ECON 317:
Economic Growth & Development 1
Lecturer:
Dr. Emmanuel Codjoe
Economics, Institutions and
Development: A Global Perspective
Introduction
Introduction to Economic Development
• According to Robert Lucas (1988), the problem of economic development is one of accounting for observed patterns, across countries and across time, in levels and rates of growth of per capita income.
• As Daron Acemoglu and James Robinson (2008) put it, “the most important questions in ....
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
• .... in social science concern the causes of cross-country differences in economic development and economic growth.”
• “ Why are some countries much poorer than others?”
• “ Why do some countries achieve economic growth while others stagnate?”
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
• Many reasons have been attributed to why such
differences in economic growth rates occur.
However, only a few will be explored in this
course.
• Some of these reasons include, geographic
endowments, innovation, institutions, culture,
‘useful knowledge’.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
• Many reasons have been attributed to why such
differences in economic growth rates occur.
However, only a few will be explored in this
course.
• Some of these reasons include, geographic
endowments, innovation, institutions, culture,
‘useful knowledge’.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
• Many reasons have been attributed to why such
differences in economic growth rates occur.
However, only a few will be explored in this
course.
• Some of these reasons include, capital formation,
growth in total factor productivity, geographic
endowments, technological innovation,
institutions, culture, ‘useful knowledge’.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
• Many reasons have been attributed to why such
differences in economic growth rates occur.
However, only a few will be explored in this
course.
• Some of these reasons include, geographic
endowments, innovation, institutions, culture,
‘useful knowledge’.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
• Evidently, the primary objective of nearly
every country in the world is to achieve
economic development: raising the well-being
and social capabilities of persons resident in
these countries.
• How do we assess how much development
has occurred over a period of time?
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• Occasionally, the terms growth and development are used to mean the same thing. Why?
• Because growth of per capita income is supposed to contribute to a general increase in the standard of living of the people in general.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• In strictly economic terms, development has
traditionally meant achieving sustained rates
of growth of income per capita to enable a
nation to expand its output at a rate faster
than the growth rate of its population.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• Consequently, modern growth, is usually defined
to involve a substantial increase of real income per
capita sustained over a long period of time.
• In simple terms, the average incomes of people
not only get better but also continue to do so.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• But it now widely accepted that economic
development goes beyond the level or growth
of per capita income, although income has a
great deal to do with it.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• For instance, whilst the per capita income of Kuwait, Qatar, or Saudi Arabia is very high, it will be wrong to suggest that the “average” citizen in these countries enjoys a standard of living higher than an “average” citizen of the USA, Denmark or Sweden.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• In the past, economic development has also been seen in terms of the planned alteration of the structure of production and employment so that agriculture’s share of both declines and that of the manufacturing and service industries increases: what has been termed, Structural Change.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• Nevertheless, the development experiences of many developing countries between the 1950s and 1980s, suggested that development must also involve the removal of poverty and undernutrition, reduction in inequality, infant mortality, and unemployment, avoidance of discrimination, and access to sanitation, clean drinking water and health services.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• This points to several issues in distinguishing
between growth and development:
–The distribution of income: a country’s GDP
may grow a very fast rate and yet only a small
proportion of the population benefit from this.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• This points to several issues in distinguishing
between growth and development:
–The population growth rate: where population
growth rate matches output growth rate, then per
capita growth rate is negligible.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• This points to several issues in distinguishing between growth and development:
– Foreign exchange conversion: in a world of floating exchange rates, foreign exchange conversion of per capita real income may not always be an adequate index of development.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• This points to several issues in distinguishing between growth and development:
–Existence of ‘Dual’ Societies: ‘dual’ societies are characterised by contrasts between the very rich and the very poor, between towns and villages, between different social classes, etc.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• Where these characteristics have been observed, we might expect to see growth without development.
• Another important feature of the measure of the level of economic development is the quality of life index.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• It is contended that such quality is not adequately reflected in the index of per capita income growth. Thus, country X may have a lower per capita real income than country Y, but the quality of life enjoyed by citizens of country X may be better than that of Y.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• But there is the problem of setting up the
index to measure the ‘quality’ of life.
However, several factors are involved in the
measurement of such ‘quality’. These include
the following:
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
1. Education and literacy rates
2. Life expectancy
3. Level of nutrition measured by calorie supply per head (good nutrition)
4. Consumption of energy per head
5. Infant mortality per 1000 live births
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
6. Access to a variety of goods and services
7. Luxury of leisure and entertainment
8. Live in healthy environment
9. Freedom from any form of discrimination
10. Access to good health care and housing
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
11. A society that is tolerant of diversity
12. A society with tolerable levels of equality
13. A society with political rights and freedoms, intellectual and cultural development, high levels of personal security, social order, etc.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• Clearly, there is an entire multitude of yardsticks that can be relied on in defining the ‘quality’ of life index.
• Development must therefore be conceived of as a multidimensional process involving major changes in many aspects of human life.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Distinguishing Between “Growth” and
“Development”
• These changes will include, those in social
structures, popular attitudes, and national
institutions, as well as the acceleration of
economic growth, the reduction of inequality,
and the eradication of poverty.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining Economic Development: Sen’s Capabilities Approach
• This is attributed to Nobel Economics Laureate, Amartya Sen.
• He argued that “economic growth cannot be sensibly treated as an end in itself. Development has to be more concerned with enhancing the lives we lead and the freedoms we enjoy”.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining Economic Development: Sen’s
Capabilities Approach
• To develop this point, he used the concept of
capabilities, which is largely defined as the
freedoms that people have, given their
personal features and their command over
commodities.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining Economic Development: Sen’s Capabilities Approach
• Sen himself defines capabilities as “the freedom that a person has in terms of the choice of functionings, given his personal features (conversion of characteristics into functionings) and his command over commodities.”
• Functionings, refers to what a person does (or can do) with the commodities of given characteristics that they come to possess or control.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining Economic Development: Sen’s Capabilities Approach
Some Key Capabilities:
• Some of the important “Beings” and “Doings” in the capability to Function include the following:
–Being able to live long
–Being well-nourished
–Being Healthy
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining Economic Development: Sen’s Capabilities Approach
– Being literate
– Being well-clothed
– Being mobile
– Being able to take part in the life of the community
– Being happy (a state of being that may be valued as a functioning)
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• The Brandt Report (1980) highlighted the growing gap in social and economic development between the developed and less developed nations of the world.
• The report also provided a basis for what some referred to as the Brandt line, dividing the rich North and the poor South.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• It is therefore easy to see why and how development could mean different things to different people.
• Nevertheless, having an acceptable measure permits an assessment of the level of progress (or otherwise).
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• It is therefore easy to see why and how development could mean different things to different people.
• Nevertheless, having an acceptable measure permits an assessment of the level of progress (or otherwise).
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• Additionally, the Brandt Report also warned of the tendency of the ‘North’ to put up economic barriers against the growing industrial ‘South’.
• Nevertheless, it also noted the mutually interdependent relationship between the two worlds.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• We also know that a significant proportion of the world’s population live in absolute poverty.
• Absolute poverty refers to the situation of being unable to meet the minimum levels of income, food, clothing, healthcare, shelter, and other essentials.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• It is therefore easy to see why and how development could mean different things to different people.
• Nevertheless, having an acceptable measure permits an assessment of the level of progress (or otherwise).
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• The Brandt Report also warned of the tendency of the ‘North’ to put up economic barriers against the growing industrial ‘South’.
• Thus, poverty remains a major challenge in today’s world, despite the increase in global wealth over the last 100 years.
• We know that a significant proportion of the world’s population live in absolute poverty.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• The Brandt Report also warned of the tendency of the ‘North’ to put up economic barriers against the growing industrial ‘South’.
• Thus, poverty remains a major challenge in today’s world, despite the increase in global wealth over the last 100 years.
• We know that a significant proportion of the world’s population live in absolute poverty.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• The challenge of poverty remains real for many countries in the world; a significant proportion of the world’s population live in absolute poverty.
• This is in stark contrast to the increase in global wealth over the last 100 years. World GDP is more than 3 times what it was about 100 years ago.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• We take a snapshot into the lives of the poor, with a few quotations from these people.
• When one is poor, she has no say in public, she feels inferior. She has no food, so there is famine in her house; no clothing, and no progress in her family.
—A poor woman from Uganda
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• For a poor person everything is terrible—illness, humiliation, shame. We are cripples; we are afraid of everything; we depend on everyone. No one needs us. We are like garbage that everyone wants to get rid of.
—A blind woman from Tiraspol, Moldova
• Life in the area is so precarious that the youth and every able person have to migrate to the towns or join the army at the war front in order to escape the hazards of hunger escalating over here.
—Participant in a discussion group in rural Ethiopia
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• However, it is worth noting that tremendous progress has been made over the last century.
• Several regions of the world have recorded remarkable reductions in the levels of absolute poverty in the last 50 years, which have been especially helped by the impetus provided by the MDGs and SDGs.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• However, it is worth noting that tremendous progress has been made over the last century.
• Several regions of the world have recorded remarkable reductions in the levels of absolute poverty in the last 50 years, which have been especially helped by the impetus provided by the MDGs and SDGs.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• The Brandt Report also warned of the tendency of the ‘North’ to put up economic barriers against the growing industrial ‘South’.
• Thus, poverty remains a major challenge in today’s world, despite the increase in global wealth over the last 100 years.
• We know that a significant proportion of the world’s population live in absolute poverty.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• Despite the picture of improvement in
poverty levels painted, progress has been
slower at higher poverty lines.
• Moreover, progress has been uneven across
the regions of the world.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• The other half therefore live in a world
characterised by the following:
–Unemployment; dwindling job opportunities
– Low and falling incomes
–High prices for essential commodities
–Unsafe sources of drinking water
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
– Poor sanitation
–High infant and maternal mortality
– Poor diet
– Poor health care facilities/services
– Poor education
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
• These features point to the main dimensions
of poverty. Thus, the meaning of poverty is
not only restricted to that related to income.
Other aspects of poverty include the
following:
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
How the Other Half Live?
–Food and Shelter
–Health and Education
–Energy
–Rights and Participation
–Freedom and Empowerment
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economics and Development Studies
• Traditional economics focuses primarily on
the efficient, least-cost allocation of scarce
productive resources and with the optimal
growth of these resources over time so as to
produce an ever-expanding range of goods and
services (sustained GDP growth).
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economics and Development Studies
• Political economy considers issues outside the domain of traditional economics. These include, the social and institutional processes through which certain groups of economic and political elites influence the allocation of scarce productive resources now and in the future, either for their own benefit exclusively or for that of the larger population as well.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economics and Development Studies
• The emphasis is on the relationship between
politics and economics, with a particular focus
on the role of power in economic decision
making.
• Development Studies has a much greater scope.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economics and Development Studies
• It is concerned with the following issues:
– the efficient allocation of existing scarce
(or idle) productive resources,
– their sustained growth over time,
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economics and Development Studies
– the interaction between economic, social, political, and institutional mechanisms, both public and private, necessary to bring about rapid and large-scale improvements in levels of living for the peoples of Africa, Asia, Latin America, and the formerly socialist transition economies – Eastern European countries.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economics and Development Studies
• Nevertheless, it is worth noting that developing
countries are a non-homogeneous group.
• However, there are a few common
characteristics that can be found in a majority
of them. these include:
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economics and Development Studies
• They are countries faced with complex social, political and economic problems
• Most commodity and resource markets (in these countries) are highly imperfect
• Consumers and producers have limited information
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economics and Development Studies
• Existence of multiple equilibria, rather than
single equilibrium, which mean prices do not
always equate demand and supply
• Prevalence of social, cultural and political norms
and attitudes
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economics and Development Studies
• As a result of the heterogeneity of the developing world, and the complexity of the development process, development studies uses an eclectic approach, combining relevant concepts and theories from traditional economic analysis with new models and broader multidisciplinary approaches derived from studying the historical and contemporary development experience of Africa, Asia, and Latin America.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economies as Social Systems: Going Beyond Simple Economics
• So far we have the need for economics to embrace a broader perspective on development.
• This raises the need for issues concerning the economic development of countries to be analysed within the context of the overall social system of a country, and indeed within an international, global context as well.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economies as Social Systems: Going
Beyond Simple Economics
• By “social system,” we mean the interdependent
relationships between economic and
noneconomic factors.
• Social systems include the following:
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economies as Social Systems: Going Beyond
Simple Economics
• Attitudes toward life, work, and authority;
• Public and private bureaucratic, legal, and
administrative structures;
• Patterns of kinship and religion;
• Cultural traditions;
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economies as Social Systems: Going Beyond Simple Economics
• Systems of land tenure;
• The authority and integrity of government agencies;
• The degree of popular participation in development decisions and activities; and
• The flexibility or rigidity of economic and social classes
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economies as Social Systems: Going Beyond Simple Economics
• Additionally, there is the need to expand the context outside that of the country, to include the international/regional context:
• That is, the organization and rules of conduct of the global economy: how they were formulated, who controls them, and who benefits most from them.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Economies as Social Systems: Going Beyond Simple Economics
• This situation is especially true today with the spread of market economies (neoliberal economics) and the fast pace face of globalization (involving trade, finance, corporate boundaries, technology, intellectual property, and labour migration).
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
From MDGs to SDGs
• The Millennium Development Goals (MDGs) were eight goals adopted by the United Nations in 2000 to be achieved by 2015. They were:
– Eradicate extreme poverty and hunger
– Achieve universal primary education
– Promote gender equality and empower women
– Reduce child mortality
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
From MDGs to SDGs
– Improve maternal health
– Combat HIV/AIDS, malaria and other diseases
– Ensure environmental sustainability
– Develop a global partnership for development
• As the end-period set for the MDGs approached and progress had been mixed, a new set of goals were proposed, the Sustainable Development Goals (SDGs).
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
From MDGs to SDGs
• The SDGs has 17 goals relating to the future of international development. These are:
–End poverty in all its forms everywhere
–End hunger, achieve food security and improved nutrition and promote sustainable agriculture
–Ensure healthy lives and promote well-being for all at all ages
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
From MDGs to SDGs
– Ensure inclusive and equitable quality education and promote lifelong learning opportunities for all
– Achieve gender equality and empower all women and girls
– Ensure availability and sustainable management of water and sanitation for all
– Ensure access to affordable, reliable, sustainable and modern energy for all
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
From MDGs to SDGs
– Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
– Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation
– Reduce inequality within and among countries
– Make cities and human settlements inclusive, safe, resilient and sustainable
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
From MDGs to SDGs
–Ensure sustainable consumption and
production pattern
–Take urgent action to combat climate change
and its impacts
–Conserve and sustainably use the oceans, seas
and marine resources for sustainable
developmentECON 317: Economic Growth & Devt 1
Dr. Emmanuel Codjoe
Introduction to Economic Development
From MDGs to SDGs
– Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss
– Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels
– Strengthen the means of implementation and revitalize the global partnership for sustainable development
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining the Developing World
• The term developing world is used to describe a group of diverse countries not part of the group of countries variously termed, “North”, “rich countries”, “industrialised countries”.
• Thus, whilst it is debateable to lump together dissimilar countries as one group – developing countries, most international institutions use the term to categorise this group of countries.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining the Developing World
• The most common way to define the developing world is by per capita income; an approach used by several international agencies, such as the OECD, World Bank, UN, IMF, etc.
• The real income per capita adjusted for purchasing power is the measured used by the World Bank for classifying countries into different states of development.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining the Developing World
• The World Bank converts all nations’ national income into Gross National Income in US$, adjusted for Purchasing Power Parity, to allow for comparison across countries.
• Based on these computations, the World Bank classifies countries according to the following criteria:
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining the Developing World
• Low-income economies – GNI per capita of $1,045 or less in 2013
• Middle-income economies – GNI per capita of more than $1,045 but less than $12,746 in 2013
• High-income economies – GNI per capita of more than $12,746 in 2013
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining the Developing World
• Lower-middle income and Upper-middle income are separated by a GNI per capita of $4,125
• With a number of important exceptions, the developing world consists of countries with low-, lower-middle or upper-middle incomes.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining the Developing World
• Lower-middle income and Upper-middle income are separated by a GNI per capita of $4,125
• With a number of important exceptions, the developing world consists of countries with low-, lower-middle or upper-middle incomes.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining the Developing World
• An evolution of terms: In the past, there was a distinction between the Third World, which consisted of mainly very poor countries, and the First World, which consisted of countries in Western Europe, North America, Japan, Australia and New Zealand.
• The Third World was divided into five regions:
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining the Developing World
• These were:
–East Asia and the Pacific
– South Asia
–Middle East and North Africa
– Sub-Saharan Africa
– Latin America and the Caribbean
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining the Developing World
• The distinction of the world into First and Third World, implied a Second World, which referred to the group of countries that formed part of the Soviet Bloc (the Soviet Union and its allies in Eastern Europe).
• Other terminologies used by the United Nations include, “least developed countries”, ….
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic Development
Defining the Developing World
• … “small island developing states”, “landlocked
developing countries”.
• Unlike the World Bank and IMF, the United
Nations notes that “there is no commonly agreed
definition of developing countries”.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic DevelopmentClassifying Nations by GNI per capita
Defining the Developing World
• … “small island developing states”, “landlocked
developing countries”.
• Unlike the World Bank and IMF, the United
Nations notes that “there is no commonly agreed
definition of developing countries”.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe
Introduction to Economic DevelopmentClassifying Nations by Human Development Index
Defining the Developing World
• … “small island developing states”, “landlocked
developing countries”.
• Unlike the World Bank and IMF, the United
Nations notes that “there is no commonly agreed
definition of developing countries”.
ECON 317: Economic Growth & Devt 1 Dr. Emmanuel Codjoe