Economic Development: A Global Perspective
Chapter 1
Introducing Economic Development: A Global
Perspective
Introduction
• Two Contrasting Images:
◦ Misery: Highlight the challenges faced by the developing world -
poverty, unsanitary conditions, overcrowding. Visuals: Images of rural
Africa or South Asian slums.
◦ Dynamism: Showcase the rapid economic growth in regions like
coastal China. Visuals: Images of modern infrastructure and bustling
cities in China.
• Key Takeaway: Economic development is leading to significant, albeit
uneven, improvements in living conditions globally.
• Data Point: Economic development has lifted millions out of poverty, but
progress remains uneven.
The Big Questions of Development Economics
• Central Theme: Why does such vast disparity exist in living standards across different countries
and regions?
• Specific Questions:
◦ Income and wealth disparities: Why is output per worker many times higher in some countries
than others?
◦ Differences in health, nutrition, education, freedom, environmental quality, etc.
◦ Variations in labor markets and job security: Why do workers in some countries have secure
formal jobs while others have informal, insecure work?
◦ Population growth rates: Why are populations growing rapidly in some countries and shrinking
in others?
◦ Efficiency and effectiveness of public services: Why are public services inefficient and corrupt
in some places and effective in others?
◦ Progress (or lack thereof) in different countries: Why have some formerly poor countries made
so much progress, and others so little?
• The Crux: Understanding these disparities is the core of development economics.
How Living Levels Differ Around the World
• Four Stylized Strata: Briefly describe the four 'strata' of living standards, supported by images and data:
◦ Stratum 1: Extreme Poverty
▪ Subsistence living, lack of basic necessities, multidimensional deprivations.
▪ Data: 768.5 million people live below the extreme poverty line of $1.90/day (2017).
▪ 1.3 billion people live with acute deprivations (2018).
◦ Stratum 2:
▪ Informal employment, basic amenities, some access to improved energy and water sources.
▪ Data: Close to 3 billion people live in this stratum, with an average income of $3.80/day.
◦ Stratum 3:
▪ Urban living, unstable jobs, access to more consumer goods, some secondary education
▪ Data: Over 2 billion people live in this stratum, with an average income of $15/day
◦ Stratum 4: Rich
▪ Formal jobs, comfortable housing, access to quality education and healthcare, various
consumer goods
▪ Data: Close to 1 billion people live in this stratum, with an average income of $75/day in
developed countries.
•
Country Classification by Income
• World Bank Classification:
◦ High-Income Countries (HICs): Gross National Income (GNI) per capita of at least
$12,056 (16% of world population)
◦ Upper-Middle-Income Countries (UMCs): GNI per capita between $3,896 and
$12,055
◦ Lower-Middle-Income Countries (LMCs): GNI per capita between $996 and
$3,895 (60% of world population)
◦ Low-Income Countries (LICs): GNI per capita below $996 (10% of world
population)
• Important Notes:
◦ Significant progress in many LMCs and UMCs, especially China and India. The
shift of countries from LIC to MIC categories.
◦ Income inequality exists within all classifications.
◦ Income alone is not a sufficient measure of well-being
Beyond Income: The Human Development Index
(HDI)
• UNDP's HDI: Incorporates health (life expectancy) and education (years of schooling) alongside income to
assess a country's development
• HDI Classifications and Regional Trends:
◦ Very High: OECD countries
◦ High: Latin America and East Asia
◦ Medium: South Asia and Arab States
◦ Low: Sub-Saharan Africa
• Key Point: Access to health and education is also unevenly distributed within countries
• Core Themes:
◦ Understanding the reasons behind rapid growth in some formerly poor countries (e.g., China)
◦ Analyzing why other countries continue to struggle with poverty and deprivation
◦ Exploring strategies for improving development outcomes at all levels
• Final Thought: Country rankings can vary significantly depending on the chosen metric (income vs. HDI).
Different metrics offer different perspectives on development progress
PART2: Economics and Development Studies: A Broader
Perspective
• Development Economics: Define development
economics as the study of how economies transition from
stagnation to growth, addressing poverty and improving
living standards.
• Multifaceted Discipline: Emphasize that development
economics encompasses various research areas, including
political economy, institutional economics, behavioral
economics, and experimental economics. It also connects
with other subfields of economics and social sciences.
Scope of Development Economics
• Beyond Traditional Economics: Development economics goes
beyond efficient resource allocation and growth. It focuses on
economic, social, political, and institutional mechanisms to
achieve rapid and large-scale improvements in living standards.
• Challenges in Developing Countries: Highlight the difficulties
faced in developing countries, including imperfect markets,
limited information, structural changes, and potential for multiple
equilibria.
• Importance of Non-Economic Factors: Stress that economic
calculations are often influenced by political, social, and cultural
priorities. Family, clan, religious, or tribal considerations can be
as important as self-interest.
Eclectic Approach
• Addressing Complexities: Development economics employs
an eclectic approach, combining traditional economic analysis
with new models and multidisciplinary insights.
• Historicaland Contemporary Experiences: Development
economics draws from the historical and contemporary
experiences of countries worldwide to understand and address
development challenges.
• Dynamic Field: Emphasize that development economics is a
constantly evolving field with new theories and data emerging,
challenging traditional viewpoints.
Central Role of Women
• Women's Crucial Role: Women play a central role in
development. They are often poorer, more deprived in health
and education, and have fewer freedoms than men.
• Breaking the Cycle of Poverty: Women's empowerment and
investment in their well-being are essential for breaking the
intergenerational transmission of poverty.
• Mothers' Impact: Studies show that mothers prioritize their
children's well-being, spending a higher proportion of income
on their health and education.
• Key Takeaway: Empowering and investing in women is crucial
for achieving development goals.
The Meaning of Development: Amartya Sen’s
“Capability” Approach
• Beyond Income and Wealth: Development is not just about material possessions but also about
what people can be and do.
• Amartya Sen's Perspective:
◦ "Capability to function" is central to well-being.
◦ Income and commodities are merely instruments for achieving human welfare and freedom.
• Functionings:
◦ Definition: What a person does (or can do) with the commodities they possess or control.
◦ Examples: Being healthy, well-nourished, educated, mobile, having self-esteem, participating in
the community.
◦ Emphasis on Use, Not Just Availability: It's not just about having things, but about what one can
do with them.
◦ Freedom of Choice: A central aspect of well-being is the ability to make choices and control one's
own life.
• Five Sources of Disparity:
◦ Personal Heterogeneities: Disability, illness, age, gender.
◦ Environmental Diversities: Climate, pollution, disease prevalence.
◦ Variations in Social Climate: Crime, violence, social capital.
◦ Distribution within the Family: Unequal access to resources based on gender or other factors.
◦ Differences in Relational Perspectives: Social norms and conventions influencing the value of
goods.
Amartya Sen’s “Capability” Approach
• Capabilities:
◦ Definition: The freedom to choose different functionings based on personal features and command
over commodities.
◦ Importance of Health and Education: Converting commodities into functionings often requires
health and education, enabling people to appreciate the richness of human life.
◦ "Growth without Development": Countries with high incomes but poor health and education
standards highlight the limitations of focusing solely on economic growth.
• Sen's View of Well-being:
◦ Being well in the basic sense (healthy, nourished, clothed, literate, etc.).
◦ Being able to participate in the community, be mobile, secure, and have freedom of choice.
• Three Objectives of Development:
◦ Increasing the availability and distribution of essential goods.
◦ Raising living standards and enhancing material well-being and self-esteem.
◦ Expanding economic and social choices, freeing people from servitude, dependence, and misery.
• Key Takeaway: Sen's capability approach provides a broader and more nuanced understanding of
development, emphasizing human agency, freedom, and the multidimensional nature of well-being. It
highlights the importance of going beyond income and consumption to focus on expanding people's
capabilities to lead fulfilling lives.
Happiness & Development
• Happiness as a Functioning: Happiness is part of human well-being
and can expand an individual's capabilities.
• Relationship between Income and Happiness:
◦ Happiness tends to increase with income, but at a decreasing rate.
◦ Beyond a certain income level, happiness plateaus.
◦ Other factors like employment, family relationships, and social trust
also influence happiness.
Sustainable Development Goals (SDGs)
• 17 Goals for 2030: The UN adopted 17 SDGs in 2015 to end poverty, improve the quality of life, and ensure a
healthy environment.
• Key Targets:
◦ No poverty
◦ Zero hunger
◦ Good health and well-being
◦ Quality education
◦ Gender equality
◦ Clean water and sanitation
◦ Affordable and clean energy
◦ Inclusive and sustainable economic growth
◦ Infrastructure and inclusive industrialization
◦ Reducing Inequality
◦ Sustainable Consumption and Production
◦ Combat Climate Change
◦ Sustainable Ecosystem: Forest, Sea, Biodiversity
◦ Peaceful and Inclusive Society
◦ Global Partnership
• Three Principles:
◦ Universality: Applies to all nations
◦ Integration: Goals must be achieved together, considering their interrelationships
◦ Transformation: Piecemeal steps are insufficient; systemic change is needed.
Conclusion
• Development Economics' Broad Scope: Development
economics is a multifaceted discipline that goes beyond
traditional economic analysis.
• Focus on Human Well-being: The capability approach
emphasizes the importance of expanding people's freedoms and
choices.
• Happiness and SDGs: While happiness is part of well-being, the
SDGs provide a comprehensive framework for achieving
sustainable development.
• Call to Action: Development economics plays a vital role in
understanding and addressing global challenges to improve the
lives of people worldwide.
