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Measurement of Economic Development

Measurement of Economic Development. To analyze the ED of countries usually GNP PC is used. But this is not the only reliable measure of economic development, some other criteria's are also used. World Bank uses PCI as Less than $800 per capita - Low income economies

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Measurement of Economic Development

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  1. Measurement of Economic Development • To analyze the ED of countries usually GNP PC is used. But this is not the only reliable measure of economic development, some other criteria's are also used. World Bank uses PCI as • Less than $800 per capita - Low income economies • $800-$3200 - Lower Middle income • $3200 to $9600 - Upper middle income • Over $9600 - High income economies • Criteria’s for ED • Increase in real GNP • Increase in real per capita income • Economic welfare criterion • Social welfare criterion • Human welfare criterion

  2. Increase in real GNP as a criteria of economic development According to Prof. Meir and Baldwin’s criteria that if real GNP(not nominal) increases over a long period of time, this situation is considered as economic development.

  3. Countries by GNP

  4. 2. Increase in real per capita income as a method of economic development: If the real per capita income of a country increases over a long period of time it will be accorded as economic development. Measurement of economic development on PCI Per capita GNP = GNP / Population

  5. Merits and demerits of the Criteria : • The method is primarily used in all economies because the information regarding national income, Price level and population is available in all economies. • Per capita can be easily calculated. • By using per capita the comparison b/w countries is easy. • Countries with same PCI is not at same level of development. • PCI dose not give any information about income inequality. • PCI= Nominal GNP-Pop growth-price level. # 1.   Luxembourg: $37,499 per person  # 2.   Switzerland:$36,987 # 3.   Japan: $35,474 # 4.   Norway: $35,053  # 5.   United States: $33,070  # 6.   Denmark: $30,191   # 7.   Iceland: $27,473 # 8.   Sweden: $25,105 # 9.   United Kingdom: $24,486 # 10.   Austria: $23,824  # . Afghanistan ; $950(approx)

  6. 3. Economic welfare as a criteria of economic development According to this criterion the economic development is the process through which people are having more Goods and services as compared to previous years, as a result their must be rise in welfare.

  7. 4. Social Welfare Criteria: • GNP and per capita indicators are having some flaws. The economists and policy makers are devising some other measurement of development. • According to socio-economic indicators approach as a measure of economic development a composite of “Social development index” was constructed. • Originally 16 indicators (9 social and 7 economic indicators) were selected.

  8. “These are as: • The life expectancy . • Percentage of Population in 20,000 (km)2 and over 3. The per capita use of animal protein per day. • The combined enrolment at primary and secondary level. • The vocational enrolment ratio. 6. Average number of persons per room. 7. News papers circulation per 1000 population. • Percentage of economically active population with electricity, Gas, water etc. 9. Agriculture production per male agri.workers.

  9. 10. Percentage of adult male labor in agriculture. 11. Electricity consumption 12. Steel consumption 13. Energy consumption. 14. Percentage of GDP derived from Manufacturing. 15. Foreign trade contribution. 16. Percentage of salaried and wage earners to total economically active population. Criticism of the approach: • This approach suggests that developing economies also develop along the lines of developed countries, while some of the indicators are not found in case of developing countries. 2)The approach mainly stress on inputs while in economic development actually stress is on output. 3. The preparation of composite index is objected coz economic development is more concern with structural change instead of social welfare.

  10. 5. The human development Index as a criteria of economic development The latest approach to measure economic development is the human development index. We are having three indicators for measuring economic development • Life expectancy (for Afghanistan 44.47 male,44.81 female) • Adult literacy rate(about 36%) • Real per capita income (approximately 600$) • Infant mortality (151/1000)

  11. HDI of selected countries • Norway 0.938 Afghanistan 0.34 Pakistan 0.490 • Australia 0.937 Nepal 0.428 • New Zealand 0.907 • United States 0.902   • Ireland 0.895 • Netherlands 0.890 • Canada 0.888 • Sweden 0.885 • Germany 0.885 • Japan 0.884 • South Korea 0.871

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