1. Introduction to Development Economics
Topic 3.2

2. Development is.. “A process where nations
achieve higher standards of living,
happiness and fulfilment often
through economic growth.”
Reading textbook to begin with Pg 158 to get overview

3. The economic problem “One generation plants a tree;
Unequal distribution of income, resources and opportunity? We are the fortunate few.
“One generation plants a tree;
the next generation gets the shade.”
Chinese Proverb
You Tube

4. Sao Paulo – gap between rich and poor, haves and have nots.

5. Differences between economic growth and economic development
Increase in GDP
Improvement in quality of life
Economic Growth
Economic Development
Higher incomes
Human Development Index
Classic macro
economic variables
Unemployment
Inflation
Growth
Access to education, healthcare
Subjective ideas – development
versus
Objective ideas – growth
Bit in the middle – what is the common aim?
Investment, capital, capacity
Labour, wages
Measured using range of variables
Progress,
Improvement in
standard of living

6. How do we measure Economic Development?
Quantitative Indicators – are based on objective and truthful pieces of information. Often collected in surveys or by in a census. eg GDP
Qualitative Indicators – are based on subjective feelings, impression and opinion. These provide a good indication of the social health of a country. Eg Happiness

7. Ways to evaluate development?
Happiness Index
HIV Infection Rate
Birth Rate
Human Development Index
Population Density
Gross National Income per capita
% employed in agriculture
Human Freedom Index
Unemployment Rate
Infant Mortality Rate
Access to clean water
Play game with hats and statistics and getting in order.
Internet Users per 1000
People per doctor
Income Equality
Average Wage (US$) per day
Cars per 1000 people

8. In what ways can development be measured?
Composite Indicators
Human Development Index (HDI) composite of
GNP per capita
Adult literacy rate
School enrolment rate
Life expectancy
A HDI between 1 and 0.8 is considered high, 0.8 and 0.6 is considered medium and 0.6 to 0.4 is considered low

9. Human Development Index (HDI) composite of
Japan = 0.956
8th in world
USA = 0.944
10th in world
Singapore = 0.918
28th in world
Zambia = 0.394
167th in world
NZ = 0.933
19h in world
Human Development Index (HDI) composite of
GNP per capita
Adult literacy rate
School enrolment rate
Life expectancy

11. Homework Difference between Developing Nations
Using one page, compare two nations on their level of Development using appropriate statistics.
Use wikipedia – HDI to find countries to compare.
Use websites to collect the data for comparison. Useful websites include
Summary should be no more than one page, use Pg 320 of your text book as a guide on how to compare.

12. What kind of disparities exist between Zambia and USA?
United States of America
Human Development Index
0.434 (low)
165th in world
0.951 (high)
12th in world
% living below poverty line
86%
12%
GDP per capita (2004)
$900
$39,700
GDP growth rate (2004)
5.1%
4.4%
Average years of schooling (2004)
5.5 (58th in world)
12 (1st in world)
Adult Literacy rate
80% (145th in world)
97% (68th in world)
Tertiary enrolment
(2000)
2.5% (129th in world)
72.6% (1st in world)

13. What kind of disparities exist between Zambia and USA?
United States of America
Forested Land
43.9%
24%
Arable Land 7%
19%
Irrigated Land (1998)
1,560 sq km
214,000 sq km
Living with AIDS (2003)
0.9 million
165 per 1000
3.1 per 1000
Life expectancy
40 years
77 years
Labour force by occupation
agriculture: 22% industry: 29%
services: 48.9%
agriculture: 1% industry: 20.4%
services: 78.7%

14. Satisfaction with Life Index Zambia = 148th score 163 USA = 23rd score 246
green = happiest blue purple orange red = least happy

15. Differences and Similarities
Economic Growth
Economic Development
Readings from McGee Pg

16. Gross National Product GNP
Foreign owned companies in Japan
Send income back to home country
Japanese owned foreign companies abroad
send income back to Japan
Japan
GDP
Japan GNP
= GDP
plus income earned from assets abroad
minus income paid to foreign companies producing in Japan

17. Gross National Product and Gross Domestic Product
For some developing countries GDP will be overestimated due to the number of foreign owned companies producing in the country. GNP will be more accurate. GNP < GDP
For some nations with foreign interests in other parts of the world GNP will tend to be a more accurate measure. GNP > GDP
See notes on Pg 152 – 153 of IB Companion Text

18. Development
The Development topic looks at the sources of development and discusses why all countries have not developed to the same extent.

19. Macro Economics & Opportunity Costs Production Possibility Frontier (PPF)
Apples
Oranges

20. Education B A B A Military Spending
Economic growth caused by increases in production possibilties
(discovery of new resources, investment in new technology)
Education B A
Economic growth caused by reductions in unemployment and productive inefficieny B A
Military Spending

21. Education A B Military Spending No improvement in standard of living
Economic growth which does not lead to economic development
(more military spending, but no more education) A B
Military Spending

22. Economic growth, which leads to more economic development
improvement
in standard of living
Education B
Economic growth, which leads to more economic development A
Military Spending