AISHA KHAN SUMMER 2009 SECTION G & I LECTURE THREE ECO 102 Development Economics

Diverse Structures and Common Characteristics Chapter Two

Structural diversity Consider the following: 1. The size of the country 2. Its historical and colonial background 3. Its endowments of physical and human resources 4. Its ethnic and religious composition 5. The relative importance of public and private sectors 6. Nature of industrial structure 7. Degree of dependence on external forces 8. Distribution of power within a nations

Common characteristics 1. Low levels of living 2. Low levels of productivity 3. High rates of population growth and dependency burdens 4. Substantial dependence on agricultural production 5. Prevalence of imperfect markets and limited information 6. Dominance, dependence and vulnerability in IR

Low levels of living Quantitatively and qualitatively Different measures allow a measurement or an idea of the levels of living  Per capita national income  Relative growth rates of national and per capital income  Distribution of national income  Extent of poverty  Health  Education  HDI

Human Development Index A holistic measure of living levels Ranks between 0-1 based on three goals  Standard of living – per real capita income adjusted for PPP  Longevity – life expectancy at birth  Knowledge – weighted average of adult literacy (2/3rds) and mean years of schooling Low human development ( ) Medium human development ( ) Low human development (0.8-1)

HDI Income index = Life expectancy index =

HDI Education index = 2/3 (adult literacy index) +1/3(gross enrollment index) Adult literacy index = Gross enrollment index =

HDI =++=++

Criticisms of HDI Gross enrollment overstates the amount of schooling Equal weightage of all three components doesn’t show on what value judgment it is based No attention is given to the role of quality (life quality or schooling quality)

Per capita national income GNP PC / GDP PC PPP conversion -  Exchange rates do measure the relative purchasing powers since many exchange rates are not floating exchange rates  PPP’s are used to convert into relative GDP and GNP  PPP = number of units of a foreign country's currency required to purchase the identical quantity of g&s in the local LDC market as $1 would buy  Thus PPP converted GDP/GNP is usually higher  due to lower prices of non-traded services in developing countries

Relative growth rates Slower GNP growth rates than developed nations

Distribution of National income Every nation shows income inequality Common measures of income inequality is the GINI coefficient

Gini coefficient

Cumulative Global Population Cumulative Wealth (PPP) Calculating the Gini Coefficient A B Although the Lorenz Curve is good visual indicator of distribution equality, the Gini Coefficient provides a clearer quantatitive value. A / B = Gini Values should lie between 0 (total integration) to 1 (total segregation). Line of total integration

Extent of poverty Magnitude of poverty depends on  Average level of national income  Degree of inequality in its distribution Absolute poverty:  represents the specific minimum level of income needed to satisfy basic physical needs for survival These levels will vary from country to country International poverty line – (constant US $370)  $1 a day

Health Constant battle against malnutrition, disease and ill health Indicators: infant mortality rates  Least DC: 96/1000 live births  LDC: 64/1000 live births  Developed: 8/1000 live births 67% of children in Bangladesh are underweight Low population-to-physician ratio (672:1 in Kenya)

Education Meager spread of education opportunities Cultural reasons for lack of education

Dates to remember Quiz 1 on the 14 th of May 2009 Quiz 2 on the 25 th of May Midterm exam- 4 th of June (tentative) Quiz 3 on the 15 th of June Quiz 4 on the 26 th of June Final exam week (July 6 th – 11 th )

HDI task

Case Study: Nigeria