Key Concepts in Economic Growth and Development

Economic growth

Increase in real GDP/GNI per capita, adjusted for inflation. E.g., Angola's oil boosts GDP.

GDP vs. GNI

GDP: Output within borders; GNI: Includes citizens' income abroad (e.g., Bangladeshi workers in Gulf).

GDP limitations

Ignores non-market work (e.g., Cambodia's farmers) and environmental costs (e.g., pollution).

Economic development vs. growth

Development includes health, education, freedoms, beyond GDP.

HDI

Measures life expectancy, education (mean/expected years), log-adjusted GNI per capita. E.g., El Salvador's 72-year life expectancy.

HDI's geometric mean

Penalizes uneven scores, lowering HDI for countries like Zimbabwe despite decent health/education.

PPP

Adjusts GDP for price differences, improving living standard comparisons. E.g., India's GDP higher when PPP-adjusted.

PPP GDP vs. current GNI

PPP GDP adjusts for prices, globally comparable; current GNI is nominal, local currency, less comparable.

MDGs

Aimed to halve poverty, reduce child mortality by two-thirds by 2015. E.g., China cut poverty from 60% to 16% by 2005.

Easterlin paradox

Higher income doesn't always increase happiness. E.g., Costa Rica's high satisfaction, low income.

Globalization's impact

Boosts trade, investment for developing countries but can increase inequality, harm local industries.

World poverty decline

Mainly East Asia (China, India) due to growth, industrialization, education. Slower in Africa.

Regional growth differences since 1960

East Asia: Exports, education; South Asia: Post-1990s reforms; Africa: Instability; Middle East: Oil; Latin America: Debt crises.

World income inequality last 50 years

Global inequality declined due to China/India growth; within-country inequality often rose.

Demographic transition

Shift from high birth/death rates to low rates with development (healthcare, education). Malthus predicted collapse, not this.

Institutions' role

Ensure stability, resource allocation via legal systems, property rights. E.g., China's growth despite limited freedoms.

Is growth enough for poverty?

No, needs policies (e.g., education, taxation) to reach poor, or inequality worsens.

Import substitution pros/cons

Pros: Protects local industries. Cons: Inefficient, costly, isolates trade.

Effective foreign aid

Targeted (health, education); less effective: Unconditional funds, mismanaged projects.

Percent change formula

(New - Old) / Old x 100.

Annual growth rate formula

(1 / number of years) (x log (New / Old)) x 100.

Doubling time formula

70 / average growth rate in percentage.