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Group 2 Comparative Economic Development

The document discusses economic development across countries. It defines developing countries based on income levels and other indicators. It also examines indicators used to measure development, such as income, health, and education levels. Characteristics of developing countries are outlined as well as differences from developed nations.

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Jean Paragas
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27 views45 pages

Group 2 Comparative Economic Development

The document discusses economic development across countries. It defines developing countries based on income levels and other indicators. It also examines indicators used to measure development, such as income, health, and education levels. Characteristics of developing countries are outlined as well as differences from developed nations.

Uploaded by

Jean Paragas
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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COMPARATIVE ECONOMIC

DEVELOPMENT

GROUP 2 MEMBERS:
IFURUNG-GONZALES, ELIZABETH C.
LEUS, AURELIA G.
ARELLANO-REYLES, AMELIA
FIGUEROA-SANTOS, NORA
MENDOZA-CLOMA, ROSARIO
COMPARATIVE ECONOMIC
DEVELOPMENT

REPORTED BY:
ELIZABETH C. IFURUNG-GONZALES, MD
DEFINING THE DEVELOPING WORLD

Per capita income – most common way


World Bank classification system - based on GNP/capita
ran

LICs < $ 1025LMCs $ 1,026 -$ 4,035


UMCs $ 4,036 -$12,475
HI OECD, & other HI countries > $12,476
MICs - LMCs & UMCs
~ Developing countries ~ with LIC, LMC, or UMC
:
DEFINING THE DEVELOPING WORLD

• Newly Industrializing Countries (NICS)

– at a relatively advanced level of economic


development w/ a substantial & dynamic
industrial sector & w/ close links to the
international trade, finance & investment system
 
DEFINING THE DEVELOPING WORLD

•  The Degree of International Indebtedness:


1. Severely Indebted

2. Moderately Indebted

3. Less Indebted
 
DEFINING THE DEVELOPING WORLD

•  Least Developed Countries (LDC)


- with low income,
low human capital &
high economic vulnerability
 
BASIC INDICATORS OF DEVELOPMENT

Basic Indicators of 3 Facets of Development:


1. Real income per capita

2. Health

3. Educational attainment
INDICATORS OF REAL INCOME PER CAPITA

GNI per capita


- often used as a summary index of the relative
economic well-being of people in different nations
INDICATORS OF REAL INCOME PER CAPITA

Gross National Income (GNI)


- total domestic & foreign output claimed by res.
of a country, consisting of GDP,
+ factor I earned by foreign residents,
- I earned in the domestic economy by non-res.

GNI = GDP
+ ( I from citizens/businesses earned abroad)
– ( I  remitted by foreigners living in the country
back to their home countries)
INDICATORS OF REAL INCOME PER CAPITA

Gross National Product (GNP)


- the total market value of all goods & services
produced by domestic res.

GNP = GDP
+ ( I earned on all foreign assets –
I earned by foreigners in the country)
 
INDICATORS OF REAL INCOME PER CAPITA

Real Income Per Capita Adjusted For Purchasing Power

• Purchasing Power Parity (PPP)


– calculation of GNI using a common set of internat’l
prices of all goods & services, to provide more accurate
comparison of living standards
REAL INCOME PER CAPITA ADJUSTED FOR
PURCHASING POWER

PPP
- the no. of units of a foreign country’s currency
required to purchase the identical quantity of
the goods & services in the local developing
country market as $1 would buy in the US
BASIC INDICATORS OF HEALTH

Indicators of Health as measured by:


1. Life expectancy
2. Undernourishment
3. Child mortality
BASIC INDICATORS OF HEALTH

1. Life expectancy
– the average no. of years newborn children would
live if subjected to the mortality risks prevailing to
their cohort at the time of birth
BASIC INDICATORS OF HEALTH

2. Undernourishment Rate
– consuming too little food to maintain normal
levels of activity
- often called the problem of hunger
 
BASIC INDICATORS OF HEALTH

3. Child Mortality (child death)


- the death of children < 14 y/o &
encompasses national mortality,
under-5 mortality, &
 mortality of children 5–14 y/o

 
BASIC INDICATORS OF EDUCATION

Basic Indicators of Educational attainment


as measured by:
1. Literacy
2. Schooling
BASIC INDICATORS OF EDUCATION

Literacy – the fraction of adult males & females


reported/estimated to have the basic
abilities to read and write

Functional literacy – generally lower than the


reported nos.
MEASURING DEVELOPMENT FOR QUANTITATIVE
COMPARISON ACROSS COUNTRIES

Holistic Measures Of Living Levels & Capabilities:


The New Human Development Index (New HDI)
- still based on standard of living, education, & health,
- it has 8 notable changes
HOLISTIC MEASURES OF LIVING LEVELS & CAPABILITIES

Human Development Index (HDI)


– an index measuring national socio-economic
development based on combining measures of
education, health, & adjusted real income per capita
HOLISTIC MEASURES OF LIVING LEVELS & CAPABILITIES

New HDI - based on 3 goals/end products of development:


1. Long & healthy life (longevity)
- life expectancy at birth

2. Knowledge
- average schooling attained by adults &
expected yrs. of schooling for school-age children

3. Decent std. of living


- real per capita GDP adjusted for the differing PPP
HOW TO CALCULATE THE HDI AS PER NEW METHOD?

New HDI = (LEI x EI x II) 1/3

New HD - the geometric mean of 3 indices is taken


(indices: LEI, EI, II)
 
where LEI - life expectancy index
EI - education index
II - income index

.
NEW HDI

The total value will be between 0 and 1.


. Division of Countries:
1. Very high human development,
2. High human development,
3. Medium high human development
4. Low high human development countries
COMPARATIVE ECONOMIC
DEVELOPMENT

REPORTED BY:
AURELIA G. LEUS, MD
CHARACTERISTICS OF THE DEVELOPING WORLD:
DIVERSITY WITHIN COMMONALITY

1. LOWER LEVELS OF LIVING & PRODUCTIVITY

2. LOWER LEVELS OF HUMAN CAPITAL


- HEALTH
- EDUCATION
- SKILLS
CHARACTERISTICS OF THE DEVELOPING WORLD:
DIVERSITY WITHIN COMMONALITY

3. HIGHER LEVELS OF INEQUALITY &


ABSOLUTE POVERTY
-ABSOLUTE POVERTY
-WORLD POVERTY

4. HIGHER POPULATION GROWTH RATES


-CRUDE BIRTH RATES
CHARACTERISTICS OF THE DEVELOPING WORLD:
DIVERSITY WITHIN COMMONALITY

5. GREATER SOCIAL FRACTIONALIZATION

6. LARGER RURAL POPULATION BUT


RAPID RURAL-TO-URBAN MIGRATION
CHARACTERISTICS OF THE DEVELOPING WORLD:
DIVERSITY WITHIN COMMONALITY

7. LOWER LEVELS OF INDUSTRIALIZATION &


MANUFACTURED EXPORTS

8. ADVERSE GEOGRAPHY

9. UNDERDEVELOPED FINANCIAL &


OTHER MARKETS
CHARACTERISTICS OF THE DEVELOPING WORLD:
DIVERSITY WITHIN COMMONALITY

10. LINGERING COLONIAL IMPACTS & UNEQUAL


INTERNATIONAL RELATIONS:

- COLONIAL LEGACY

- EXTERNAL DEPENDENCE
HOW LOW-INCOME COUNTRIES TODAY
DIFFER FROM DEVELOPED COUNTRIES
8 Differences:
1. Physical & Human Resource Endowments

2. Per Capita Incomes & Levels of GDP in Relation


to the Rest of the World

3. Climate

4. Population Size, Distribution, & Growth


HOW LOW-INCOME COUNTRIES TODAY DIFFER FROM
DEVELOPED COUNTRIES

5. Historical Role of International Migration

6. International Trade Benefits

7. Basic Scientific & Technological Research &


Development Capabilities

8. Efficacy of Domestic Institutions


ARE LIVING STANDARDS OF DEVELOPING
AND DEVELOPED NATIONS CONVERGING?

REPORTED BY:
AMELIA ARELLANO-REYLES, MD
Divergence
 Tendency of higher income countries to grow faster per
capita income than lower-income countries
 Income gap widens across countries over time
 Seen in two centuries after industrialization began
Convergence
 Tendency of lower-income countries to grow
faster per capita income than higher-income
countries
 “catching up” over time
Conditional Convergence
Convergence in specific variables
eg. population growth rates, savings rate
Relative Country Convergence
 Examination of the growth rates of developing
countries in relation to developed countries
 Seen in two growth income perspectives: from
the developing country and from developed
countries
Absolute Country Convergence
 In long term, per capita income converges to
same growth in all countries
 All countries converge to same level of capital-
labor ratio
 Converge with same output per capita
 Converge to same consumption and
 Equal growth rage
Table Convergence of GDP per worker in 8 OECD countries

World Bank, 2010


 Weighs the country’s per capita growth rate in
proportion to its population size
 Eg. China and India

POPULATION-WEIGHTED RELATIVE
COUNTRY CONVERGENCE
 Cross national convergence in certain economic
sectors
 Eg. slow growth in the employment rates in the
manufacturing sectors in low-income countries

SECTORAL CONVERGENCE
LONG-RUN CAUSES OF COMPARATIVE
DEVELOPMENT
 Pre-existing conditions before European colonization
had large impact on subsequent inequality and
institutional development

 The above might have facilitated or prevented


participation in modern economic growth

 Phenomenon of underdevelopment is best viewed in


national and international context
 Economic institutions in Europe and North America are
in most cases closer to effficient

 Developing nations have weaker institutions, lower


levels of income, lower levels of human development,
inequality, lower levels of education and health
For sustainable economic growth, concomitant
and complimentary changes should be done in:
 Human capital – education & health
 Technology
 Social equality
 Institutional – laws and policies
THANK YOU.

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