Discuss economic development and explain the various indicators of economic development
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Economic development is a broader concept than economic growth. Development reflects social and economic progress and requires economic growth. Growth is a vital and necessary condition for development, but it is not a sufficient condition as it cannot guarantee development.
Indicators of development
The extent to which a country has developed may be assessed by considering a range of narrow and broad indicators, including per capita income, life expectancy, education, and the extent of poverty.
The Human Development Index (HDI)
The HDI was introduced in 1990 as part of the United Nations Development Programme (UNDP) to provide a means of measuring economic development in three broad areas - per capita income, heath and education. The HDI tracks changes in the level of development of countries over time.
Each year, the UNDP produces a development report, which provides an update of changes during the year, along with a report on a special theme, such as global warming and development, and migration and development.
The introduction of the index was an explicit acceptance that development is a considerably broader concept than growth, and should include a range of social and economic factors.
The HDI has two main features:
A scale from 0 (no development) to 1 (complete development).
An index, which is based on three equally weighted components:
Longevity, measured by life expectancy at birth
Knowledge, measured by adult literacy and number of years children are enrolled at school
Standard of living, measured by real GDP per capita at purchasing power parity
What the figures mean:
An index of 0 – 0.49 means low development - for example, Nigeria was 0.42 in 2010.
An index of 0.5 – 0.69 means medium development – for example, Indonesia was 0.6. 3.
An index of 0.7 to 0.79 means high development – for example, Romania was 0.76. 4.
Above 0.8 means very high development – Finland was 0.87 in 2010.
The HDI is a very useful means of comparing the level of development of countries. GDP per capita alone is clearly too narrow an indicator of economic development and fails to indicate other aspects of development, such as enrolment in school and longevity. Hence, the HDI is a broader and more encompassing indicator of development than GDP, though GDP still provides one third of the index.
Life expectancy
A variety of factors may contribute to differences in life expectancy, including:
The stability of food supplies
War
The incidence of disease and natural disasters
According to World Bank figures, life expectancy at birth in developing countries over the past 40 years has increased by 20 years. However, these increases were not evenly distributed. Indeed, in many countries in sub-Saharan Africa, life expectancy is falling due to the AIDS epidemic.
Adult literacy
The percentage of those aged 15 and above who are able to read and write a simple statement on their everyday life.
More extensive definitions of literacy include those based on the International Adult Literacy Survey. This survey tests the ability to understand text, interpret documents and perform basic arithmetic.
GDP per capita
GDP per capita is the commonest indicator of material standards of living, and hence is included in the index of development. GDP per capita It is found by measuring Gross Domestic Product in a year, and dividing it by the population.
Evaluation of the HDI
Despite the widespread use of the HDI there are a number of criticisms that can be made, including:
The HDI index is for a single country, and as such does not distinguish between different rates of development within a country, such as between urban and traditional rural communities.
Critics argue that the equal weighting between the three main components is rather arbitrary.
Development is largely about freedom, but the index does not directly measures this. For example, access to the internet might be regarded by many as a freedom which improves the quality of people's lives.
As with the narrow measure of living standards, GDP per capita, there is no indication of the distribution of income.
In addition, the HDI excludes many aspects of economic and social life that could be regarded as contributing to or constraining development, such as crime, corruption, poverty, deprivation, and negative externalities.
Indicators of development
The extent to which a country has developed may be assessed by considering a range of narrow and broad indicators, including per capita income, life expectancy, education, and the extent of poverty.
The Human Development Index (HDI)
The HDI was introduced in 1990 as part of the United Nations Development Programme (UNDP) to provide a means of measuring economic development in three broad areas - per capita income, heath and education. The HDI tracks changes in the level of development of countries over time.
Each year, the UNDP produces a development report, which provides an update of changes during the year, along with a report on a special theme, such as global warming and development, and migration and development.
The introduction of the index was an explicit acceptance that development is a considerably broader concept than growth, and should include a range of social and economic factors.
The HDI has two main features:
A scale from 0 (no development) to 1 (complete development).
An index, which is based on three equally weighted components:
Longevity, measured by life expectancy at birth
Knowledge, measured by adult literacy and number of years children are enrolled at school
Standard of living, measured by real GDP per capita at purchasing power parity
What the figures mean:
An index of 0 – 0.49 means low development - for example, Nigeria was 0.42 in 2010.
An index of 0.5 – 0.69 means medium development – for example, Indonesia was 0.6. 3.
An index of 0.7 to 0.79 means high development – for example, Romania was 0.76. 4.
Above 0.8 means very high development – Finland was 0.87 in 2010.
The HDI is a very useful means of comparing the level of development of countries. GDP per capita alone is clearly too narrow an indicator of economic development and fails to indicate other aspects of development, such as enrolment in school and longevity. Hence, the HDI is a broader and more encompassing indicator of development than GDP, though GDP still provides one third of the index.
Life expectancy
A variety of factors may contribute to differences in life expectancy, including:
The stability of food supplies
War
The incidence of disease and natural disasters
According to World Bank figures, life expectancy at birth in developing countries over the past 40 years has increased by 20 years. However, these increases were not evenly distributed. Indeed, in many countries in sub-Saharan Africa, life expectancy is falling due to the AIDS epidemic.
Adult literacy
The percentage of those aged 15 and above who are able to read and write a simple statement on their everyday life.
More extensive definitions of literacy include those based on the International Adult Literacy Survey. This survey tests the ability to understand text, interpret documents and perform basic arithmetic.
GDP per capita
GDP per capita is the commonest indicator of material standards of living, and hence is included in the index of development. GDP per capita It is found by measuring Gross Domestic Product in a year, and dividing it by the population.
Evaluation of the HDI
Despite the widespread use of the HDI there are a number of criticisms that can be made, including:
The HDI index is for a single country, and as such does not distinguish between different rates of development within a country, such as between urban and traditional rural communities.
Critics argue that the equal weighting between the three main components is rather arbitrary.
Development is largely about freedom, but the index does not directly measures this. For example, access to the internet might be regarded by many as a freedom which improves the quality of people's lives.
As with the narrow measure of living standards, GDP per capita, there is no indication of the distribution of income.
In addition, the HDI excludes many aspects of economic and social life that could be regarded as contributing to or constraining development, such as crime, corruption, poverty, deprivation, and negative externalities.
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Answer:
While several gauges are available to measure these changes, the most common indicators of economic development are Gross Domestic Product (GDP) per capita, the poverty level, life expectancy, the proportion of workers in agriculture and changes in the physical quality of life.
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