4.3
MEASURES OF DEVELOPMENT
economic growth is measured by real GDP and the productive potential of the
country
economic development is about improvements in living standards
THREE DIMENSIONS OF HDI AND HOW THEY ARE
MEASURED AND COMBINED
HDI is a measure of economic development calculated by the UN
A mean is taken from each factor to give a figure between 0 and 1
the higher the number, the greater the level of development
It is based on three factors
HEALTH - measured by life expectancy
EDUCATION - measured by literacy
INCOME - measured by real GNI per capita
ADVANTAGES AND LIMITATIONS OF USING HDI TO
COMPARE DEVELOPMENT
ADVANTAGES
takes into account three factors which are important for development rather
than growth
relatively easy to calculate - govt tends to collect the statistics needed
DISADVANTAGES
health does not take into account the quality of life people enjoy
education doesnt take into account the quality and success of education
4.3 1
, ignores income inequality
other factors may affect developement - freedom, corruption, environment
OTHER INDICATORS OF DEVELOPMENT
GENUINE PROGRESS INDICATOR
indicators are grouped into 3 main categories
economic, environmental, social
it aims to show economic sustainability to ensure development does
not limit the amount produced and consumed in the future
developed countries may show negative growth due to their impact on the
environment
ACCESS TO FINANCIAL SERVICES
PERCENTAGE OF POPULATION IN RURAL AREAS
LEVEL OF CORRUPTION WITHIN ECONOMY
ACCESS AND RELIABILITY TO BASIC INFRASTRUCTURE
e.g transport, clean water, household sanitation
DIAGRAMS TO SUPPORT THIS
LORENZ CURVE
level of inequality moves closer to the line of equality
equality is increasing
MARKET FAILURES IN POOR COUNTRIES
Underconsumption of basic merit goods
education, housing, vaccines
Underconsumption of public goods
4.3 2
, there is low govt tax revenue - little can be spent on water, sanitation,
power
Financial market failure
limited access to loans, limits investment
makes loans and insurance unaffordable
FACTORS INFLUENCING GROWTH AND
DEVELOPMENT
PRIMARY PRODUCT DEPENDANCY
primary products include agriculture and mining
most developing country’s economic activity is based on a primary
product
ISSUES WITH THIS
natural disasters -
can wipe out production and can impact families and the economy
often non renewable goods -
the country will eventually run out of this and suffer
volatility in prices can affect AD and economic growth
fluctuating current account
falling prices will reduce the terms of trade
this can affect their ability to buy more imports e.g capital equipment
makes it hard for farmers to plan ahead
this will discourage investment into the farm to improve productivity
low business confidence
e.g purchase of seeds, equipment etc
4.3 3
MEASURES OF DEVELOPMENT
economic growth is measured by real GDP and the productive potential of the
country
economic development is about improvements in living standards
THREE DIMENSIONS OF HDI AND HOW THEY ARE
MEASURED AND COMBINED
HDI is a measure of economic development calculated by the UN
A mean is taken from each factor to give a figure between 0 and 1
the higher the number, the greater the level of development
It is based on three factors
HEALTH - measured by life expectancy
EDUCATION - measured by literacy
INCOME - measured by real GNI per capita
ADVANTAGES AND LIMITATIONS OF USING HDI TO
COMPARE DEVELOPMENT
ADVANTAGES
takes into account three factors which are important for development rather
than growth
relatively easy to calculate - govt tends to collect the statistics needed
DISADVANTAGES
health does not take into account the quality of life people enjoy
education doesnt take into account the quality and success of education
4.3 1
, ignores income inequality
other factors may affect developement - freedom, corruption, environment
OTHER INDICATORS OF DEVELOPMENT
GENUINE PROGRESS INDICATOR
indicators are grouped into 3 main categories
economic, environmental, social
it aims to show economic sustainability to ensure development does
not limit the amount produced and consumed in the future
developed countries may show negative growth due to their impact on the
environment
ACCESS TO FINANCIAL SERVICES
PERCENTAGE OF POPULATION IN RURAL AREAS
LEVEL OF CORRUPTION WITHIN ECONOMY
ACCESS AND RELIABILITY TO BASIC INFRASTRUCTURE
e.g transport, clean water, household sanitation
DIAGRAMS TO SUPPORT THIS
LORENZ CURVE
level of inequality moves closer to the line of equality
equality is increasing
MARKET FAILURES IN POOR COUNTRIES
Underconsumption of basic merit goods
education, housing, vaccines
Underconsumption of public goods
4.3 2
, there is low govt tax revenue - little can be spent on water, sanitation,
power
Financial market failure
limited access to loans, limits investment
makes loans and insurance unaffordable
FACTORS INFLUENCING GROWTH AND
DEVELOPMENT
PRIMARY PRODUCT DEPENDANCY
primary products include agriculture and mining
most developing country’s economic activity is based on a primary
product
ISSUES WITH THIS
natural disasters -
can wipe out production and can impact families and the economy
often non renewable goods -
the country will eventually run out of this and suffer
volatility in prices can affect AD and economic growth
fluctuating current account
falling prices will reduce the terms of trade
this can affect their ability to buy more imports e.g capital equipment
makes it hard for farmers to plan ahead
this will discourage investment into the farm to improve productivity
low business confidence
e.g purchase of seeds, equipment etc
4.3 3
