Single Indicators of Development (DP IB Economics)

Revision Note

The Multidimensional Nature of Economic Development

  • The 17 Sustainable Development Goals demonstrate the complexity of the nature of economic development

  • The different elements can be separated into three categories: economic, social and environmental

  • Sustainable economic development occurs at the intersection of all three and is represented in the diagram below

4-8-1-single-indicators-of-development

Sustainable economic development is a multi-dimensional concept incorporating economic growth, environmental care and social progress 

  • Viable refers to the fact that the combination of economic and environmental progress is happening with some care, however it is not sustainable in the long term

  • Bearable refers to the fact that the interaction of society and the environment is happening with some thought, however it is still not sustainable in the long term

  • Equitable refers to the fact that the interaction of the economy and society is happening with some attention to well-being, however it is still not sustainable in the long term 

  • Due to this complexity, elements of economic development can be measured using single or composite indicators

Single Indicators of Economic Development

  • A single indicator is one factor, such as GDP per person (capita), used to measure the development of a country

  • Single indicators measures only one development characteristic within a country
     

1. GDP/GNI per person (per capita) at PPP

  • Real GDP is the value of all goods/services produced in an economy in a one-year period - and adjusted for inflation

    • For example, if nominal GDP is £100bn and inflation is 10% then real GDP is £90bn
       

  • GDP per capita = GDP / the population

    • It shows the mean wealth of each citizen in a country

    • This makes it easier to compare standards of living between countries: 

      • For example, Switzerland has a much higher GDP/capita than Burundi
         

  • Gross national income (GNI) measures the income earned by citizens operating outside of the country + the GDP

    • Many citizens employ their resources outside of a country's borders - and then send the income home
       

  • Purchasing power parity (PPP) is a conversion factor that can be applied to GDP, GNI and GNP

    • PPP calculates the relative purchasing power of different currencies

    • It shows the number of units of a country's currency that are required to buy a product in the local economy, as $1 would buy of the same product in the USA

    • The aim of PPP is to help make a more accurate standard of living comparison between countries where goods/services cost different amounts
       

  • Using real GDP/Capita provides better information than real GDP as it takes population differences into account

  • Using real GNI/capita is a more realistic metric for analysing the income available per person than GDP/capita

  • Using GDP/GNI per person (per capita) at PPP allows for comparisons between countries which take into account the substantial differences in the cost of living
     

2. Health and education indicators

  • Multiple single indicators for health and education can provide useful data for comparisons between countries

  • Typical single health indicators include:

    • Infant mortality rate

    • Life expectancy

    • Number of doctors per 1,000 of the population

    • Diabetes incidence

  • Typical single education indicators include:

    • Youth literacy rate

    • Adult literacy rate

    • Mean years in school

    • Ratio girls/boys in school

    • Math achievement 8th grade
       

3.  Economic/social inequality indicators

  • Typical single economic and societal indicators include:

    • The Gini Coefficient

    • Murders per 1000 of the population

    • Percentage of women in national parliaments
       

4. Energy indicators

  • Typical single energy indicators include:

    • Coal consumption per person

    • Electricity generation per person

    • Residential electricity usage

    • Oil consumption per person
       

5. Environmental indicators

  • Typical single environmental indicators include:

    • CO2 emissions per person

    • Total CO2 emissions

    • Agricultural water withdrawal

    • Primary forest area

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