Development Economics

Course Outline
1. Definition and Terminology
2. Development Goals and Policies
3. Indicators and Measures of Economic
Growth & Development.
4. Comparative Paths to Growth and
Development:National Case Analyses..
 Definition and Terminology

What is economics?
“Economics is a social science that studies the
maximization of scarce(limited) resources in order
to fulfill unlimited human wants & needs.”
Historical Antecedent
Economics as a social science evolved in the 18th
century(Industrial Revolution)
 Factors of Production
Factors of Production:
• Land – all gifts of nature, paid for by rent
• Labor – exertion of human efforts, salaries and
wages
• Capital – produced goods used to produce
more goods, interest and
• Entrepreneurship – ownership of enterprises
with profit
Some people are better off than others by virtue
of their ownership of production factors.
 The basic lesson of economics?
You can maximize limited resources to fulfill
human wants and needs!!
1. Land – if limited, go upwards(vertical
expansion), enhance fertility of soil, not to
abuse nature.
2. Labor – has 2 components: raw labor & human
capital. Raw labor – usage of native strength.
Human capital – enhancement of the value of
labor via formal, non-formal and informal
education.
3. Capital – differentiated production modes
like production outsourcing of Apple
products to China(notice the label, designed
in California, made in China?). or Nike shoes
made in a South American country like Peru
or Under-Armour shirts made in the
Philippines?
4. Entrepreneur – the oft unrecognized
creativity of our business owners hatching
novel business models or products!!(the case
of Cebu-Pacific or SMC branching out to
infrastructure?
 Channels to human capital
enhancement
1. Formal education – structured, graded e.g.,
from elementary to secondary to collegiate to
graduate schooling to post graduate
studies (Knowledge, skills and values).
2. Non-formal education – via formal schooling,
apprenticeship or OJT, all geared toward
competency development(Skills oriented)
3. Informal education – via vicarious
experiences, e.g. travels, meeting other people,
exposure to cultures, etc.
Accretion of income due to human
capital formation
Now you know!
Why education is given a premium by all
governments? – biggest earner of foreign exchange
for RP? – OFW
2022 National Budget of PhP 5.024 T:
Education gets 774B 15.40% of total
DPWH 686 13.65
DILG 250.4 4.98
DOH 242 4.81
DSWD 191.4 3.81
DoTr 151.3 3.01
DA/NIA 103.5 2.06
-The budget allocation shows the priorities of a
government.
-and even families!! - because it may be the only
way out of poverty for many!!!
-Why? Because of the desire to provide for a “better
quality of life” for all!
-All embracing terms of growth and
development
-What is growth? Growth is a concept synonymous to
“enlargement”, “increase” & “expansion” - all implying
quantitative increases, as in the case of an increase in
salary. However growth does not always imply an
improvement in the quality of life, as in the case of a
tumor growing inside a human body, there is growth but
no improvement in life’s quality. Remember, not all forms
of growth is desirable.
• Economic Growth – implies an enlargement,
increase, an expansion of economic welfare of
an individual, a community or a country.
What may indicate economic growth on the
level of the individual? An increase in his
income for one, availability of motor vehicles
for family mobility or the ownership of a
house to ensure comfort for the family. For
the community – the availability of roads and
bridges to enhance community mobility, the
availability of health services given by clinics
and hospitals.
• In the national level, how is economic growth measured? It is
measured by several means – the most popular being the “Per
Capita Gross National Product”. For a better understanding, let us
understand the concept of Gross National Product(GNP) first.
• GNP represents the final value of all goods and services produced
within the geographical boundaries of a country within a particular
period of time. In other words, it is the aggregate(combined)
amount of all goods and services produced by all residents in a
country within a particular period of time(usually a year). Let us
look at a hypothetical case. Republic of Sensewal has 5 residents
only, each one earning a certain amount.

Mr. Yoso - PhP 10,000,000.00

Ms. Malou Sog - 372,000.00
Tio Paeng Maliksi - 10,000.00
Neneng Co - 632,000.00
Inno Besyon - 233,000.00
__________________
PhP 11,247,000.00
If one is asked what is the GNP of the Republic of
Sensewal, then you can say that it is the total
production of all its residents which, in this case, is
PhP 11.247M. The next question that comes in is,
how does R.S. compare to say Japan or US in terms
of the quality of live of their people. Then
economists usually divide the GNP by the total
number of residents 11.247M/5 = PhP 2.249M, this
is the per capita GNP. It shows the average
productive capacity of each citizen in a country.
Would this mean that all 5 residents earn 2.249M in
a year? No, but it is the average earning for the 5.
Do we have empirical (actual) data on the per capita
GNP of Filipinos to show our comparative
productivity with other countries? Meron, ito:
Rank Country Value Year
(in $US)

1 Liechtenstein 116,430.00 2009

2 Switzerland 84,410.00 2018
3 Norway 80,610.00 2018
4 Macao SAR, China 79,110.00 2018
5 Luxembourg 70,870.00 2018
6 Iceland 67,960.00 2018
7 United States 63,080.00 2018
8 Ireland 61,390.00 2018
9 Qatar 61,150.00 2018
10 Denmark 60,140.00 2018
111 Tonga 4,300.00 2018
112 Armenia 4,230.00 2018
113 Jordan 4,200.00 2018
114 Sri Lanka 4,060.00 2018
115 Azerbaijan 4,050.00 2018
116 Samoa 4,020.00 2018
117 Eswatini 3,930.00 2018
118 Algeria 3,920.00 2017
119 Indonesia 3,840.00 2018
120 Philippines 3,830.00 2018
181 Liberia 610.00 2018
182 Afghanistan 550.00 2018
183 Madagascar 510.00 2018
184Central African Republic 490.00 2018
185 Dem. Rep. Congo 490.00 2018
186 Sierra Leone 490.00 2018
187 Mozambique 460.00 2018
188 Niger 390.00 2018
189 Malawi 360.00 2018
190 Burundi 280.00 2018
191 Somalia 130.00 1990
• What is meant by these figures? In a ranking of
191 countries, our country, the Philippines is
ranked 120th – not bad, right? - but not good too!
Imagine, the number #1 country in the list –
Liechtenstein(a principality in Western Europe),
recorded a per capita GNP of $US116,430 or
roughly the equivalent of PhP 5,821,500 and the
Philippines, #120 with $US 3,830 or the equivalent
of PhP 191,500.
• From the example given above, the Philippines
compare poorly with other countries in the world
but, it could have been worse. Look, the 191th
country in the list, Somalia, in sub-saharan Africa
has a comparable figure of only $US 130
equivalent to PhP 6,500, not bad eh?
• This is just one of the many measures of
economic growth and development and it is not
certainly the most reliable. But for lack of actual
data, it is used to indicate the comparative
position of a country in a development scale. It
can show policy and decision makers the
potential for a country to still grow and develop.
In this context,the Philippines still has plenty of
room to improve, to grow and to develop. This is
the subject matter of this course – how to bring
the Philippines to #119, 118, 50th, 20th etc.
• If the Philippine government can “grow” the
economy into a higher level – up the comparative
scale, would this mean the Philippines is
developing? Yes and No. Yes, because incomes of
Filipinos would be growing and No, if the income
is concentrated in only a few individuals in the
economy as in the example cited in slide 11
where the high productive capacity of the 5
residents is concentrated only on one individual.
There is growth but not development why,
because there is no equality, the benefits of
growth is not shared by all – the ideal of
development. Now you know!
In this context, Growth is a pre-requisite for
Development. Growth implies numerical increases
in tangible measures of material welfare as increase
in income. However, if it happens that together with
an increase an income, there are also increases in
prices, the latter cancels out the positive
contribution of the former. It is growth but not
indicative of development. An increase in income
without any corresponding increases in prices would
truly improve the quality of life of people for they
can now buy more goods to satisfy their needs and
wants. Development therefore implies quantitative
and qualitative improvements in human welfare.
Growth implies only quantitative increases,
development both quantity & quality!!