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A LevelEconomicsAQARevision NotesThe National & International Economy14. The International EconomyEconomic Growth & Development

Economic Growth & Development (AQA A Level Economics)

Revision Note

Lorraine

Written by: Lorraine

Reviewed by: Steve Vorster

The Difference Between Growth and Development

  • Economic development is the sustainable increase in living standards for a country, typically characterised by increases in life span, education levels, and income

  • Economic growth is defined as an increase in output and does not involve a change in structure in society. Measured using GDP, GNP, etc

The Main Characteristics of Less-developed Economies

  • Less developed economies have many similar characteristics which slow down the rate of economic development

Characteristics of Less-developed Economies

Characteristic 

Explanation 

High rate of population growth

  • High rates of population growth as a result of high birth rates 

    • There is also a very low life expectancy 

High foreign debts

  • High levels of debt uses government revenue 

  • The repayments have opportunity cost of spending

    • That could have been used for investment into public services  


Uneven distribution of wealth 


  • There is a low income per capita

  • A  minority of the population may control a large part of the country’s wealth resulting in widespread poverty


Over-dependence on one product


  • May be over-dependent on one crop

  • The country may be subject to crop failure and/or a wide variation in export prices 


Large primary sector 


  • High percentage of the population engaged in extractive/primary industries

  • This results in not enough workers in secondary & tertiary sectors, resulting in low standards of living.

Poor levels of education

  • Low levels of education and literacy

    • This limits economic development, resulting in high unemployment


Poor living conditions


  • A large percentage of the population live in poor living conditions with no water and poor sanitation

The Human Development Index (HDI)

  • There are many measures of economic development

    • Single indicators e.g. number of doctors/1000 people; infant mortality rate; % of the population with access to clean drinking water

    • Composite indicators include indicators such as the Human Development Index (HDI), the Gender Inequality Index (GII), Inequality Adjusted Human Development Index (IHDI), and the Happy Planet index (HPI)

The Human Development Index (HDI)

  • Developed by the United Nations, it is a combination of 3 indicators

 Diagram: The Human Development Index

The components of the Human Development Index
 

  1. Health, as measured by the life expectancy at birth e.g.in 2019 it was 81.2 years in the UK

  2. Education, as measured by a combination of the mean years of schooling that 25 year old's have received, together with the expected years of schooling for a pre-school child

  3. Income, as measured by the real gross national income per capita at purchasing power parity (PPP)

  • Each indicator is given equal weighting in the index

  • The index ranks countries on a score between 0 & 1

    • The closer to 1, the higher the level of economic development and the better the standard of living

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The Human Development Index scores from 1990 to 2021 (Source: UNDP Data Centre)
 

  • A value of < 0.550 is considered low development, e.g. Senegal was at 0.514 in 2021

  • A value of 0.550-0.699 is considered medium development, e.g.Bangladesh was at 0.667 in 2021

  • A value of 0.700-0.799 is considered high development; e.g Thailand was at 0.777 in 2021

  • A value ≥ 0.800 is considered very high development, e.g. Austria was at 0.918 in 2021

Evaluating the Different Approaches used to Measure Development

  • All development indicators have limitations

  • Due to the multi-dimensional nature of economic development, it is necessary to use a range of indicators in order to gain insights into the many dimensions of quality of life, well-being, human development and happiness

  • Composite indicators provide better insight than single indicators

  • Single indicators can be useful in targeting just one aspect - or in prioritising different aspects of development

  • Qualitative data is used to measure many aspects of economic development and this can be subject to bias and errors in data interpretation

  • It requires time to gather qualitative data and this means that the data often lags reality by several years

  • Data collection and statistical reporting is subject to political agendas and often the data presented has to be questioned in light of these e.g. many Middle East countries moved from the bottom third to the top third in the Gender Inequality index (GII) in 2017, a very unlikely transition in such a short time period
     

The Advantages and Disadvantages of Using the HDI

Advantages

Disadvantages

  • It is a composite indicator which provides a more useful comparison metric than single indicators do

  • It incorporates three of the most important metrics for households i.e. health, education and income

  • It is widely used all over the world which provides an opportunity for meaningful comparisons

  • It provides a goal for governments to use when developing their policies e.g. it may help identify that the education levels are holding back improvements to the HDI and government policy can target that

  • It provides citizens with an understanding of how their quality of life compares to other countries

  • It does not measure the inequality that exists as it uses the mean GNI/capita

  • It does not measure or compare the levels of absolute and relative poverty that exist

  • For many countries it does not provide useful short-term information as gathering the data required for the calculation is difficult. This means the data often lags reality by several years

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    Author
    Reviewer
    Lorraine

    Author: Lorraine

    Expertise: Economics Content Creator

    Lorraine brings over 12 years of dedicated teaching experience to the realm of Leaving Cert and IBDP Economics. Having served as the Head of Department in both Dublin and Milan, Lorraine has demonstrated exceptional leadership skills and a commitment to academic excellence. Lorraine has extended her expertise to private tuition, positively impacting students across Ireland. Lorraine stands out for her innovative teaching methods, often incorporating graphic organisers and technology to create dynamic and engaging classroom environments.

    Steve Vorster

    Author: Steve Vorster

    Expertise: Economics & Business Subject Lead

    Steve has taught A Level, GCSE, IGCSE Business and Economics - as well as IBDP Economics and Business Management. He is an IBDP Examiner and IGCSE textbook author. His students regularly achieve 90-100% in their final exams. Steve has been the Assistant Head of Sixth Form for a school in Devon, and Head of Economics at the world's largest International school in Singapore. He loves to create resources which speed up student learning and are easily accessible by all.