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Module1 Development Economics PDF

The document outlines the key concepts covered in an economic development and demography course. The 5 modules are: 1) concepts of development, 2) growth models and empirics, 3) poverty and inequality, 4) political institutions and functioning of the state, and 5) demography and development. It also discusses indicators of development like GDP, GNI, life expectancy, literacy, and institutions.

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Bhavya Jha
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29 views

Module1 Development Economics PDF

The document outlines the key concepts covered in an economic development and demography course. The 5 modules are: 1) concepts of development, 2) growth models and empirics, 3) poverty and inequality, 4) political institutions and functioning of the state, and 5) demography and development. It also discusses indicators of development like GDP, GNI, life expectancy, literacy, and institutions.

Uploaded by

Bhavya Jha
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Economic Development and

Demography
ED219
Course Outline

• Module 1: Concepts of Development


• Module 2: Growth Models and Empirics
• Module 3: Poverty and Inequality
• Module 4: Political Institutions and Functioning of the State
• Module 5: Demography and Development
What are the indicators of development according to this class?
Development Economics

• Discipline focused on the process of economic transformation in developing


countries
• Emerged as a multifaceted field in which there may be no single big idea
• Active debate about the role of macro versus micro-approaches
• Different understandings of what is meant by development economics
• Very different policy prescriptions and emphasis
• What policies should be followed? More industrialization? More regulation? More
investment in health and education?
Economic development

• Raise the well being


• Improve material well being or physical quality of life- GDP/ GNP
• Equitable well being- per capita GDP/ GNP
• Economic capabilities of people-health, life expectancy, literacy
• Sometimes follows naturally from growth in GDP/ GNP
• But this connection is not automatic
• Institutions
GDP across countries (US$)- 2022

Source: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?end=2022&start=1960&view=map&year=2021
GDP per capita across countries (US$)- 2022

Source: https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?view=map
GNI per capita, PPP terms (US $)- 2022

https://data.worldbank.org/indicator/NY.GNP.PCAP.PP.CD?view=map
https://data.worldbank.org/indicator/SE.PRM.UNER.MA?view=map&year=2021
Features of economic under-
development
1. Measurement issues
• Low per capita growth
• Under-reporting of incomes
• Tax collection system-sometimes inefficient
• High proportion of production used for self consumption-subsistence farming
• Prices not reflected in exchange market-not traded internationally-under
estimation of real income in PPP terms
• Prices always do not reflect preferences-government dictated prices
• Externalities
2. Low human development
• Lack of access to basic services-health, sanitation, education etc
• But outliers-depending on policy focus
Structural features of developing countries
• High birth and death rates
• Dependence on agriculture
• Less urbanisation
• Rural to urban migration
• Large informal/ unorganised sector
• Composition of trade-distribution of primary products and
manufactured goods
Human development-HDI
• The Human Development Index (HDI) is a summary measure of
average achievement in key dimensions of human
development:
• a long and healthy life,
• being knowledgeable and
• having a decent standard of living.

• The HDI is the geometric mean of normalized indices for each


of the three dimensions.
Calculation of individual index
Minimum and maximum values
For the education Societies can subsist without The maximum is set at The low minimum value
dimension, equation 1 formal education, justifying $75,000 per capita. for gross national income
is first applied to each the education minimum of 0 Kahneman and Deaton (GNI) per capita, $100, is
(2010) have shown that justified by the
of the two indicators, years. The maximum for
there is virtually no gain in considerable amount of
and then the arithmetic expected years of schooling, human development and unmeasured subsistence
mean of the two 18, is equivalent to achieving wellbeing from annual and nonmarket production
resulting indices is a master’s degree in most income above $75,000 in economies close to the
taken. countries. The maximum for per capita. minimum, which is not
mean years of schooling, 15, captured in the official
The justification for placing is the projected maximum of data
the natural zero for life this indicator for 2025.
expectancy at 20 years is
based on historical evidence
that no country in the 20th
century had a life
expectancy of less than 20
years
Due to constantly improving
living conditions and medical
advances, life expectancy has
already come very close to 85
years in several economies
EXAMPLE
Health index = 65.3 – 20 85 – 20 = 0.6971

Expected years of schooling index = 7.9 – 0 18 – 0 = 0.4380


Mean years of schooling index = 3.8 – 0 15 – 0 = 0.2513
Education index = 0.4380 + 0.2513 2 = 0.3447

Income index = ln(3,829) – ln(100) ln(75,000) – ln(100) = 0.5506

Human Development Index = (0.6971 . 0.3447 . 0.5506)1/3 = 0.510

This Report keeps the same cutoff points


on the HDI for grouping countries that
were introduced in the 2014 Report:
Bhagwati-Sen debate
• https://www.livemint.com/Politics/zvxkjvP9KNfarGagLd5wmK/Everyt
hing-you-wanted-to-know-about-SenBhagwati-debate.html

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