measuring development Flashcards
o Traditional Economic Measure
GDP, GNI
o Wider Measures of Development
GDP + reduction of poverty and inequality and unemployment, improvement in wellbeing
Converting GNI and GDP to be internationally comparable
o Atlas method – three-year moving average of exchange rates adjusted for differences in inflation
o Purchasing power parity method – accounts for non-tradeable good and differences in the cost of living between countries – number of units of foreign country’s currency required to purchase the identical quantity of goods and services that $1 would get in the US – foreign currency/US dollar
Criticism of GDP or GNI
doesn’t take income distribution and utility of income into account
Amartya Sen’s ‘Capability’ Approach
poverty is about a person’s capability to function - development is an expansion of people’s capabilities
HDI
o It is used for an indicator with more than one dimension – long life, knowledge and a decent standard of living
o Each of these dimensions generate a score between 0 and 1
o Dimension index for H, E, or I = (actual value – minimum)/(maximum-minimum)
o HDI = H1/3 E1/3 I1/3
MDI
o MDI evaluates multidimensional poverty but at the individual level
o Scoring 1/3 or higher on ten indicators defines an individual as MPI poor
o Covers 110 of the poorest countries in the world
Growth rate in discrete time
Yt+1 = Yt (1 + g)
Growth rate in continuous time
Yt+1 = Yte^gt - shows that small differences in growth rates lead to big differences in long run levels
Unconditional convergence
the tendency for per capita income to grow faster in lower-income countries so that lower-income countries are ‘catching up’ over time
Conditional convergence
when countries are hypothesised to converge not in all cases but other things being equal- a country’s per capita income will converge to a country-specific level in the long run
