Economic Growth & Development (AQA A Level Economics)

Revision Note

Author

Expertise

Economics Content Creator

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

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

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)

What is the Human Development Index (HDI)? - The Twilight Tutor

The components of the Human Development Index

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

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

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

to absolutely everything:

the (exam) results speak for themselves:

Did this page help you?