MODULE 2: DEVELOPMENT THEORY

DISCLAIMER: The information content provided in this course material is designed to provide
helpful information on the subjects discussed. Some information are compiled from different
materials and summarized from different books. Some information are based from contributors'
perspective and understanding. References are provided for informational purposes only and do not
constitute endorsement of websites or other sources. Readers should be aware that the
websites/electronic references listed in this course material may change. Hence, the contributors do
not claim any information presented in the materials and do not reflect their own work.

About the Instructor:

April Annie Joy L. Homoroc, MBA
College Professor- College of Accountancy, Business and Management

Contact Information:
Mobile number:
Email: edtianity@gmail.com/ alhomoroc@nu-baliwag.edu.ph
Social Media: Facebook/Messenger: April Homoroc

I. Pre-test / Activity:
One-Sentence Summary
On your OneNote, write a one-sentence summary (bullet points) of your key takeaways during the
introduction and overview of Economic Development.

II. Learning Outcomes

1. Appreciate the concept of output and improvement in the quality of life

III. Content:

1. Explanation of What Development Means

Because the term development may mean different things to different people, it is important
that we have some working definition or core perspective on its meaning. Without such a perspective
and some agreed measurement criteria, we would be unable to determine which country was actually
developing and which was not.

Traditional Economic Measures

In strictly economic terms, development has traditionally meant achieving sustained rates of
growth of income per capita to enable a nation to expand its output at a rate faster than the growth
rate of its population. Levels and rates of growth of “real” per capita gross national income (GNI)
(monetary growth of GNI per capita minus the rate of inflation) are then used to measure the overall
economic well-being of a population—how much of real goods and services is available to the
average citizen for consumption and investment.

Economic development in the past has also been typically seen in terms of the planned
alteration of the structure of production and employment so that agriculture’s share of both declines

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 admissions-nubaliwag@nu.edu.ph
and that of the manufacturing and service industries increases. Indeed, the emphasis is often on
increased output, measured by gross domestic product (GDP).

Income per capita is the total gross national income of a country divided by its total
population.

Gross national income (GNI) is the total domestic and foreign output claimed by residents of
a country. It comprises gross domestic product (GDP) plus factor incomes accruing to residents from
abroad, less the income earned in the domestic economy accruing to persons abroad.

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 admissions-nubaliwag@nu.edu.ph
 Gross domestic product (GDP) is the total final output of goods and services produced by the
country’s economy, within the country’s territory, by residents and nonresidents, regardless of its
allocation between domestic and foreign claims.

The New Economic View of Development

The experience of the first decades of post–World War II and postcolonial development in the
1950s, 1960s, and early 1970s, when many developing nations did reach their economic growth
targets but the levels of living of the masses of people remained for the most part unchanged, signaled
that something was very wrong with this narrow definition of development. In short, during the 1970s,
economic development came to be redefined in terms of the reduction or elimination of poverty,
inequality, and unemployment within the context of a growing economy. “Redistribution from
growth” became a common slogan.

Development must therefore be conceived of as a multidimensional process involving major

changes in social structures, popular attitudes, and national institutions, as well as the acceleration of
economic growth, the reduction of inequality, and the eradication of poverty. Development, in its
essence, must represent the whole gamut of change by which an entire social system, tuned to the
diverse basic needs and evolving aspirations of individuals and social groups within that system,
moves away from a condition of life widely perceived as unsatisfactory toward a situation or
condition of life regarded as materially and spiritually better.

2. Quality of Life
The general well-being of societies, including not only wealth and employment, but also the
environment, physical and mental health, education, recreation and leisure time, and social belonging.
Quality of life is a non-financial component associated with job and life satisfaction. When used in a
work-related way, qualify of life often refers to the time and ability to do the thing you enjoy.

Quality of Life Indicators

Measuring economic welfare is not an exact science. Often in economics, we focus on GDP
statistics (measuring national output). However, quality of life depends on many other factors apart
from just GDP.
• GDP – the total output of an economy. This is a guide to national output and influences the
level of consumption. Higher GDP enables a country to alleviate levels of absolute poverty.
• Distribution of Income in society. e.g. looking at how income is distributed. Some countries
have high GDP per capita, but some people still live in poverty.
• Employment / Unemployment. Unemployment is one of the main economic causes of poor
life changes. Also, quality of employment, e.g. widespread part-time/temporary contracts may
suggest underemployment in the economy.
• Life Expectancy. Dependent on health care standards, environmental factors and cultural
factors
• Education Standards. One simple measure is the rate of literacy in an economy. For example,
Sri Lanka has a higher rate of literacy than Saudi Arabia, despite a lower GDP per capita.
• Housing. The standard and quality of housing and related amenities. Also, include the rate of
homelessness.
• Air Pollution. The quality of air can influence the quality of life and also health issues.

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 admissions-nubaliwag@nu.edu.ph
 • Levels of Congestion and Transport. Congestion can lead to time lost sitting in traffic jams
as well as being frustrated. For example, average traffic speeds (11mph) in London (2010) are
similar to 100 years ago when we still used the horse and cart
• Environmental Standards. Quality and quantity of ‘green spaces’ where people can escape
pressures of cities, e.g. London does quite well on this measure.
• Wildlife Diversity. Protection of wildlife and areas of natural beauty important. e.g. a new
road may reduce congestion but damage areas of outstanding natural beauty.
• Access to clean drinking Water. Basic necessity is often taken for granted in West, a but, is
big issue in the developing world.
• Climate. Climate can make some areas inhospitable leading to defensive spending, e.g.
spending on air-conditioning or heating. Global Warming could tip the ecological balance in
some countries with fragile eco-balance.

3. The Three Objectives of Development

We may conclude that development is both a physical reality and a state of mind in which
society has, through some combination of social, economic, and institutional processes, secured the
means for obtaining a better life. Whatever the specific components of this better life, development
in all societies must have at least the following three objectives:

1. To increase the availability and widen the distribution of basic life-sustaining goods such as food,
shelter, health, and protection

2. To raise levels of living, including, in addition to higher incomes, the provision of more jobs,
better education, and greater attention to cultural and human values, all of which will serve not only
to enhance material wellbeing but also to generate greater individual and national self-esteem

3. To expand the range of economic and social choices available to individuals and nations by
freeing them from servitude and dependence, not only in relation to other people and nation-states,
but also to the forces of ignorance and human misery

IV. Activity
Identify the following statement in relation to quality of life indicator.
1. Global Warming could tip the ecological balance in some countries with
fragile eco-balance.
2. Part-time/temporary contracts
3. A new road may reduce congestion but damage areas of outstanding
natural beauty
4. Basic necessity is often taken for granted in West, a but, is big issue in the
developing world
5. The standard and quality of shelter and related amenities
6. Quality and quantity of ‘green spaces’
7. One simple measure is the rate of literacy in an economy
8. Some countries have high GDP per capita, but some people still live in
poverty.
9. Frustrations due to traffic jams and volume of vehicles on the road

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 admissions-nubaliwag@nu.edu.ph
 10. Dependent on health care standards, environmental factors and cultural
factors

V. Evaluation / Assessment

It’s A Match!
Select two (2) indicators of Quality of Life and connect your selected indicators to the Objectives of
Development. Justify your answer.

Rubric for grading:

Criteria Performance Indicators Points
Content Provided pieces of evidence, supporting details, and factual 7
scenarios
Grammar Used of correct grammar, punctuation, spelling and 1
capitalization
Organization of Ideas Expressed the points in clear and logical arrangement of 2
ideas in the paragraph
Total 10

VI. Other Reading Materials

Links
Pettinger, T., Quality of Life Indicators
https://www.economicshelp.org/blog/2445/economics/quality-of-life-indicators/
6 November 2017

Kagan, J., Quality of Life

https://www.investopedia.com/terms/q/quality-of-life.
4 August 2019

VII. References
Dowling, J.M. and Valenzuela, R. (2012). Economic Development in Asia, Second Edition,
Singapore: Cengage Learning Asia Pte Ltd.
Todaro, M. & Smith, S. (2015). Economic Development, Twelfth Edition, USA: Pearson
Mutya, R. (2017). Economics with Agrarian Reform and Taxation, Anvil Publishing Inc.

SM Baliwag Complex, Dona Remedios Trinidad Highway, Brgy. Pagala, Baliwag, Bulacan
(+63) 927-533-0342 – (+63) 923-949-5265 admissions-nubaliwag@nu.edu.ph