Midterm Flashcards
HDI calculation
cube root[(life expectancy index)(education index)(income index)]
sub index calculation
(observed value - minimum value/ maximum value - minimum value)
income index
(ln(observed value) - ln(minimum value)/ ln(maximum value) - ln(minimum value)
education index
square root[(mean schooling index)(expected schooling index)]/ maximum value
Total poverty gap (TPG)
(absolute poverty line - income of each person under line)+ continued
Average poverty gap (APG)
TPG/N N is total population
Average income shortfall (AIS)
TPG/H H is headcount of ppl under poverty line
GDP vs GNI
GDP: Measures the total value for final use of output produced by an economy, by both residents and nonresidents.
GNI: Total domestic and foreign value added claimed by a country’s residents (without making deductions for depreciation of the domestic capital stock).
Purchasing power parity (PPP)
Official foreign exchange rates (used to convert a country’s GNI and GDP into US$ for cross-country comparison) fail to measure the relative domestic purchasing power of different currencies; we often use PPP instead.
Intuitive definition of PPP: the number of units of a foreign country’s currency required to purchase the identical quantity of goods and services in the local market as $1 would buy in the U.S.
Other Ways to Measure Development
Happiness Health Life Expectancy Education/Literacy Human Development Index (HDI)
Official Development Assistance (ODA)
Measures all flows of official financing for the purpose of promoting economic development to developing countries (low and middle income categorization by the World Bank, see Table 1.1).
Includes flows from donor governments to developing governments (bilateral ODA) and flows from “multilateral institutions” (e.g., World Bank, IMF, United Nations Development Program).
Official Assistance (OA)
Measures all flows of official financing when the recipient is a developed country.
Specifically, recipient country’s income above the World Bank’s “high income” threshold for three consecutive years.
Example: US aid to Israel
Private Voluntary Assistance
Funding from nongovernment organizations (NGOs)
Examples: Doctors Without Borders, Bill and Melinda Gates Foundation
Randomized Control Trials (RCTs)
Similar to the way drug companies test the efficacy of pharmaceuticals.
Participants are randomly assigned to either the treatment group or the control group.
After the trial period, compare outcomes between the groups to measure policy impact.
Poor Economics will discuss RCTs and their utility in development at length.
Example: Jameel Poverty Action Lab (J-PAL)
Macroeconomic impacts of health crises
Affects labor supply
E.g., 13% decline in South African labor force attributed to HIV/AIDS
Affects labor productivity
