Economic Development (Copy)
11.3 Economic Development
11.3.1 Classification of Economies by Level of Development
- Developed economies: High industrialisation, high living standards, diversified economies.
- Developing economies: Lower industrialisation, reliance on agriculture, lower living standards.
- Emerging economies: Rapid industrial growth, improving infrastructure, rising incomes.
- Least developed countries (LDCs): Very low incomes, weak infrastructure, high poverty rates.
11.3.2 Classification of Economies by Level of National Income
| Category | Criteria (World Bank, GNI per capita, 2023) |
|---|---|
| Low-income | ≤ $1,085 |
| Lower-middle income | $1,086 – $4,255 |
| Upper-middle income | $4,256 – $13,205 |
| High-income | ≥ $13,206 |
11.3.3 Indicators of Living Standards and Economic Development
Monetary Indicators:
- GDP per capita: Total output ÷ population.
- GNI per capita: GDP + net income from abroad ÷ population.
- NNI per capita: GNI − depreciation ÷ population.
- Purchasing Power Parity (PPP): Adjusts income for cost of living differences.
Issues with Monetary Comparisons:
- Exchange rate fluctuations.
- Income distribution not reflected.
- Informal/black economy excluded.
- Quality of goods/services not measured.
Non-Monetary Indicators:
- Literacy rate, life expectancy, access to clean water, healthcare access.
Composite Indicators:
- Human Development Index (HDI): Weighted average of income (PPP GNI), education (literacy, school years), life expectancy.
- Measure of Economic Welfare (MEW): Adjusts GDP for leisure, environmental costs, and non-market activities.
- Multidimensional Poverty Index (MPI): Considers health, education, and living standards to measure poverty beyond income.
Kuznets Curve:
- Hypothesis: Inequality first increases, then decreases as an economy develops.
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11.3.4 Comparison of Economic Growth Rates and Living Standards
Over Time:
- Rising GDP per capita usually increases living standards, but may also cause environmental degradation and inequality.
- Must adjust for inflation, population growth, and real income.
Between Countries:
- Use PPP-adjusted per capita measures for fairer comparison.
- Consider non-economic factors: political stability, healthcare, education, environment.