Human Development

Lecture 10
Prepared by,
Shashish Shami Kamal
Lecturer
Department of Development Studies
Bangladesh University of Professionals (BUP)

Prepared for,
Batch: DS-2016
Course Name: Human Development
Course Code: BDS-2418

Lecture Prepared by: Shashish Shami Kamal

Economic Growth

Lecture Prepared by: Shashish Shami Kamal

The relationship between economic growth
and human flourishing

Lecture Prepared by: Shashish Shami Kamal

Ranis, Stewart, and Ramirez (2000)
‘Economic growth and human development’
World Development

Lecture Prepared by: Shashish Shami Kamal

 Saving

Lecture Prepared by: Shashish Shami Kamal

 Four Influencing Factors
Ranis, Stewart, and Ramirez (2000) highlight four factors that influence
the extent to which economic growth contributes to human flourishing

Lecture Prepared by: Shashish Shami Kamal

First Factor
• There is household activity, especially the households’ propensity to
spend their after-tax income on items that contribute most directly to
the promotion of human flourishing, such as food, potable water,
education and health.
• The extent to which households spend on these goods depends on
who controls the expenditures in the household
• Greater female control over household income
• Greater female education often mean higher spending on such goods

Lecture Prepared by: Shashish Shami Kamal

Second Factor
• The extent to which economic growth increases the incomes of the
poor depends on income distribution in the country itself, and the
extent to which economic growth is capable of generating
employment for low-income groups and rural households.

Lecture Prepared by: Shashish Shami Kamal

Third Factor
• The level of government activity influences the translation of
economic growth into improved quality of life. This depends on-
1. The public expenditure ratio
2. The social spending allocation ratio (the proportion of total government
expenditures going to the education and health sectors)
3. The social priority ratio (the proportion of total social expenditures going
into primary areas, such as basic education).
• These three ratios are determined especially by-
• The tax capacity of the government
• The size of military expenditures
• Corruption
• Level of Decentralization in the government

Lecture Prepared by: Shashish Shami Kamal

 Government Expenditure Trend in Bangladesh (FY2008-FY2016)

15.8 16 15.8
15.3 15.3
14.9
13.9 14.2
13.4

10
9.5
9.1
8.6 8.4 8.7 8.6 8.4 8.7

5.3
4.9
4.4 4.4
3.6 3.3 3.6 3.9 3.9

Total Expenditure Revenue Expenditure ADP

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Source: Prepared by Shashish Shami Kamal based on MoF

Lecture Prepared by: Shashish Shami Kamal

Fourth Factor
• NGOs can be an important factor in promoting human flourishing.

Lecture Prepared by: Shashish Shami Kamal

But the relationship between economic growth and human flourishing
is not only uni-directional: it goes in both directions

Lecture Prepared by: Shashish Shami Kamal

But the relationship between economic growth and human flourishing
is not only uni-directional: it goes in both directions
[Ranis, Stewart, and Ramirez (2000) highlight Six Mechanisms through
which improvements in human flourishing contribute to greater
economic growth]

Lecture Prepared by: Shashish Shami Kamal

Six Mechanisms
1. Health, primary and secondary education and nutrition raise the
productivity of rural and urban workers;
2. Secondary education facilitates the acquisition of skills and
managerial capacity;
3. Tertiary education supports the development of basic science, the
appropriate selection of technology imports, and the domestic
adaptation and development of technologies;

Lecture Prepared by: Shashish Shami Kamal

Six Mechanisms
4. Secondary and tertiary education represent critical elements in the
development of key institutions, such as government, the law and
the financial system;
5. A better educated workforce is more creative, leading to greater
technological innovation
6. A better educated female workforce leads to reduced fertility rates,
and hence higher economic growth per capita.

Lecture Prepared by: Shashish Shami Kamal

Investment and Education
Ranis et al (2000) however qualify the role of education in promoting
economic growth:
• For education to lead to economic growth, one needs a certain
quantity and quality of foreign and domestic investment so that
employment opportunities can be created.

Lecture Prepared by: Shashish Shami Kamal

Ranis’s Classification of Countries
Gathering evidence for 76 countries over 30 years (1960-1992), Ranis et al
(2000) classify country performance into four categories:
1. Virtuous Cycle: Human development enhances growth, which in turn
promotes human development, and so on.
2. Vicious Cycle: Poor performance on human development tends to lead to
poor growth performance, which in turn depresses human development
achievements and so on.
3. HD-lopsided: Lopsided with strong human development but weak
economic growth
4. EG-lopsided: Lopsided with strong economic growth but weak human
development

Lecture Prepared by: Shashish Shami Kamal

 The End

[Give Time for Term Paper Related Questions]

Lecture Prepared by: Shashish Shami Kamal