File Name: differentiate between economic growth and economic development .zip
Readers Question: What is the difference between growth and development? Can a country experience economic growth without development?
Economic growth measures an increase in Real GDP real output. It basically measures the total volume of goods and services produced in an economy. Development looks at a wider range of statistics than just GDP per capita. Development is concerned with how people are actually affected. It looks at their actual living standards and the freedom they have to enjoy a good standard of living.
Absolute Poverty. Do people have sufficient resources to maintain a healthy diet and basics of life such as shelter?
Economic growth may be essential to enable higher incomes for people to be able to buy more food. A key issue is whether the benefits of economic growth are equitably distributed amongst different groups of society. Education standards. Economic growth may enable more money to be spent on education. However, there is no guarantee that the proceeds of growth will be used to improve education standards.
There is often a weak correlation between GDP and literacy rates. Environmental standards. For example, higher output could cause more pollution.
If higher growth involves cutting down forests — this could have adverse environmental consequences in long-term. This may be important for regions which may be cut off from the main areas of economic growth.
Measuring economic development is not as precise as measuring GDP because it depends on what factors are included in the measure. There are several different measures of economic development, such as the Human development index HDI. It is possible to have economic growth without development. This could occur due to:. Economic development means an improvement in the quality of life and living standards, e. Ceteris paribus , we would expect economic growth to enable more economic development.
Higher real GDP enables more to be spent on health care and education. However, the link is not guaranteed. The proceeds of economic growth could be wasted or retained by a small wealthy elite. Economic development Development looks at a wider range of statistics than just GDP per capita.
Measures of economic development will look at: Real income per head — GDP per capita Levels of literacy and education standards Levels of healthcare e. Measures of economic development Measuring economic development is not as precise as measuring GDP because it depends on what factors are included in the measure.
Average life expectancy compared to a global expected life expectancy. Educational standards and labour productivity. Basic levels of literacy and education can determine the productivity of the workforce.
Levels of inward investment. For example, China has invested in many African countries to help export raw materials, that its economy needs. Labour mobility. Is labour able to move from relatively unproductive agriculture to more productive manufacturing?
The flow of foreign aid and investment. Targeted aid, can help improve infrastructure and living standards. Level of savings and investment. Higher savings can fund more investment, helping economic growth. Economic growth without development It is possible to have economic growth without development. For example, if a country produces more oil, it will see an increase in GDP.
A country may see higher GDP, but the benefits of growth may be syphoned into the bank accounts of politicians Environmental problems. Producing toxic chemicals will lead to an increase in real GDP. However, without proper regulation, it can also lead to environmental and health problems. This is an example of where growth leads to a decline in living standards for many. Economic growth can cause an increase in congestion. This means people will spend longer in traffic jams. GDP may increase but they have lower living standards because they spend more time in traffic jams.
Production not consumed. If a state-owned industry increases output, this is reflected in an increase in GDP. However, if the output is not used by anyone then it causes no actual increase in living standards. Military spending. A country may increase GDP by spending more on military goods. However, if this is at the expense of health care and education it can lead to lower living standards.
Evaluation It depends on the nature of economic growth. Are the proceeds of growth used to improve living standards? Might be useful to use statistics like the Human Development Index which look at real GDP, but also education and health care indexes.
Readers Question: What is the difference between growth and development? Can a country experience economic growth without development? Economic growth measures an increase in Real GDP real output. It basically measures the total volume of goods and services produced in an economy. Development looks at a wider range of statistics than just GDP per capita. Development is concerned with how people are actually affected. It looks at their actual living standards and the freedom they have to enjoy a good standard of living.
We have started our discussion of development by addressing very broad issues relating to the concept of development. However, much of the literature and thinking about 'development' focuses on economics. Indeed 'development' and 'economic development' have often been treated as synonymous concepts. The economic development of a country or society is usually associated with amongst other things rising incomes and related increases in consumption , savings, and investment. Of course, there is far more to economic development than income growth; for if income distribution is highly skewed, growth may not be accompanied by much progress towards the goals that are usually associated with economic development. What characteristics are typically associated with economic development?
The upcoming discussion will update you about the differences between economic growth and economic development. Development economics emerged as a distinct field of study during the post-World War II. Growth and development were thought to be synonymous. Dreze and A. Though development economics in its infancy has had a strong relation to growth economics, it began to emerge as a separate field of study during the post-War II.
Erwann Sabai and Dr. Chirok Han from University of Auckland for their valuable comments and to the following people: Dr. Shahid M. Alam of Northeastern University, Boston, for their intuitive comments; and Ms.