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Measuring Economic Growth

The document discusses sustainable development goals and various indicators used to measure economic development, including single and composite indicators like GDP, HDI, and GII. It highlights the strengths and limitations of these measures and their relationship to economic growth. Additionally, it emphasizes the importance of considering inequality and sustainability in assessing a country's development progress.

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0% found this document useful (0 votes)
14 views10 pages

Measuring Economic Growth

The document discusses sustainable development goals and various indicators used to measure economic development, including single and composite indicators like GDP, HDI, and GII. It highlights the strengths and limitations of these measures and their relationship to economic growth. Additionally, it emphasizes the importance of considering inequality and sustainability in assessing a country's development progress.

Uploaded by

rismail
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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What are the sustainable development goals?


Is the world on target to achieve the goals that it has set itself?
• The multidimensional nature of economic development

• Single indicators
- GDP/GNI per person (per capita) at PPP
- Health and education indicators
- Economic/social inequality indicators
- Energy indicators
Lesson - Environmental indicators
Objective •Composite indicators
Section 4.8 - Human Development Index (HDI)
- Gender Inequality Index (GII)
- Inequality-adjusted Human Development Index (IHDI)
- Happy Planet Index

•Strengths and limitations of approaches to measuring


economic development

•Possible relationship between economic growth and economic


development
 HDI - a statistic composite index of life expectancy, education, and per capita income
indicators, which are used to rank countries into four tiers of human development.
 IEF - an index of economic freedom, which measures the level of individual freedom in
the nation.
 Gender related development index (GDI) - measures the level of gender equality in a
country, or put another way the level of HDI adjusted for the level of gender inequality in
an economy.
 Human poverty index (HPI) - measures the level of deprivation in a country. It
measures the % of citizens in a country without access to education or health services.
Terminologie  Genuine progress indicator (GPI) - an index which adjusts the level of economic
growth in a nation for the negative externalities resulting from that growth - cost of crime,
s ozone depletion and resource depletion, e.t.c.
 Dependency ratio - the % of the population not actively engaged in work. The higher
the number the greater number of people supported by each working population.
 Purchasing power parity (PPP) - a way of measuring economic variables between
different countries so that irrelevant exchange rate variations do not distort comparisons.
 Single measurement indicators - index that measure a single factor e.g. GNI per capita
or dependency ratios.
 Composite indicators - index that measure a range of factors in calculations e.g. HDI,
IEF or the human poverty index.
 Expected years of schooling - the number of years during which a 2-year-old child can
expect to spend in schooling, based on the school enrolment rates at a given date.
 Inequality-adjusted human development index (IHDI) - this index measures how a
nation's HDI is distributed among its country's population by 'discounting' each
dimension's average value according to its level of inequality.
 Happy planet index - measures sustainable wellbeing for all, recording how well nations
are doing at achieving long, happy and sustainable lives.
- Measures that may be used to assess development.
They are broken down in financial. Health, Education, and Institutional.
Financial Measures:

1. GDP per capita: a total of all economic activity in a country, divided by the number in the
population. (this includes the income of foreign companies producing in the country)
GNI per capita: total income that is earned by a country’s factors of production, divided by
number of population. (this means that the income of foreign companies producing within a
country would not be included in the national income)
Single Note:
Indicators In developing countries the FDI is calculated in the GDP, so figures will be higher than the
GNI. (as their profits will not remain in the country) Hence this is why GNI figures tend to be
used.

In developed countries whose firms are involved in FDI, their GDP will be lower than their
GNI.

2. Purchasing Power Parity (PPP): to avoid the exchange rate and cost of living in different
countries when comparing, they use PPP exchange rate. This exchange rate attempts to
equate the purchasing power of currencies in different countries. It is calculated by the
World Bank.
Health Measures:

1. Life expectancy at birth: a measure of the average number of years that a person may
expect to live from the time they are born. (one of the HDI measures)
Good health care, health services, providing of clean water and adequate sanitation,
provision of nationwide education, supply of food, healthy diet lifestyle, low levels of
poverty, and lack of conflict. The lack of these factors will lead to relatively low expectancy
figures.

2. Infant Mortality Rate: a measure of the number of deaths of babies under the age of one
year per thousand live births in a given year. (does not include babies that are still bon)
Single Education Measures:

Indicators 1. Expected years of schooling: measure the years of schooling that a child of school age
entrance age may expect to receive.
2. Mean years of schooling: a measure of the average years of schooling that have been
received by those people in the economy who are aged 25 years and over.

Other Indicators:

3. Economic/social inequality indicators: measures in areas such as income and wealth


distribution, pay inequality, asset ownership, and access to credit.
4. Energy indicators: the inability to maintain the home at an adequate temperature or to
provide essential energy services to ensure decent temperature or to provide essential
energy services to ensure decent living conditions.
5. Environmental indicators: air pollution, climate change, biodiversity, waste, water
resources..etc.
Multidimensional; they combine of single indicators with weighting to
give a single, combined figure.

1. Human Development Index (HDI): they measure human


development by long and healthy life, life expectancy at birth, and
standard of living. (Life expectancy, years of schooling and PPP)
Measured from 0 – 1. The higher the value the higher the
development.

HDI is to re-emphasize that people and their capabilities should be the


Composite ultimate criteria for assessing the development of a country, not
Indicators economic growth.

But still can would not show inequalities, in men and women and ethnic
group.
1. Gender Inequality Index (GII): this represents a major barrier to
human development. Women are discriminated against against
health, education, political representation, and the labor market.
It measures, reproductive health, maternal mortality ratio, and
adolescent birth, labor market participation, and rate of female to male
ratio of 15 years and older.
The higher the GII the greater the level of gender inequality.

Other
Indicators
2. Inequality-adjusted Human Development Index (IHDI) : it is the HDI
but takes into account the human development costs of inequality.

In a country of perfect equality, the HDI will be equal to the IHDI.


Without perfect equality, the IHDI value will be below the HDI value,

Other
Indicators
Countries with lower
inequality their IHDI
rank higher than HDI

Countries with more


inequality their IHDI
rank is lower than
HDI
3. Happy Planet Index (HPI): measures how well countries are doing in
achieving a long and happy life, taking into account sustainability.

4. Multidimensional Poverty Index (MPI): deprivations experienced by


poor people in a country in health, education, and standards of living.

Other
Indicators
5. Inclusive Development Index (IDI): measures how countries perform
on eleven dimensions of economic progress in addition to GDP. Mainly
focuses on growth and development, inclusion, and intergenerational
equity and sustainability.
P453

4 mark questions Paper 2

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