ECON
. Introduction
. SDG
. HDI
Scope of Economic Development
. tackle economic problems
. united nation SDGs
. compare developed and developing countries
Traditional economics
– approach to economics that emphasizes utility, profit maximization,
market efficiency
Development economics
– The study of how economies are transformed from stagnation to growth
and from low-income to high-income status and overcome problems of
poverty
Developing countries
– Countries characterized by low levels of living and other development
deficits
More developed countries (MDCs)
– The now economically advanced capitalist countries of western Europe,
North America, Australia, New Zealand, and Japan etc.
Traditionally, development meant sustained levels of GDP and GNP
Gross Domestic Product (GDP)
– The output of goods and services produced by the country’s economy,
within the country’s territory, by residents and nonresidents
3
Gross National Product (GNP)
2
–
1
value of all products and services produced by the citizens of a country
– Despite high economic growth, living standards of countries remained
3
unchanged.
–
2
Development must represent the change by which an entire social
1
system, tuned to the diverse basic needs and aspirations of individuals,
moves away from a condition of unsatisfactory life toward a situation
regarded as materially and spiritually better
Three Core Values of Development
● Sustenance (To meet basic needs)
● Self-Esteem (To be a person)
● Freedom (To be able to choose)
Sustainable Development Goals
. No poverty
. Zero hunger
. Good health and well-being
. Quality Education
. Gender equality
. Clean water and sanitation
. Affordable and clean energy
. Decent work and economic growth
. Industry, innovation and infrastructure
. Reduced inequalities
. Sustainable cities and economies
. Responsible consumption and production
. Climate action
. Life below water
. Life on land
. Peace, justice and strong institutions
. Partnership for the goals
Defining the developing world - Income
● The World Bank classifies countries according to their per capita Gross
National Income (GNI), which is computed by the country’s GNI divided
by the country’s population
● Countries are then classified into low-, middle-, and high-income
countries
Gross National Income
= GDP + Income of citizens abroad - Income of foreigners
Gross Domestic Income
– The total final output of goods and services produced by the country’s
–
economy within the country’s territory by residents and nonresidents
GNI across countries
● GNI per capita is converted to USD to have a common standing for
comparison.
● However, exchange rates fluctuate and show an incomplete view since
cost of living is not considered.
● Thus, economists have used Purchasing Power Parity (PPP) instead.
Purchasing Power Parity
● Calculation of GNI using a common set of international prices for all
goods and services, to provide more accurate comparisons of living
standards.
● Thus, using PPP can paint a clearer picture about the wealth of an
individual
Indicators:
● Health: Life Expectancy
○ the average number of years a newborn children would live if
subjected to the prevailing mortality risks
● Education: Years of Schooling
○ Number of years people spend in school, both actual and expected;
Human Development Index
● Developed by the United Nations Development Programme
● Measures economic development, based on combining measures of
education, health, and adjusted real income per capita.
● Ranks each country on a scale of 0 (lowest human development) to 1
(highest human development)
● a long and healthy life as measured by life expectancy at birth;
● knowledge as measured by average schooling attained by adults and
expected years of schooling for school-age children;
● and a decent standard of living as measured by real per capita gross
national income
Steps in computing HDI
. Computing the three “dimension indices”, one each for income, health and
literacy
. Aggregating the three indices to produce overall HDI
Note: In each index, the country’s performance is compared with the global
average.
Dimension Index =
Actual value — Minimum value
Maximum value — Minimum value
Actual value - country's measure for the year
Max and Min value - highest and lowest for all countries in a time series
Health index =
Actual value — Minimum value
Maximum value — Minimum value
Global maximum life expectancy = 83.6
Global minimum life expectancy = 20.0
In computing the Education index, we solve first for using the dimension index:
– MY Index (Mean Years of Schooling)
– EY Index (Expected Years of Schooling)
– Max MY = 15 years
– Max EY = 18 years
– Minimum MY and EY = 0 years
Education Index = (MYI + EYI) / 2
Income Index =
ln(Actual value) — ln(Minimum value)
ln(Maximum value) — ln(Minimum value)
ln = natural logarithm
Min = $100
Max = $75,000
HDI = ∛HI * EI * II
