4.3.1 Measures of development

What is the difference between economic growth and development?

Economic growth: Measured purely by real GDP and the productive potential of a country

Economic development: The sustainable increase in living standards for a country, typically characterised by life span, education, and income

What are the 3 dimensions of the Human Development Index (HDI)? How are they measured?

Health - measured by life expectancy at birth

Education - measured by average years of schooling of adults aged 25+ and expected years of schooling for current 5 year olds

Income - measured by real GNI per capita, adjusted by purchasing power parity

• Each three indicators are given equal weighting and a mean is taken to give a value between 0 and 1 - the higher the number, the greater the level of development

Advantages of using HDI to compare levels of development between countries

• Takes into account three key factors which are important for a country’s development (education, health, income)

• Relatively easy to calculate and it is widely used all over the world

• Provides a goal for governments to use when setting policies (e.g. they can identify that education levels are holding back development and target that)

Limitations of using HDI to compare levels of development between countries

• Data may be inaccurate depending on country (e.g. hidden economy and poor data collection)

• Does not consider income inequalities (Gini coefficient)

• Also does not consider things like freedom from corruption and environmental sustainability

• Only an indicator and not a precise measure, so not perfect

Alternative indicators of development

1. Inequality adjusted Human Development Index (IHDI)

• Includes inequality on top of education, heath, and income - broader than HDI

2. Multi-dimensional Poverty Index (MPI)

• Measures the percentage of population that is multidimensional poor

• Uses data from heath, education, and standard of living, and a broader range of indicators

3. The Genuine Progress Indicator

• Calculated from 26 different indicators group into three main categories of economic, environmental and social