10. Economic Development

What is Economic Development

A sustained improvement in a country’s economic and social welfare, expanding beyond just GDP to include higher living standards, increased life expectancy, better education, and reduced inequality

Characteristics of Less Developed Economies

Low Standards of Living

Low Levels of Productivity

Low Levels of Saving

High Population Growth

Primary Sector Dominance

Incomplete Markets

High Unemployment

Low Economic Power on the International Stage

What is the HDI

Human Development Index

A summary measure to assess a country's development based on people and their capabilities, rather than just economic growth

What does the HDI measure

Longevity (Life Expectancy at Birth)

Knowledge (Adult Literacy and School Enrollment)

Standard of Living (GDP/Capita PPP)

All of these components have equal weighting

Pros of HDI

Broad (Includes three single measures)

Focus on development outcomes

Allows for Progress to be measured over time

Attention focused on those with low development (Aid)

Cons of the HDI

Distribution of Income?

More focused weightings could be better as better allocation of resources

Freedom and Choice?

Other Factors (e.g. crime, corruption, poverty and negative externalities)

Three factors that affect growth and development

Education

Healthcare

Infrastructure

Four other factors that affect growth and development

Taxation

Appropriate use of Technology

The Empowerment of Women

Income Distribution

What is a major threat to development

Corruption

Pros of FDI

Injection into circular flow

Fills savings gap

Positive BoP Effects

MNCs and infrastrucutre development

Improved productivity domestically

Technological Transfer

Increased Tax Revenue Collection

Cons of FDI

Employment may be short term or less than expected

MNCs have too much power

MNCs may invest in labour saving techology

MNCs may strip resources and leave

Environmental Costs

Tax revenue collection may be lower than expected