3.6 Development Economics
By the end of this unit you should be able to:
- Distinguish between economic growth and economic development.
- Explain the multidimensional nature of economic development in terms of reducing widespread poverty, raising living standards, reducing income inequalities, and increasing employment opportunities
- Explain that the most important sources of economic growth in economically less developed countries include increases in quantities of physical capital and human capital, the development and use of new technologies that are appropriate to the conditions of the economically less developed countries, and institutional changes.
- Explain the relationship between economic growth and economic development, noting that some limited economic development is possible in the absence of economic growth but that, over the long term, economic growth is usually necessary for economic development (however, it should be understood that under certain circumstances economic growth may not lead to economic development).
- Explain, using examples, that economically less developed countries share certain common characteristics (noting that it is dangerous to generalize as there are many exceptions in each case), including low levels of GDP per capita, high levels of poverty, relatively large agricultural sectors, large urban informal sectors, and high birth rates.
- Explain that in some countries there may be communities caught in a poverty trap (poverty cycle), where poor communities are unable to invest in physical, human, and natural capital due to low or no savings; poverty is therefore transmitted from generation to generation, and there is a need for intervention to break out of the cycle.
- Explain, using examples, that economically less developed countries differ enormously from each other in terms of a variety of factors, including resource endowments, climate, history (colonial or otherwise), political systems, and degree of political stability.
- Outline the current status of international development goals, including the Millennium Development Goals.
What is the difference between Economic Growth and Development? We will start by defining Economic growth and development. Having economic growth without economic development is possible.
Economic growth in an economy is demonstrated by an outward shift in its Production Possibility Curve (PPC). Another way to define growth is the increase in a country’s total output or Gross Domestic Product (GDP). It is the increase in a country’s production.
A country’s economic development is usually indicated by an increase in citizens’ quality of life. ‘Quality of life’ is often measured using the Human Development Index, which is an economic model that considers intrinsic personal factors not considered in economic growth, such as literacy rates, life expectancy and poverty rates.
Economic growth in an economy is demonstrated by an outward shift in its Production Possibility Curve (PPC). Another way to define growth is the increase in a country’s total output or Gross Domestic Product (GDP). It is the increase in a country’s production.
A country’s economic development is usually indicated by an increase in citizens’ quality of life. ‘Quality of life’ is often measured using the Human Development Index, which is an economic model that considers intrinsic personal factors not considered in economic growth, such as literacy rates, life expectancy and poverty rates.
Economic Growth vs Development |
What is Human Development? |
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