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Table of Contents

  1. Topic pack - Development economics - introduction
  2. 4.1 Economic development (notes)
    1. Economic development - introduction
    2. Development - pause for thought
    3. Economic growth and economic development
    4. Sustainability
    5. The sources of economic growth and economic development
    6. Natural factors
    7. Importance of agriculture
    8. Externalities
    9. Case study - farming in Kenya
    10. Human factors
    11. Population
    12. Physical capital and technological factors
    13. Institutional factors
    14. The consequences of growth for Development
    15. Common characteristics of economically less developed countries
    16. Poverty cycle
    17. Diversity among economically less developed nations
    18. International development goals
    19. Millennium Development Goals
    20. Case Study - Millennium Development Goals
  3. 4.1 Economic development (questions)
  4. 4.2 Measuring Economic Development (notes)
  5. 4.2 Measuring development (questions)
  6. 4.3 The role of domestic factors in economic development (notes)
  7. 4.3 The role of domestic factors in economic development (questions)
  8. 4.4 The role of international trade (notes)
  9. 4.4 The role of international trade (questions)
  10. 4.5 The role of Foreign Direct Investment (FDI) (notes)
  11. 4.5 The role of foreign direct investment (questions)
  12. 4.6 The role of foreign aid and multilaterial development assistance (notes)
  13. 4.6 The role of foreign aid and multilateral development assistance (questions)
  14. 4.7 The role of international debt (notes)
  15. 4.7 The role of international debt (questions)
  16. 4.8 The balance between markets and intervention (notes)
  17. 4.8 The balance between markets and intervention (questions)
  18. Print View

Economic Growth and Economic Development - Read, Think, Discuss

Economic growth

This occurs where there is an increase in the productive potential of the economy and is best measured by the increase in a country's real level of output over a period of time, i.e. the increase in real Gross Domestic Product (real means adjusted for inflation) - You can use either PPC or AS/ADmodels to illustrate answers in this area.

Economic development

Economic development, on the other hand, is a process where there is improvement in the quality of lives of people in the country. This involves not only living standards (see above definition), such as greater availability of goods and services (and also the ability to purchase them) but also the promotion of attributes such as:

  • Health
  • Education
  • self-esteem,
  • dignity and respect,
  • people's freedom to choose and to take control of their own lives.

While a country may grow richer therefore, through the growth of its real output, this may mean sacrificing other aspects of welfare such as China´s rapid GDP growth creating massive externalities at the same time. However, increasing GDP (Economic Growth) ceteris paribus does mean development has occurred.

As Dudley Seers says: "if one or two of the central problems (poverty, unemployment or equality) have been growing worse, especially if all three have, it would be strange to call the result 'development' even if per capita income doubled"(from D.Seers, 'The meaning of economic development').

According to Professor Michael Todaro, development should involve the following objectives:

  1. "To increase the availability and widen the distribution of basic life-sustaining goods such as food, shelter, health and protection.
  2. To raise levels of living including, in addition to higher incomes, the provision of more jobs, better education, and greater attention to cultural and humanistic values, all of which will serve not only to enhance material well-being but also to generate greater individual and national self-esteem.
  3. To expand the range of economic and social choices available to individuals and nations by freeing them from servitude and dependence not only in relation to other people and nation-states but also to the forces of ignorance and human misery."

(from M.P.Todaro 'Economic development')

There are several measures that are used to measure economic development such as

  • GNP/GDP per capita,
  • population growth and structure,
  • health,
  • education,
  • technology,
  • employment,
  • rural/urban migration,
  • rights of women and
  • distribution of poverty and income.

Statistically, GDP per capita is generally acknowledged as the best single indicator but composite indicators of development are also used. One such index is the Human Development Index (HDI) which includes

  • GDP per capita,
  • life expectancy and
  • literacy rates.