A-Level Economics Notes on Measures of Development

Definitions

1. Gross Domestic Product (GDP): The total market value of all final goods and services produced within a country in a given period.
2. GDP per capita: GDP divided by the population of the country, providing an average economic output per person.
3. Gross National Income (GNI): +The total domestic and foreign output claimed by residents of a country, including wages, rents, interest, profits, and taxes, less subsidies.
4. Purchasing Power Parity (PPP): A method of measuring the relative purchasing power of different countries’ currencies over the same types of goods and services.
5. Gini Coefficient: A measure of the inequality of a distribution, a value of 0 expressing total equality and a value of 1 expressing maximal inequality.
6. Human Development Index (HDI): A composite index measuring average achievement in three basic dimensions of human development: a long and healthy life, knowledge, and a decent standard of living.
7. Life Expectancy: The average number of years a newborn is expected to live if current mortality rates continue to apply.
8. Literacy Rate: The percentage of people who are able to read and write at a specified age.
9. Infant Mortality Rate: The number of deaths of infants under one year old per 1,000 live births in a given year.
10. Education Index: A component of the HDI, calculated from the mean years of schooling for adults aged 25 years and more and expected years of schooling for children of school entering age.
11. Income Inequality: The extent to which income is distributed unevenly in a country.
12. Multidimensional Poverty Index (MPI): An index that measures multiple deprivations in the same household in terms of education, health, and living standards.
13. Gender Inequality Index (GII): A measure reflecting inequality in achievements between women and men in three dimensions: reproductive health, empowerment, and the labor market.
14. Environmental Performance Index (EPI): A method of quantifying and numerically marking the environmental performance of a state’s policies.
15. Unemployment Rate: The percentage of the labor force that is jobless and actively looking for employment.
16. Inflation Rate: The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling.
17. Economic Diversification: The process by which a growing range of economic outputs is produced.
18. Sectoral Change: The shift in the relative share of gross domestic product (GDP) and employment that is attributed to each business sector.
19. Industrialization: The process by which an economy is transformed from primarily agricultural to one based on the manufacturing of goods.
20. Sustainable Development: Economic development that is conducted without depletion of natural resources.
21. Official Development Assistance (ODA): Government aid designed to promote the economic development and welfare of developing countries.
22. Trade Balance: The difference between the monetary value of a nation’s exports and imports over a certain time period.
23. Foreign Direct Investment (FDI): An investment made by a firm or individual in one country into business interests located in another country.
24. Human Capital: The collective skills, knowledge, or other intangible assets of individuals that can be used to create economic value for the individuals, their employers, or their community.

Measures of Development

Development measures are diverse and reflect the multi-dimensional nature of progress within a country. They encompass economic, social, and political progress indicators.

1. Economic Indicators

Gross Domestic Product (GDP):

• Definition: The total value of goods and services produced within a country’s borders in a specific time period.
• GDP per capita: GDP divided by the population size, indicating the average economic output per person.
• Growth rate: The year-on-year percentage increase in GDP, reflecting economic expansion.

Gross National Income (GNI):

• Definition: GDP plus net income from abroad (including dividends, interest, and remittances).
• GNI per capita: GNI divided by the population, adjusted for purchasing power parity (PPP), which accounts for cost of living differences.

Income Distribution:

• Gini Coefficient: A statistical measure of income inequality ranging from 0 (perfect equality) to 1 (perfect inequality).
• Lorenz Curve: A graphical representation of income distribution.

Industrial Structure:

• Sectoral composition of the economy: The contribution of agriculture, industry, and services to GDP.
• Economic diversification: The range and balance of industries within the economy.

2. Social Indicators

Human Development Index (HDI):

• A composite index measuring average achievement in three basic dimensions of human development: life expectancy, education, and per capita income.

Education:

• Literacy rates: The percentage of the population over a certain age that can read and write.
• Mean years of schooling: The average number of completed years of education of a country’s population.

Health:

• Life expectancy: The average number of years a newborn is expected to live under current mortality rates.
• Infant mortality rate: The number of deaths of infants under one year old per 1,000 live births.
• Access to healthcare: The proportion of the population with access to healthcare services.

Standard of Living:

• Access to essential goods: Availability of clean water, adequate food, and shelter.
• Quality of life: Factors such as crime rates, environmental quality, and political stability.

3. Technological Indicators

Innovation and Technology:

• Research and development (R&D) expenditure: Investment in innovation as a percentage of GDP.
• Internet penetration: The percentage of the population with access to the internet.

Productivity:

• Output per worker: Measures the efficiency of the labor force.
• Technological adoption: The rate at which new technologies are embraced by businesses and consumers.

4. Political Indicators

Governance:

• Political stability and absence of violence/terrorism.
• Government effectiveness: Quality of public services and the degree of its independence from political pressures.

Freedom:

• Civil liberties: The extent of democratic participation and freedom of expression.
• Political rights: The degree to which a country’s inhabitants can participate in the political process.

Limitations of Development Measures

• Single indicators like GDP do not capture all aspects of development and may overstate or understate the true progress or well-being of a nation.
• Composite indicators may mask disparities within countries, such as regional inequalities or differences between demographic groups.
• Data quality and availability can be inconsistent across countries, affecting the reliability of comparisons.
• Cultural bias can influence the selection and interpretation of indicators, as development is a complex and subjective concept.