital
➢ Considered to be a merit good due to the positive externalities
➢

Note​​: indicators rarely prove cause and effect relationship, but it is a intertwined net of correlations that is represented by the data
→ dangerous to only rely on one factor/indicator

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5 Multiple indicators of economic development
World Bank:​ ​source of development indicators
➔ Breadth of data measured by the World Bank creates a more detailed picture than a single indicator
United Nations​: Millennium Development Goals
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Universal primary education
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Reduce child mortality rate
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Develop global partnership for development
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Combat HIV and other diseases

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6 Composite indicators of economic development
Human Development Index
➔ Used to shift away from a purely growth based model to a broader view to encompass health and education
◆ Long life: life expectancy
◆ Education: primary enrolment ratio, adult literacy rate
◆ SoL: GDP per capita
➔ Variety of information from this set of factors
Gender Inequality Index
➔ Comparison between men and women in
◆ Reproductive health: maternal mortality, adolescent fertility
◆ Empowerment: parliament seats, education levels
◆ Labor maret: women’s participation in the workforce

DOMESTIC AND INTERNATIONAL FACTORS AND ECONOMIC DEVELOPMENT
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1 Domestic factors and economic development
Economic growth only leads to development when incomes rise, education increases, and they can afford health care
➔ This can also work vice versa where education and health care lead to better growth, due to the increased productivity
Domestic obstacles to economic development
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Natural resource trap
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Geography trap
i
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Education / poor governance trap
i
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Conflict trap
i
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Institutional and political obstacles
a
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Less foreign investment, money hiding from government in foreign systems → less revenue for the
government
b
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Less investment (investors want certainty that the land will be theirs; farmers + shopkeepers neglect
fields/business)
c
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Inequality in the distribution of income
i
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Lack of infrastructure
i
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Lack of access to credit
i
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Social and cultural obstacles
a
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Conflict of religion creates economic uncertainty, thus reducing actual development
b
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Objectives of economic growth questioned by members who want a more traditional society,
hindering development
Domestic factors contributing to economic development
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Strong correlation between education and income, due to higher productivity
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Not only the result of development, but leads to it, too → individuals can shift their minds onto something
else if their well being is given
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Allows access to credit for poor country entrepreneurs: they can build up a business with a socially beneficial
purpose, thus also increasing employment

i
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This money comes from individuals from developed countries, who want to help without losing
money
ii
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Great long run potential → pay off for entrepreneur, lender and workers now employed
i
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Reduced fertility rates
i
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Women in the workforce
i
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2
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3
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