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Economic Growth is a narrower concept than economic development.It is an increase in a country's real level of national output which can be caused by an increase in the quality of resources (by education etc.), increase in the quantity of resources & improvements in technology or in another way an increase in the value of goods and services produced by every sector of the economy. Economic Growth can be measured by an increase in a country's GDP (gross domestic product). Economic development is a normative concept i.e. it applies in the context of people's sense of morality (right and wrong, good and bad). The definition of economic development given by Michael Todaro is an increase in living standards, improvement in self-esteem needs and freedom from oppression as well as a greater choice. The most accurate method of measuring development is the Human Development Index which takes into account the literacy rates & life expectancy which affect productivity and could lead to Economic Growth. It also leads to the creation of more opportunities in the sectors of education, healthcare, employment and the conservation of the environment.It implies an increase in the per capita income of every citizen. Economic Growth does not take into account the size of the informal economy. The informal economy is also known as the black economy which is unrecorded economic activity. Development alleviates people from low standards of living into proper employment with suitable shelter. Economic Growth does not take into account the depletion of natural resources which might lead to pollution, congestion &

disease. Development however is concerned with sustainability which means meeting the needs of the present without compromising future needs. These environmental effects are becoming more of a problem for Governments now that the pressure has increased on them due to Global warming. Economic growth is a necessary but not sufficient condition of economic development.

Economic Development Scope: Concerned with structural changes in the economy Development relates to growth ofhuman capital indexes, a decrease in inequality figures, and structural changes that improve the general

Economic Growth

Growth is concerned with increases in the economy's output Growth relates to a gradual increase in one of the components of Gross Domestic Product: consumption, government spending, investment, net exports


population's quality of life

Economic Development Implication: It implies changes in income,saving and investment along with progressive changes in socioeconomic structure of country(institutional and technological changes) Qualitative.HDI (Human Development Index), genderrelated index (GDI), Human poverty index (HPI), infant mortality, literacy rate etc. Brings qualitative and quantitative changes in the economy Normative concept

Economic Growth

It refers to an increase in the real output of goods and services in the country like increase the income in savings,in investment etc.


Quantitative. Increase in real GDP. Shown by PPF.


Brings quantitative changes in the economy


Narrower concept than economic development

Economic Development Relevance: Economic development is more relevant to measure progress and quality of life in developing nations.

Economic Growth

Economic growth is a more relevant metric for progress in developed countries. But it's widely used in all countries because growth is a necessary condition for development.


This chapter reviews the literature that tries to explain the disparity and variation of GDP per worker and GDP per capita across countries and across time. There are many potential explanations for the different patterns of development across countries, including differences in luck, raw materials, geography, preferences, and economic policies. We focus on differences in economic policies and ask to what extent can differences in policies across countries account for the observed variability in income levels and their growth rates. We review estimates for a wide range of policy variables.. In this chapter, we review the ongoing debates of the literature and the progress that has been made thus far. Gross domestic product (GDP)per worker of rich countries like the united states is about 30 times that of poor countries like Ethiopia.The fastest growing countries grow

at 9 percent .Over the the postwar period, there is actually no correlation between income levels and subsequent growth rates and growth rates show very little persistance.

INCOME AND WELFARE There is a big relationship between cross-country income differences because high income levels reflect high standards of living .Having insufficient money to lead a healthy life is a highly significant cause of health inequalities, there is a clear relationship between wealth and health - the wealthier you are the heathier you are likely to be. The relationship between socioeconomic status and disability free life expectancy, for instance, follows a clear gradient. Wages, taxation, and benefits (in countries with welfare states), all have an effect on individual income and welfare and should be seen as important health policies. In the Marmot Review, it was recommended that the UK government review and establish systems of taxation, benefits, pensions and tax credits to provide minimum income for healthy living for people of all ages. In a global setting, providing a minimum income and financial support for all people, but particularly those who are disadvantaged or struggling, is also very important. The reports below discuss these issues and provide examples of programmes that have sought to analyse the relationship between income, welfare systems and health and recommend

ways of reducing health inequalities through financial and welfare policies Using different estimation models, we find a world in which the top 20 percent of the population enjoys more than 70 percent of total income, contrasted by two paltry percentage points for those in the bottom quintile in 2007 under PPP-adjusted exchange rates; using PPP exchange rates, the richest population quintile gets 83 percent of global income with just a single percentage point for those in the poorest quintile. While there is evidence of progress, it is too slow; we estimate that it would take more than 800 years for the bottom billion to achieve ten percent of global income under the current rate of change. Also disturbing is the prevalence of children and youth among the poorest income quintiles, as approximately 50 percent are below the $2/day international poverty line. Middle-income countries appear the most unequal. Gini index trends show that Eastern Europe/former Soviet Union and Asia had the largest increases between 1990 and 2008. Latin America remains the region with the highest level of income inequality, although the region is marked by significant improvement since 2000. Low-income countries show mixed results; Sub-Saharan Africa is highly unequal but appears to have reduced its Gini index by almost five points, on average, since 1990. Overall, the extreme inequality in the distribution of the worlds income should make us question the current development model (development for whom?), which has accrued mostly to the wealthiest billion. Not only does inequality slow economic growth, but it results in health and social problems and generates political instability. Inequality is dysfunctional, and there is a grave need to place equity at the center of the

development agenda. As an alternative, the paper summarizes the United Nations development agenda, which aims to strike the right balance between growth and equitable development progress