Measurement of economic development

T
MEASUREMENT OF ECONOMIC
DEVELOPMENT
MEASUREMENT OF ECONOMIC DEVELOPMENT
 Economic development is a process of change over a long period of
time.
 There are several criteria or principles to measure the economic
development.
 None of the criteria provides a satisfactory and universally acceptable
index of economic development.
 It is a complex problem to answer about the measuring of economic
development.
MEASUREMENT OF ECONOMIC DEVELOPMENT
R.G. Lipsey maintains that there are many possible measures of
a country’s degree of development like income per head, the
percentage of resources unexploited, capital per head, saving per
head and amount of social capital.
 Commonly used criteria of economic development are increase
in national income, per capita real income, comparative concept,
standard of living and economic welfare of the community etc.
R.G. Lipsey
GROSS NATIONAL PRODUCT (GNP)
Gross national product (GNP) is an estimate of total value
of all the final products and services turned out in a given
period by the means of production owned by a country's
residents.
GNP is commonly calculated by taking the sum
of personal consumption expenditures, private domestic
investment, government expenditure, net exports and any
income earned by residents from overseas investments,
minus income earned within the domestic economy by
foreign residents.
Net exports represent the difference between what a
country exports minus any imports of goods and services.
GNP measures the total monetary value of the output produced by a country's
residents.
ny output produced by foreign residents within the country's borders must be
excluded in calculations of GNP, while any output produced by the country's
residents outside of its borders must be counted.
GNP does not include intermediary goods and services to avoid double-counting.
PER CAPITA INCOME
Per capita income is a measure of the amount of
money earned per person in a nation or geographic
region.
can be used to determine the average per-person
income for an area and to evaluate the standard of
living and quality of life of the population.
Per capita income for a nation is calculated by dividing
the country's national income by its population.
PHYSICAL QUALITY OF LIFE INDEX
 The Physical Quality of Life Index (PQLI) is an attempt
to measure the quality of life or well-being of a country.
 It considers the value is the average of three statistics:
basic literacy rate, infant mortality, and life expectancy
at age one.
 It all equally weighted on a 0 to 100 scale.
It was developed for the Overseas Development
Council in the mid-1970s by Morris David Morris
Morris David Morris
HUMAN DEVELOPMENT INDEX
 HDI is a statistic developed and compiled by the United Nations
to measure and various countries' levels of social and economic
development.
 It is composed of three principal areas of interest: mean years of
schooling expected years of schooling, life expectancy at birth,
and gross national income per capita.
 This index is a tool used to follow changes in development levels
over time and to compare the development levels of different
countries.
 The computed HDI of a country is an average of indexes of each
of the life aspects that are examined: knowledge and
understanding, a long and healthy life, and an acceptable standard
of living.
 The components is normalized to scale between 0 and 1.
CAPABILITY APPROACH
The capability approach also referred to as the capabilities
approach is an economic theory conceived in the 1980s as an
alternative approach to welfare economics.
In this approach, Amartya Sen and Martha Nussbaum bring
together a range of ideas that were previously excluded from
traditional approaches to the economics of welfare.
The core focus of the capability approach is on what
individuals are able to do.
Amartya Sen
Martha Nussbaum
Sen argued for five components in assessing capability:
1.The importance of real freedoms in the assessment of a person's advantage
2.Individual differences in the ability to transform resources into valuable activities
3.The multi-variate nature of activities giving rise to happiness
4.A balance of materialistic and no materialistic factors in evaluating human welfare
5.Concern for the distribution of opportunities within society
Sen has helped to make the capabilities approach predominant as a paradigm for policy
debate in human development where it inspired the creation of the UN's Human
Development Index.
It became a popular measure of human development, capturing capabilities in health,
education, and income
GENDER RELATED DEVELOPMENT INDEX
The Gender Related Development Index (GDI) is an index
designed to measure gender equality.
GDI together with the Gender Empowerment Measure (GEM) were
introduced in 1995 in the Human Development Report written by
the United Nations Development Program.
The aim of these measurements was to add a gender-sensitive
dimension to the Human Development Index (HDI).
The GDI is defined as a "distribution-sensitive measure that accounts
for the human development impact of existing gender gaps in the
three components of the HDI.
The HDI and the GDI (as well as the GEM) were created to rival the
more traditional general income-based measures of development
such as gross domestic product (GDP) and gross national product
(GNP).
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Measurement of economic development

  • 2. MEASUREMENT OF ECONOMIC DEVELOPMENT  Economic development is a process of change over a long period of time.  There are several criteria or principles to measure the economic development.  None of the criteria provides a satisfactory and universally acceptable index of economic development.  It is a complex problem to answer about the measuring of economic development.
  • 3. MEASUREMENT OF ECONOMIC DEVELOPMENT R.G. Lipsey maintains that there are many possible measures of a country’s degree of development like income per head, the percentage of resources unexploited, capital per head, saving per head and amount of social capital.  Commonly used criteria of economic development are increase in national income, per capita real income, comparative concept, standard of living and economic welfare of the community etc. R.G. Lipsey
  • 4. GROSS NATIONAL PRODUCT (GNP) Gross national product (GNP) is an estimate of total value of all the final products and services turned out in a given period by the means of production owned by a country's residents. GNP is commonly calculated by taking the sum of personal consumption expenditures, private domestic investment, government expenditure, net exports and any income earned by residents from overseas investments, minus income earned within the domestic economy by foreign residents. Net exports represent the difference between what a country exports minus any imports of goods and services.
  • 5. GNP measures the total monetary value of the output produced by a country's residents. ny output produced by foreign residents within the country's borders must be excluded in calculations of GNP, while any output produced by the country's residents outside of its borders must be counted. GNP does not include intermediary goods and services to avoid double-counting.
  • 6. PER CAPITA INCOME Per capita income is a measure of the amount of money earned per person in a nation or geographic region. can be used to determine the average per-person income for an area and to evaluate the standard of living and quality of life of the population. Per capita income for a nation is calculated by dividing the country's national income by its population.
  • 7. PHYSICAL QUALITY OF LIFE INDEX  The Physical Quality of Life Index (PQLI) is an attempt to measure the quality of life or well-being of a country.  It considers the value is the average of three statistics: basic literacy rate, infant mortality, and life expectancy at age one.  It all equally weighted on a 0 to 100 scale. It was developed for the Overseas Development Council in the mid-1970s by Morris David Morris Morris David Morris
  • 8. HUMAN DEVELOPMENT INDEX  HDI is a statistic developed and compiled by the United Nations to measure and various countries' levels of social and economic development.  It is composed of three principal areas of interest: mean years of schooling expected years of schooling, life expectancy at birth, and gross national income per capita.  This index is a tool used to follow changes in development levels over time and to compare the development levels of different countries.  The computed HDI of a country is an average of indexes of each of the life aspects that are examined: knowledge and understanding, a long and healthy life, and an acceptable standard of living.  The components is normalized to scale between 0 and 1.
  • 9. CAPABILITY APPROACH The capability approach also referred to as the capabilities approach is an economic theory conceived in the 1980s as an alternative approach to welfare economics. In this approach, Amartya Sen and Martha Nussbaum bring together a range of ideas that were previously excluded from traditional approaches to the economics of welfare. The core focus of the capability approach is on what individuals are able to do. Amartya Sen Martha Nussbaum
  • 10. Sen argued for five components in assessing capability: 1.The importance of real freedoms in the assessment of a person's advantage 2.Individual differences in the ability to transform resources into valuable activities 3.The multi-variate nature of activities giving rise to happiness 4.A balance of materialistic and no materialistic factors in evaluating human welfare 5.Concern for the distribution of opportunities within society Sen has helped to make the capabilities approach predominant as a paradigm for policy debate in human development where it inspired the creation of the UN's Human Development Index. It became a popular measure of human development, capturing capabilities in health, education, and income
  • 11. GENDER RELATED DEVELOPMENT INDEX The Gender Related Development Index (GDI) is an index designed to measure gender equality. GDI together with the Gender Empowerment Measure (GEM) were introduced in 1995 in the Human Development Report written by the United Nations Development Program. The aim of these measurements was to add a gender-sensitive dimension to the Human Development Index (HDI). The GDI is defined as a "distribution-sensitive measure that accounts for the human development impact of existing gender gaps in the three components of the HDI. The HDI and the GDI (as well as the GEM) were created to rival the more traditional general income-based measures of development such as gross domestic product (GDP) and gross national product (GNP).