Development Economics:An Overview

based on Cypher and Dietz

The Process of Economic Development

Ch. 1

1990-2004 percent of population living on less than $1/day (Table 1.1, part 2)

1981 1987 1990 1993 1999 2004 Poverty Gap

East Asia&Pacific

57.7 28.0 29.6 24.9 15.7 9.0

China 63.8 28.5 33.0 28.4 17.8 12.5 2.1

Latin America and the Caribbean

9.7 10.9 11.3 11.3 10.5 8.6

Middle east and North Africa

5.1 3.2 2.3 1.6 2.6 1.5

South Asia 51.5 45.0 41.3 40.1 32.2 30.8

India 7.9

Sub-saharan Africa

41.6 46.8 44.6 44.0 45.7 41.1

Total 40.4 28.4 27.9 26.3 21.8 18.1

Poverty Statistics in TurkeyUNDP Report 2007

Poverty Statistics in TurkeyUNDP Report 2007

What is wrong with having a shortfall in income? i.e. with being poor?

Poverty is not only a shortfall in income in fact low incomes have some real consequences. Of the approx. 4.6 billion people in the less-developed countries,

• How many lacked access to improved water sources?• 968 million persons; • How many were without proper sanitation?• 2.4 million; • How many illiterate adults?• 854 million (64% of these were women); • How many infected with HIV/AIDS?• 34 million; • How many were dying annually from indoor air pollution (exposure to toxic fumes

from wood-burning cooking)?• 2.2 million;• How many children under the age of five were dying every year from preventable

illnesses?• 11 million (i.e. more than 35,000 deaths daily, more than 1400 children dying every

hour of the day. Mostly respiratory illnesses and diarrhoea.)

Table 1.2 Average income per capita and growth rates of per capita income

Income per capita

(GNI per capita)

Annual % change

(of GDP per capita)

2005 1980-90 1990-2000 2000-05

Less-developed world 1,742 1.03 12.14 3.89

Sub-saharan Africa 743 -1.04 -0.34 2.05

East Asia and Pacific 1,628 5.38 7.08 7.32

South Asia 693 3.37 3.21 4.71

Middle East and North Africa

2,223 -0.05 1.76 2.07

Latin America and the Caribbean

4,157 -0.87 1.62 1.13

Developed World 34,962 2.62 1.87 1.40

Source: World Bank, World Development Indicators, online.

Table 1.3 World income, world population and their distribution, 2001 Share of world’s Share of world’s

income, % population, % 1985 1995 2005

1985 1995 2005Less-developed economies 22.0 17.5 22.0 81.7 83.2 84.1

    East Asia and Pacific 4.1 4.4 6.8 30.5 30.2 29.2

    Latin America and Caribbean 5.4 5.8 5.5 8.2 8.4 8.5    Middle East and N. Africa 2.5 1.2 1.6 4.1 4.5 4.7

    South Asia 2.4 1.6 2.3 20.8 21.822.8 Sub-Saharan Africa 1.6 1.0 1.3 9.3 10.411.7

Developed economies 78.1 82.5 78.1 18.3 16.815.9  Note:  Missing data for the Europe and Central Asia mean that subtotals do not add to totals for the less-developed economies. The income shares are computed as a per cent of total world Gross Domestic Income.Source: World Bank, World Development Indicators On-line.

Is Development synonymous simply with Economic Growth?

Different Development Goals of Society • Rising income and standard of living• Equity in the distribution of income and wealth • Equality of opportunity• Political democracy and wide-spread participation• Expanded role for women, minorities and all social classes

in public life• Increased opportunities for education and self-

improvement• Expanded availability of and improvements in health care• Public and private safety nets to protect the vulnerable• A clean and healthy environment• Efficient, competent and fairly administered public sector• A reasonable degree of competition in the private sector

Structural Changes and Patterns characteristic of a successful

Development Process

• Growth of industrialization

• A decrease in the role of agriculture

• Changing trade patterns

• Increased application of human capital and knowledge to production

• Undertaking essential institutional change• institutions defined over a wide spectrum: financial institutions,

government and public bodies, civil society, basic values, and so on.

Potential Internal Barriers to Development

• inequalities in the existing distribution of income and wealth

• level and efficiency of infrastructure development• the role and level of development of financial

markets and financial intermediaries• an ineffective educational system• prevailing ideological concepts (religion, culture,

etc.)• the initial endowment of natural resources• the role of the state• the extent of political corruption and patronage

Potential External Barriers to Development

• multinational or transnational corporations that control national resources

• international division of labor and the pattern of international trade

• functioning of international institutions• influence of the geopolitical and strategic interests

of larger economic powers vis-a-vis smaller and weaker economic entities

• economic policies of more developed nations