4.7-4.8 Sustainable development & Measuring development

Economic growth

Increase in real GDP or GNI per capita over time

Focuses on quantity of output, not distribution or quality of life

Economic development

Multidimensional process improving living standards, education, health, equity

Includes access to merit goods, employment, gender equality, and reduced poverty

Sources of growth in ELDCs

Physical capital, human capital, technology, institutions

Raise productivity and support development

Curse of natural resources

Heavy reliance on commodities may hinder growth

Leads to volatility, debt, poor diversification

Growth may not lead to development if

Income is unevenly distributed or limited investment in human capital

Neglect of informal sector, rural areas, and vulnerable groups

Country classification by income

Low, lower-middle, upper-middle, high-income

Used by World Bank based on GNI per capita

Limit of income-based classification

Income alone does not reflect development

HDI gives better insights into human wellbeing

Common characteristics of ELDCs

Low GDP/GNI

High poverty

High unemployment

High inequality

Weak institutions

Low education

Poor health

Low physical capital

Low productivity

Poverty trap/cycle

Low income leads to low savings and low investment

Reinforces cycle of poverty, low productivity, and low growth

Sustainable Development Goals (SDGs)

17 global goals for ending poverty, improving health, education, and sustainability by 2030

Difficulties measuring development

No single indicator reflects all aspects of development Indicators vary across countries and have limitations

GDP per capita

Measures average output produced per person

Good for comparing productivity

GNI per capita

Measures average income received per person

Better for comparing living standards

Purchasing power parities (PPPs)

Exchange rates adjusting for cost-of-living differences

Makes cross-country income comparisons more valid

Health indicators

Life expectancy, infant mortality, maternal mortality

Reflect population wellbeing and healthcare access

Education indicators

Adult literacy, primary and secondary enrolment, mean years of schooling

Show access and attainment of education

Composite indicators

Combine multiple measures into one index

More accurate for assessing development than single indicators

Human Development Index (HDI)

Measures education, health, and GNI per capita

Ranks countries by human development achievements

HDI vs GNI per capita

HDI includes education and health dimensions

Better reflects human development than income alone

Inequality-adjusted HDI

Adjusts HDI for income, education, and health inequality

Larger inequality lowers HDI score

Gender Inequality Index (GII)

Measures loss due to gender inequality in health, empowerment, and labor

Higher GII = more inequality

Multidimensional Poverty Index (MPI)

Measures deprivation in education, health, living standards

Goes beyond income to reflect poverty realities