Eugene D.
Alipio 20193479
ECOPE05: Economic Development Online
MR. FRANCIS A. GUMAWA
Read and answer the following questions below.
1. How useful are generalizations about the third or developing world?
Indicate ways of subclassifying the third world.
Generalizations are difficult to make concerning third world countries because
there is such a wide range of development represented. Generalizations may need to be
based on sub-categories. One useful categorization, based on 2003 per-capita GNI (see
map, inside back cover) is low-income economies (less than $1,000), lower-middle-
income economies ($1,001-$3,000), and upper-middle-income economies ($3,001-
$9,000). Countries can also be classified by region, PPP , HDI freedom , and other
measures.
2. Discuss the price-index problem that LDCs face in measuring economic
growth.
The GNP price deflator is used to calculate growth rates over time. The results
can vary greatly, depending on which weighted price index that is used. Whether a
country uses early or late weights in devising a price index makes a substantial
difference in determining how large the price deflator will be in adjusting GNP growth.
In showing how Malaysia calculates its GNP price deflator, assume that Malaysia
produces only two goods, electronic calculators and rubber boots. Suppose Malaysia
produces 20 million electronic calculators at R400 apiece (with R the Malaysian
currency ringgit) and 200 million pairs of rubber boots at R100 per ton in 1973, and 100
million calculators at R100 apiece and 400 million pairs of rubber boots at R200 per ton
in 1998. The output of boots grew steadily as prices doubled, whereas the output of
calculators increased fivefold and prices were cut substantially, as the industry benefited
from large-scale economies and a rapidly-improving technology.
3. According to World Bank’s World Development Indicators, 2003,
Canada’s 2001 GNI per capita ($21,930) was about 63 times higher than
Kenya (with $350). Can we surmise that the average economic well-being in
Canada was about 63 times the average economic well-being in Kenya?
No, it is not likely that well-being is 63 times greater in Canada than Kenya. First,
since Canada is located in a temperate climate some of Canada's GNI is for items like
heating, insulation, and warmer clothing that merely offset the disadvantages of cold
weather and add to GNI without increasing satisfaction. Secondly, GNI for Kenya is
probably understated since a greater proportion of goods are produced in the home for
own consumption and never enter the market and is thus likely left out of GNP
measurements. Third, GNI is understated for Kenya, where household size is
substantially larger than in Canada. Fourth, GNI is overstated for Canada, because a
number of items included in its national income are intermediate goods, reflecting the
costs of producing and guarding income. Fifth, the exchange rate used to convert GNI in
Kenyan shillings into Canadian dollars, if market clearing, is based on the relative prices
of internationally traded goods (and not on purchasing power). On balance, the per-
capita income differences between Canada and Kenya are vastly overstated
4. Nigeria’s 2001 GNP per capita was $290, more than one and one-half
times that of neighboring Niger’s $180. What other assessments of
socioeconomic welfare (other than GNP per capita in U.S. dollars at the
prevailing exchange rates) could be used in comparing Nigeria and Niger?
What are the advantages and disadvantages of these alternative
assessments?
Nigeria’s per-capita GNP may be more than one and one-half times that of
Niger’s, as the 1.5 multiple may understate Nigeria’s superiority vis-à-vis Niger in health
care and education. GNP at purchasing power parity, PQLI, and HDI are alternative
measures that may better compare these differences.
There are basic arguments for the use of alternative assessments. As the inclusion
of individuals with disabilities increases, there is concern among families, educators,
and administrators that all students have fair access to the same curriculum. Students
with severe disabilities should not be cheated out of their opportunity to learn. If they
are given curricular access, they must also be assessed. If they cannot perform a
traditional test, they must be given an alternative. While alternative assessments sound
like a positive solution that creates fair curricular access for all students, there are areas
of genuine concern.
