Key Factors to Global Development Studies
All information in this summary was compiled from lectures at the University of Groningen and the
book ‘Economic Development’ by Todaro and Smith 12th Edition.
GDP per capita
A metric that breaks down a country’s economic output per person and is calculated by dividing the
GDP of a country by its population.
Problems with GDP per capita as an indicator of socio-economic development:
- Measurement issues, GDP measures are internationally harmonized but still suffer from
short comings.
- It does not account for inequality within countries.
- Socio-economic development is wider than income increases.
Amartya Sen’s Capability Approach
- Functioning as an achievement
- Capabilities as freedoms enjoyed in terms of functioning’s.
- Well-being in terms of being well and having freedoms of choice.
Human Development Index
- Health
- Education
- Income
This measures the national socioeconomic development, based on combining measures of
education, health and adjusted real income per capita. Each of these indexes are to the
route of 1/3.
Each individual index is calculated by
4 Approaches to Economic Development
1. Linear stages of growth model (all countries have to pass a series of successive stages of
economic growth)
2. Theories and patterns of structural changes (using modern economic theory in attempt to
portray the internal process of structural change that a ‘typical’ developing country must
undergo if it is to succeed in generating and sustaining economic growth)
3. International-dependance revolution (views underdevelopment in term of international and
domestic power relationships, institutional and structural economic rigidities and the
resulting proliferation of dual economies and dual societies both within and among the
nations of the world)
4. Neoclassical, free market counterrevolution (emphasizes the beneficial role of free market,
open economies, and the privatization of inefficient public enterprises) Failure to develop
from this point of view was because of too much government intervention and regulation of
the economy.
, Why Agriculture is Good for Development
- Three complimentary elements of an agriculture and employment-based strategy:
1. Accelerated output growth.
2. Rising domestic demand for agricultural output
3. Non-agricultural labor-intensive rural development activities that are supported
by the farming community.
The Role of Agriculture in Economic Growth
- Agricultural sector
o Food source
o Income source
- Direct link to other sectors
o Capital
o Labor
o Intermediate inputs
- Indirect links
o Demand for industrial products
o Source of foreign exchange
o Suppresses rising income inequality.
Why Industrialization is important for Development.
- Agricultural productivity is important for growth and poverty reduction in early phases.
- There needs to be a shift towards industry and services.
- Industry provides opportunities for productivity growth.
What do we think of as structural change?
- In agriculture
o Small scale, labor intensive
o Low labor productivity, unskilled
- In industry
o Large scale, capital intensive
o High labor productivity, skilled
Reasons for structural transformation
➔ Demand
o Changes in demand patterns due to different income elasticity of demand for
products
o Changes of composition of trade
➔ Supply
o Changes in composition of production factors (land, labor, capital, resources)
o Higher productivity = expansion of manufacturing sector
o Differential patterns of productivity growth across sectors
All information in this summary was compiled from lectures at the University of Groningen and the
book ‘Economic Development’ by Todaro and Smith 12th Edition.
GDP per capita
A metric that breaks down a country’s economic output per person and is calculated by dividing the
GDP of a country by its population.
Problems with GDP per capita as an indicator of socio-economic development:
- Measurement issues, GDP measures are internationally harmonized but still suffer from
short comings.
- It does not account for inequality within countries.
- Socio-economic development is wider than income increases.
Amartya Sen’s Capability Approach
- Functioning as an achievement
- Capabilities as freedoms enjoyed in terms of functioning’s.
- Well-being in terms of being well and having freedoms of choice.
Human Development Index
- Health
- Education
- Income
This measures the national socioeconomic development, based on combining measures of
education, health and adjusted real income per capita. Each of these indexes are to the
route of 1/3.
Each individual index is calculated by
4 Approaches to Economic Development
1. Linear stages of growth model (all countries have to pass a series of successive stages of
economic growth)
2. Theories and patterns of structural changes (using modern economic theory in attempt to
portray the internal process of structural change that a ‘typical’ developing country must
undergo if it is to succeed in generating and sustaining economic growth)
3. International-dependance revolution (views underdevelopment in term of international and
domestic power relationships, institutional and structural economic rigidities and the
resulting proliferation of dual economies and dual societies both within and among the
nations of the world)
4. Neoclassical, free market counterrevolution (emphasizes the beneficial role of free market,
open economies, and the privatization of inefficient public enterprises) Failure to develop
from this point of view was because of too much government intervention and regulation of
the economy.
, Why Agriculture is Good for Development
- Three complimentary elements of an agriculture and employment-based strategy:
1. Accelerated output growth.
2. Rising domestic demand for agricultural output
3. Non-agricultural labor-intensive rural development activities that are supported
by the farming community.
The Role of Agriculture in Economic Growth
- Agricultural sector
o Food source
o Income source
- Direct link to other sectors
o Capital
o Labor
o Intermediate inputs
- Indirect links
o Demand for industrial products
o Source of foreign exchange
o Suppresses rising income inequality.
Why Industrialization is important for Development.
- Agricultural productivity is important for growth and poverty reduction in early phases.
- There needs to be a shift towards industry and services.
- Industry provides opportunities for productivity growth.
What do we think of as structural change?
- In agriculture
o Small scale, labor intensive
o Low labor productivity, unskilled
- In industry
o Large scale, capital intensive
o High labor productivity, skilled
Reasons for structural transformation
➔ Demand
o Changes in demand patterns due to different income elasticity of demand for
products
o Changes of composition of trade
➔ Supply
o Changes in composition of production factors (land, labor, capital, resources)
o Higher productivity = expansion of manufacturing sector
o Differential patterns of productivity growth across sectors
