Economic Development & Economic

Growth
 Economic Growth is a narrower concept than
economic development. It is an increase in a
country's real level of national output which
can be caused by an increase in the quality of
resources (by education etc.), increase in the
quantity of resources & improvements in
technology or in another way an increase in
the value of goods and services produced by
every sector of the economy. Economic Growth
can be measured by an increase in a country's
GDP(gross domestic product).
How can we measure growth?
 We measure it by the percentage change in the
level of national income, often over the period of
one year.
 There are three ways of adding it up:
 production or incomes, and expenditure
 GDP = gross domestic product (produced within a
country).
 GNP = gross national product (includes income
coming into or going out of country).
 NNP = net national produce (an allowance is
made for depreciation of capital).
 National income per capita often matters most if
looking at how well off a country is; how well it is
doing; or if comparing it with another country.
 Some problems in measuring national income
(NI) and Growth
 Statistics are unreliable; they are often late
arriving; and they are sometimes not strictly
comparable across national boundaries
because of different definitions and standards.
 There can be much excluded data:
 Non-income earning producers, e.g.
housewives/husbands, family members, and
production within the household.
 The “Black Economy” is excluded – in Italy it
may be as high as 30 per cent of national
income!
 Environmental damage is excluded.
 Leisure is excluded.
 Welfare or happiness is excluded.
 Voluntary workers are excluded.
 Those who swap services (e.g., Baby Sitting
Clubs) or maybe barter goods.
 Income distribution is ignored
 Cross country comparisons involve special
difficulties
 Economic development is a normative
concept i.e. it applies in the context of
people's sense of morality (right and wrong,
good and bad). The definition of economic
development given by Michael Todaro is an
increase in living standards, improvement in
self-esteem needs and freedom from
oppression as well as a greater choice.
Sustenance. This refers to the capacity to meet
basic necessities such as food, clothing, and
shelter. Lack of even one of these means that a
person's life is not progressive. A country
develops if its citizens have enough or more than
enough for their basic necessities, there is growth
of income, extreme poverty is addressed, and
there is equality among members of society.
Self-esteem. The quality of life is good when there is
respect, trust, and self-value. Each person has needs
which can be achieved through the presence of respect,
dignity, and a good reputation in society. A person's worth
as an individual cannot simply be measured by the
ownership of material things which is often given
emphasis by progressive capitalist countries such as the
United States. In the Philippines, material wealth is not
the only important thing but the love for one's family, the
family's reputation, and a person's dignity and self-
esteem. A country is developed if this unique need of the
people is addressed.
Self-esteem. The quality of life is good when there is
respect, trust, and self-value. Each person has needs
which can be achieved through the presence of respect,
dignity, and a good reputation in society. A person's worth
as an individual cannot simply be measured by the
ownership of material things which is often given
emphasis by progressive capitalist countries such as the
United States. In the Philippines, material wealth is not the
only important thing but the love for one's family, the
family's reputation, and a person's dignity and self-
esteem. A country is developed if this unique need of the
people is addressed.
 The Human Development Index (commonly
abbreviated HDI) is a summary of human
development around the world and implies
whether a country is developed, still
developing, or underdeveloped based on
factors such as life expectancy, education,
literacy, gross domestic product per capita.
The results of the HDI are published in the
Human Development Report, which is
commissioned by the United Nations
Development Program(UNDP) and is written by
scholars, those who study world development
and members of the Human Development
Report Office of the UNDP.
According to the UNDP, human development is
“about creating an environment in which
people can develop their full potential and
lead productive, creative lives in accord with
their needs and interests. People are the real
wealth of nations. Development is thus about
expanding the choices people have to lead
lives that they value.”
 In the year 1990 the United Nations Development
Programme in its first Human Development Report
introduced the concept of Human Development
Index.
 It is the cumulative measurement of:
 (a) Longevity
 (b) Knowledge
 (c) Decent Standard of Living.
 (a) Longevity: It shows the life expectancy. It is a
choice to live long and healthy life.
 (b) Knowledge: It is a choice to acquire literacy,
education, information, etc. It is measured by the
literate percentage in ratio with the total population.
The literacy rate may be compared in the primary,
secondary and tertiary levels.
 (c) Decent standard of life: It is a joy to enjoy a
quality and standard life. It depends upon the
purchasing power of the people and the per capita
income of the people etc.
 The rank of a country is determined by the overall
developments in these three basic dimensions of
human developments. ADI ranks countries, in
relation to each other to tell them how for a country
has travelled and how for yet it has to travel in the
part of Human Development
 The most accurate method of measuring
development is the Human Development Index
which takes into account the literacy rates &
life expectancy which affect productivity and
could lead to Economic Growth. It also leads to
the creation of more opportunities in the
sectors of education, healthcare, employment
and the conservation of the environment. It
implies an increase in the per capita income of
every citizen.
Difference between economic growth and
economic development.
 Economic Growth does not take into account
the size of the informal economy. The informal
economy is also known as the black economy
which is unrecorded economic activity.
Development alleviates people from low
standards of living into proper employment
with suitable shelter. Economic Growth does
not take into account the depletion of natural
resources which might lead to pollution,
congestion & disease.
 Development however is concerned with
sustainability which means meeting the needs
of the present without compromising future
needs. These environmental effects are
becoming more of a problem for Governments
now that the pressure has increased on them
due to Global warming.
Basis Economic Development Economic Growth
Economic development implies Economic growth
changes in income, savings and refers to an increase
investment along with progressive in the real output of
changes in socio-economic goods and services in
structure of country (institutional the country.
and technological changes).

Growth relates to a
gradual increase in
Development relates to growth of one of the components
human capital indexes, a decrease of Gross Domestic
Factors: in inequality figures, and structural Product:
changes that improve the general consumption,
population's quality of life. government spending,
investment, net
exports.
Basis Economic Economic Growth
Development

Qualitative.HDI (Human
Development Index),
Quantitative.
gender- related index
Measurement: Increase in real GDP.
(GDI), Human poverty
Shown by PPF.
index (HPI), infant
mortality, literacy rate etc.

Narrower concept
Concept: Normative concept than economic
development
Basis Economic Economic Growth
Development

Brings qualitative and

Brings quantitative changes
Effect: quantitative changes in the
in the economy
economy

Economic growth is a more

Economic development is
more relevant to measure
Relevance:
progress and quality of life in
developing nations.
relevant metric for progress
in developed countries. But
it's widely used in all
countries because growth is a
necessary condition for
development.