Chapter - 2

Development Economics 2
Comparative Economic Development
1. Briefly explain the important measures of economic development.

Economic development: Economic development means an improvement in the quality of life and living standards,
e.g. measures of literacy, life-expectancy and health care.
1. National Income
National income is referred to as the total monetary value of all services and goods that are produced by a nation
during a period of time.
National income = C + G + I + X + F – D
2. Per Capita Income
Per capita income is the total gross national income (GNI) of a country divided by its total population
Per capita income= Real national income/ Size of population
3. Physical Quality of Life Index
The physical quality of life index involves 3 basic components as
1. Life expectancy 2. Adult literacy 3. Infant mortality
4. Basic Needs
The basic needs approach gives priority to satisfy the basic needs of the people. It aims at removing poverty,
unemployment and inequalities that obstacle the growth of many countries.
5. Human Development Index (HDI)
It defines Human development as a process of enlarging people’s choices.
The Human development index involves 3 basic components as
1. Life expectancy 2. Adult literacy 3. Per capita income
6. Gender Related Development Index
It measures economic development as the HDI does, but take into account the inequality between men and
women.
7. Gender Empowerment Measure (GEM)
GEM is an indicator of gender inequality in economic and political participation and decision making.
8. Human Poverty Index (HPI)
The variables used by the HPI are
➢ The percentage of people expected to die before the age of 40
➢ The percentage of adults who are illiterate
➢ The percentage of people without access to health services and safe drinking water
➢ The percentage of under -weight children under the age of 5 years
2. What is HDI? How do you measure HDI? Explain with the help of hypothetical data.
Human Development Index (HDI) is an index measuring national socioeconomic development, based on
combining measures of education, health, and adjusted real income per capita.
HDI includes three dimensions:

➢ Health: Life expectancy at birth
➢ Education and Knowledge:
▪ Mean years of schooling
▪ Expected Years of Schooling
➢ Standard of living: Gross National Income (GNI) per capita
Based on the minimum and maximum values, individual indices can be calculated as:
Index = (Actual Value) – (Minimum Value) / (Maximum Value) – (Minimum Value)
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Based on the above information, calculation of each indexes can be done as:
• Life Expectancy Index (LEI) = Actual LE – 20 / (85-20)
• Income Index (II) = {ln(GNI pc)- ln(100)} / {ln(75,000) – ln(100)}
• Education Index (EI) = MYSI+EYSI / 2
• Mean Years of Schooling Index (MYSI) = MYS-0 / 15-0
• Expected Years of Schooling Index (EYSI) = EYS-0 / 18-0
Now, HDI is the geometric mean of previous three indices
HDI=
The cut-off point of HDI and their classification:
3. Write down the differences between underdeveloped and developed countries.

Basis for comparison Developed Countries Developing Countries
1. Meaning A country having an effective Developing country is a
rate of industrialization and country which has a slow rate
individual income is known of industrialization and low
as developed Country. per capita income.
2. Per capita income High Low
3. Unemployment and Low High
Poverty
4. Rates Infant mortality rate, death High infant mortality rate,
rate and birth rate is low death rate and birth rate,
while the life expectancy rate along with low life
is high. expectancy rate.
5. Living conditions Good Moderate
6. Generates more revenue Industrial sector Service sector
from
7. Growth High industrial growth. Lower industrial growth
8. Standard of living High Low
9. Distribution of income Equal Unequal
10. Factors of Production Effectively utilized Ineffectively utilized
11. For example USA, UK, Japan Nepal, Pakistan, Bangladesh
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4. What are the similarities and differences among development countries.
1. Levels of income and productivity
Similarity: Developing countries generally have lower levels of income and productivity compared to developed
nations.
Difference: The extent varies due to factors such as economic policies and natural resource endowments.
2. Human capital attainments
Similarity: Many developing countries face challenges in achieving high levels of education and healthcare for their
populations.
Difference: Some invest more in human capital development, leading to better outcomes in education and
healthcare.
3. Inequality and absolute poverty
Similarity: Inequality and absolute poverty are widespread in developing countries.
Difference: The severity varies due to factors like economic policies and social structures.
4. Population growth and age structure
Similarity: Developing countries often experience rapid population growth and youthful age structures.
Difference: Rates of growth and age distributions differ due to factors like fertility rates and government policies.
5. Rural population and rural-to-urban migration
Similarity: Many developing countries have significant rural populations and experience rural-to-urban migration.
Difference: The pace and scale of migration vary due to economic opportunities and infrastructure development.
6. Social fractionalization
Similarity: Social diversity exists in many developing countries, posing challenges to social cohesion.
Difference: The impact varies, with some countries managing diversity effectively while others face social tensions.
7. Level of industrialization and manufactured exports
Similarity: Developing countries generally have lower levels of industrialization compared to developed ones.
Difference: Some countries prioritize industrial development, leading to higher levels of manufactured exports.
8. Geography and natural resource endowments
Similarity: Developing countries possess diverse geography and natural resources.
Difference: The abundance and types of resources vary, influencing economic development paths.
9. Extent of financial and other markets
Similarity: Developing countries may have less developed financial and other markets compared to developed
ones.
Difference: Some countries have more developed financial sectors due to reforms and investments.
10. Quality of institutions and external dependence
Similarity: Developing countries often grapple with institutional weaknesses.
Difference: The quality of institutions varies, impacting levels of external dependence and economic stability.

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Development Economics 2

Comparative Economic Development

1. Briefly explain the important measures of economic development.

HDI includes three dimensions:

3. Write down the differences between underdeveloped and developed countries.

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