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Economic Growth and Development (Preview) - Coggle Diagram
Economic Growth and Development (Preview)
Difference between growth and development
Economic growth is the increase in a country’s real national output. This is caused by increases in the quality or quantity of factors of production, which cause an outward shift in the PPF
Economic development refers to living standards, freedom (from oppression) and life expectancy. Essentially, it covers a more moral side to economic growth and it is normative. Development is also concerned with how sustainable the economy is and whether the needs of future generations can be met
Characteristics of LEDCs
Low life expectancies
High mortality rates
High dependency ratio
Low GDP
Fast population growth
Low levels of education
Poor standard of living
Poor nutrition, lack of access to clean, safe drinking water and a lack of sanitation
Poor or absent health care provision
Indicators of development
Human Development Index (HDI) - education, life expectancy and standard of living, measured by real GNI at purchasing power parity (PPP) per capita. Human Development Index (HDI) - education, life expectancy and standard of living, measured by real GNI at purchasing power parity (PPP) per capita. The education component combines the statistics of the mean number of years of schooling and the expected years of schooling. The life expectancy component uses a life expectancy range of 25 to 85 years
HDI does not consider how free people are politically, their human rights, gender equality or people’s cultural identity. HDI does not take the environment into account. It could be argued that this should be included to focus on human development more. HDI does not consider the distribution of income. A country could have a high HDI but be very unequal. This can mean many people might still be in poverty. HDI does allow for comparisons between countries to be made, based upon which countries are generally more developed than other countries. It provides a much broader comparison between countries than GDP does. Education and health are important development factors to consider, and it can provide information about the country’s infrastructure and opportunities. It also shows how successful government policies have been
Human Poverty Index (HPI): measures life expectancy, education and the ability of citizens to meet basic needs. There are two types: HPI-1 and HPI-2. The former measures poverty in developing countries and the latter measures poverty in developed countries
In HPI-1, the longevity part of the index measures the probability of living to the age of 40. The education component considers the adult literacy rate. The ability of citizens to meet basic needs is measured by the percentage of underweight children and the percentage of people not using improved water sources
For HPI-2, the probability of not surviving to at least the age of 60 is used. The percentage of adults which do not have literacy skills is calculated, and poverty is calculated by those living below the poverty line. This is below 50% of median income
Gender-related Development Index (GDI): measures the relative inequality between men and women. It combines HDI with a consideration of gender. For example, it will consider differences in life expectancies, income and education between genders
Factors that affect growth and development
Trade liberalisation
Promotion of FDI
Removal of government subsidies
Floating exchange rate systems
Microfinance schemes
Privatisation
Interventionist strategies
Protectionism
Development of human capital
Managed exchange rates
Infrastructure development
Promoting joint ventures with global companies
Buffer stock schemes
Other strategies
Industrialisation - the Lewis model
Development of tourism
Development of primary industries
Fair trade schemes
Aid
Debt relief
Barriers to growth and development
Primary product dependency
Savings gap - Harrod Domar model
Foreign currency gap
Capital flight
Demographic factors
Debt
Access to credit and banking
Infrastructure
Education/skills
Absence of property rights
Corruption
Poor governance/civil war
Vulnerability to external shocks