Single indicators
GDP / GNI per capita at purchasing power parity (PPP)
PPP exchange rates are used to resolve the issue of different countries having different purchasing powers of the same amount of money.
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Eliminate the effect of differing price levels.
Health indicators
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Infant mortality rate: number of deaths before age 1 per 1,000 live births.
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Maternal mortality rate: number of women who die per year as a result of pregnancy-related related causes, per 100,000 births.
Composite indicators
Human development index (HDI)
Composite indicator of development that includes 3 indicators that measure 3 dimensions of development equally to give a score between 0 and 1.
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Income per capita: measured by GNI per capita at PPP.
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Healthcare: measured by life expectancy at birth.
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Education: measured by mean and expected years of schooling.
Inequality adjusted HDI (IHDI)
Measures development in the same way as HDI but each of the 3 dimensions are adjusted to take into account inequality.
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Perfect income, healthcare, and education equality → HDI
Gender inequality index (GII)
Measures gender inequality in 3 dimensions: reproductive health, empowerment, and labour market participation
Evaluating measures of development
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Development is multi-dimensional, requiring a variety of indicators.
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Composite indicators provide richer insights compared to single ones.
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Single indicators are handy for targeting specific areas or priorities.
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Qualitative data can be biased and prone to interpretation errors.
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Time-consuming data gathering leads to lagging information.
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Political agendas can influence data accuracy, raising concerns.
The Advantages and Disadvantages of Using the HDI
Advantages | Disadvantages |
• Composite nature allows for more meaningful comparisons.
• Includes health, education, and income metrics, crucial for households.
• Widely used globally, facilitating meaningful comparisons.
• Guides government policies, identifying areas for improvement.
• Provides citizens with insights into their quality of life relative to other countries. | • Does not measure inequality, only mean GNI/capita.
• Doesn't assess absolute and relative poverty levels.
• Gathering required data for calculation can be challenging, leading to lagging information. |
Relationship Between Economic Growth & Economic Development:
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Economic growth typically has a positive impact on development.
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The distribution of income affects the level of development.
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Higher equity in income distribution correlates with greater development.
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Growth often precedes development, but exceptions exist (e.g., Bangladesh's transformation).
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In some cases, growth tied to a single industry may lead to decreased living standards due to negative externalities.
Relationship between economic growth and economic development
Economic development: a multidimensional concept involving improvements in standards of living, reduction in poverty, improved health and education along with freedom and economic choice.
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Increased economic growth → rising real GDP → increased government tax revenue.
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Tax revenue used to provide greater education and healthcare → greater economic development.