The Difference between Economic Growth and Economic Development

Economic growth, as defined by the Oxford English Dictionary, is “the increase in the
production of goods and services per head of population over a stated period of time” or “the
rate of expansion of the national income” (2019). On a national level, this means that
economic growth pertains to increases in measurable outputs such as gross domestic product
(GDP) over a short, specific period of time. On a local level, economic growth typically refers to
the change in the number of companies or the change in jobs over some time period.
A change in economic growth may be influenced by a number of quantitative or qualitative
factors such as technological developments or an increase in consumption of a product;
however, economic growth itself is strictly quantitative in nature and is only measured in
quantitative terms. Economic growth is relates to the quantity of output rather than the quality
of life of in a community. Economic growth can contribute greatly to economic development.

Economic development, as opposed to economic growth, is a much longer process and has
several different facets. While economic development is typically focused on the numbers of
jobs in a community, economic development focuses on the quality of life and standard of living
in a community and seeks strategies that can improve both. In many cases, one of these
strategies is economic growth, but this is not always the case.
Economic development is a continuous process that involves improvements to the socio-
economic structure of a community. With its focus on the community’s quality of life, the
metrics that measure the change in economic development are much harder to identify and
measure. These improvements follow changes in the fabric of the community, such as
increased education levels, improved literacy rates, or a decrease in infant fatalities. As the
economic growth of an area increases, the economic development of an area will likely increase
alongside it, but this is not always the case.
There are indicators that help to capture the level of economic development on a national or
large regional basis. For example, the human development index (HDI) was created as a
measure of economic development beyond the scope of economic growth. The view of the HDI,
as stated on their website, is that “people and their capabilities should be the ultimate criteria
for assessing the development of a country, not economic growth alone” (see Human
Development Index). The HDI is comprised of dimensions, indicators, and dimension indices.
The dimensions include a long and healthy life, knowledge, and a decent standard of living.
Following the dimensions, the indicators include life expectancy at birth, expected years of
schooling and mean years of schooling, and the gross national income (GNI) per capita. These
indicators are used to create indices that allows countries to be ranked according to their
economic development efforts.

Although the HDI does a good job of capturing an accurate assessment of a country’s
development, it is not well suited to assessing the economic development efforts of a local
community. The Center for Regional Economic Competitiveness (CREC) has assembled a set of
indicators that are more suited for the local or small regional economy. The CREC divides its
indicators into two categories: job quality/worker prosperity and business dynamics. The job
quality/worker prosperity indicators address issues such as job benefits, skill development,
career pathways and geographic centricity (are the jobs locally based). The business dynamics
indicators focus on issues such as business growth and survival, generational competitiveness
(i.e., business succession in the community) and the socioeconomic characteristics of the
business. These measures are similar to other sources of economic development performance
measures such as the ones put forth by the Economic Development Association of Canada and
Sharkey and Fricker (2009).
However, the metrics put forth in these sources still primarily focus on the economic growth
components of economic development. While these metrics are very important, it is difficult to
derive an accurate estimate of how the community is doing based solely on the economic
growth because the scope of economic growth is very narrow in comparison to economic
development. Given this lack of holistic focus from the economic development community, it
might be time to turn our attention to the field of community development to see if there are
contributions to our effort.
The Community Tool Box provides a tremendous number of community-level indicators that
could be useful for a particular community. They categorize their indicators into five areas:
health, human services and education, community development, public safety, and the
environment. Examples of indicators for each broad category include:

Health
• Percentage of children who have regular dental visits
• Shelf space in stores devoted to tobacco
• Mileage of bike paths and hiking/running trails, compared to road miles in the
community
• Percentage of children attending school with recommended inoculations
• Number of hospital admissions/deaths resulting from particular diseases/conditions
• Percentage of uninsured families
• Number of elders receiving in-home health and care services
Human Services and Education
• Family status, especially for children and seniors
• Number of families with children seen by social/medical service agencies
• Extent of homelessness in the community
• Number of families receiving fuel assistance
• Percentage of adults lacking high school diplomas
• Availability and use of community mediation (rather than using the court system to
settle disputes)
• Public school class size
 • Community scholarships for post-secondary education
Community Development
• Average income level
• Average housing prices
• Percentage of residents who own their own home
• Number of service clubs, fraternal organizations, churches and other gathering points
• Number of performance centers in the community (theaters, concert halls, clubs, etc.)
Public Safety
• Existence of emergency management plans
• Equal police and fire protection presence in all neighborhoods
• Crime rate by neighborhood
• Number of arrests of youth under 18
The Environment
• Amount of protected land within the county
• Efforts to preserve and restore historical structures
• Availability and ease of recycling
• Local sponsorship or support for public art
While this list is not comprehensive by any means, it does point out the breadth of the
argument that economic development should be much broader than the measurement of jobs
and wages. If positive changes in these metrics can occur, one might also expect a boost in the
overall quality of life through increased access to technology and information, cleaner drinking
water, better educational and healthcare facilities, etc. These types of activities also influence
positive economic growth by making the community more attractive to startup, existing and
relocating companies alike. This helps to show that economic development is the standard of
living of an area combined with the economic growth of an area.
It is important to remember that economic growth is often an automatic process that naturally
results from the workings of an economy while economic development is usually initiated or
stimulated by community leadership (whether elected and/or non-elected). A concerted
economic development within a community could develop programs that provide incentives for
others to volunteer their time and effort teaching and medical scholar programs. New
businesses also contribute to the economic development of an area through the attraction of
new employees to the area who demand improvement in the socioeconomic aspects of the
region. It must be realized that these contributions to economic development must be
purposeful and do not happen solely due to a natural economic cycle.
In short, while there are several differences between economic growth and economic
development, it is essential that community stakeholders recognize that they are related
concepts that primarily differ in scope. eduCBA provided the following list of contrasts
between the concepts that should be beneficial in developing an effective plan that deals with
both concepts.

• economic growth is a short-term concept while economic development is

focuses on the long run;
• economic growth has a narrow focus while economic development has a much
broader scope;
• economic growth is focused on the income of the people in an economy while
economic development is made up of the economic growth in addition to the
standard of living
• economic growth is single dimensional while economic development is
multidimensional
• economic growth is measured in quantitative terms while economic
development is measured in both quantitative and qualitative terms
• economic growth applies only to developed countries while economic
development applies to developed countries as well as countries that are
currently developing
• economic growth is only measured for a short, specified period of time while
economic development is a continuous process that grows over a long period of
time
References
Center for Regional Economic Competitiveness. Redefining Economic Development
Performance Indicators for a Field in Transition. July 2017. Arlington, VA.
http://creconline.org/wp-content/uploads/2017/07/Redefining-Economic-Development-
Performance-Indicators-for-a-Field-in-Transition-CREC-2017.pdf
eduCBA. Economic Growth vs Economic Development. Maharashtra, Mumbai. Accessed
March 27, 2019. https://www.educba.com/economic-growth-vs-economic-development/
Human Development Index (HDI). United Nations Development Programme.
http://hdr.undp.org/en/content/human-development-index-hdi. Accessed March 27, 2019.
International City/County Managers Association. State-of-the-Art Measures in Economic
Development. January 2012. Washington, D.C. https://icma.org/articles/article/state-art-
measures-economic-development-0
Lindblad, M.R. Performance Measures in Local Economic Development. Urban Affairs Review.
Vol 1, No 5. May 2006. https://journals.sagepub.com/doi/pdf/10.1177/1078087406286462
Matthew Fischer & Associates, Inc. Performance Measurement in Economic Development:
Development of Performance Measurement Systems for Local and Regional Economic
Development Organizations. September 2011. Stoney Creek, ON (Canada). http://edac.ca/wp-
content/uploads/2014/03/Final-Report-Oct-20-Performance-Measurement-in-Economic-
Development-EDAC-Project-Sept-version_Addition_May7_2013.pdf

Oxford English Dictionary. Accessed March 27, 2019.

http://www.oed.com/view/Entry/59384?redirectedFrom=economic+growth#eid5965872

Sharkey, J.L. and J.D. Fricker. Economic Development Performance Measures and Rural
Economic Development in Indiana. Purdue University. West Lafayette, IN. April 2009.
https://docs.lib.purdue.edu/cgi/viewcontent.cgi?article=2638&context=jtrp

Study.com. Chapter 10, Lesson 5 – Economic Inequality: Differences in Developed and

Developing Nations. Accessed March 27, 2019. https://study.com/academy/lesson/economic-
inequality-differences-in-developed-and-developing-nations.html
The Community Tool Box. Chapter 38, Section 10 – Community-Level Indicators: Some
Examples. https://ctb.ku.edu. Accessed March 27, 2019. https://ctb.ku.edu/en/table-of-
contents/evaluate/evaluate-community-initiatives/examples-of-community-level-
indicators/main