ECON 455/555 Economic Development

What is Economic Development?What is Economic Development? –Income and Growth? –Poverty and Inequality? –Health and Happiness? –Market Economy? –Political Rights and Freedoms? Introduction Development Economics

Four Essential Aspects of an Economic Development ClassFour Essential Aspects of an Economic Development Class –Define development – to the extent possible –Describe different ways to measure development –Describe theory to understand the mechanisms that make developing countries different –Examine empirical evidence to see if theory is right Introduction Development Economics

Ray, pages 8 & 9:Ray, pages 8 & 9: –We must be careful, no one would say development is defined as growth of income per capita. –But more universal features of economic development: health, life expectancy, literacy, etc., follow in a natural way from growth of income per capita. –Economics is all about trying to describe essential mechanisms that underlie an observed phenomenon, in this case development. Theory is about stripping away complexity to try and uncover truths about key economic forces at work –So studying growth is a natural starting point in a study of development. –Later we shall begin to start to do two things: add more complexity and begin to look more narrowly at particular aspects of development. Introduction Development Economics

There are currently almost 6.7 billion people in the worldThere are currently almost 6.7 billion people in the world –In developing countries it is estimated that (2003): 826 million people do not have enough food826 million people do not have enough food 1 billion people have no access to safe drinking water1 billion people have no access to safe drinking water 2.4 billion have no sanitation2.4 billion have no sanitation 10,000 children die EVERY DAY from diseases caused by contaminated water10,000 children die EVERY DAY from diseases caused by contaminated water Source: Weil (2003) Introduction: Some Facts Development Economics

Introduction (cont) –Life expectancy at birth: 77 for 1.1 billion who live in UN classified ‘high human development countries’ (HDC) 67 for 4.05 billion in medium HDC 53 for 840 million in low HDC

Development Economics Introduction (cont) –Other indicators: High income: 443 cars per 1,000 Low income: 9 per 1,000

Development Economics Introduction (cont) –Other indicators: Canada: 667 telephone lines per 1,000 Bangladesh: 4 telephone lines per 1,000.

Development Economics Introduction (cont) –Other indicators: Continent of Africa: 13% of world’s population uses 2.9% of electricity USA: 5% of world’s population uses 25% of electricity.

Development Economics Introduction (cont) –Other indicators: 20% of the world that lives in the richest countries have 62% of the wealth. 1.2 billion have incomes of less than $1 per day billion have less than $2 per day.

Development Economics Introduction (cont) –Differences within countries over time are just as dramatic: Life expectancy in Japan 1880: 35 Life expectancy in Japan today: 81 Between 1775 and 1975 the average height of a male in Great Britain increased 3.6 inches from better nutrition.

Development Economics Introduction (cont) –Differences within countries over time are just as dramatic: Since late 1800s in the United States the fraction of income spent on recreation has tripled. The fraction spent on food has decreased by 2/3. In 1870 the average work week in US was 61 hours, now 34.

Development Economics Introduction (cont) –Even poor countries are ‘rich’ by historical standards: Egypt, Indonesia and Brazil have higher life expectancy then British nobility in 1900.

Development Economics Introduction (cont) –Things are getting better? - perhaps: Fraction of people with incomes less than $1 fell by 1/3 from 1980 to –But growth rate differences continue to be a problem.

Development Economics Introduction (cont) –Growth rate differentials lead to quickly increasing inequality

Institutional Features Higher population growth rates Higher percentage of agricultural production and rural residents Rapid rural to urban migration Large involvement in international trade, much of it in primary products and light manufactures