Chapter One

1. Introduction
1.1. Definition of development geography
Development geography is a branch of human geography which study about the change of living
standard and quality of life and the overall distribution of these changes within and across
countries. The pattern of development in space can vary largely across regions and countries.
Development in Geography view,
✓ Society: related to the development of the people of the place;
✓ Economy: related to the finances and wealth of the place;
✓ Environment: related to the quality of peoples, air, water, soil etc.
✓ Politics: related to the political systems & freedoms afforded by the place.

1.2. The concept of development

Development is not purely an economic phenomenon rather it is a multi-dimensional process. The
concept of development generally denotes some sort of an ‘advancement’ in the positive(desired)
direction. In the societal context, it refers to progressive transformation of certain aspect of a given
society.

Economic Development: Some economists have used the concepts of economic growth and
economic development interchangeably. The economic growth refers to the rise in per capita
income while economic development refers to the rise in income and changes in economic and
social structure. Thus, economic growth and the economic development refers to quantitative and
qualitative in nature respectively. The themes of economic development as pointed out by various
economists move around two central issues: Capital formation and technical progress. Technical
progress generally promotes capital formation and capital formation encourages technical
progress. Economic development of the society alone cannot raise the living standard of the society
as a whole. The process of distributive justice is quite significant for ensuring a fairly balanced
development of society. In this context state becomes an effective instrument of political
development and legitimizes economic and social institutions and their networks.

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Political Development: There is a high, positive relationship between socio-economic
development and democratic political development. The development of the society as a whole is
possible only when the society develops socially, economically and politically.

Social development: is a process which can be explained only with the help of economic and
political development. It is very much interrelated with these two. Social scientists have
enumerated the contents of development under various categories such as nutrition, shelter, health,
education, leisure and recreation, security and opulence level or under the categories like output
and income, conditions of production, levels of living, attitude towards life and work, institutions
and policies. To conclude, the term development is fraught with various conceptual and ideological
issues. Therefore, a review of wide range of theoretical positions existing till date is attempted.
Now it is evident that with the passage of time, concept and meaning of development has witnessed
a positional, theoretical and ideological shift from economic development to human development.

Human Development: According to Human Development Report 1990, human development is

a process of enlarging people’s choices. It is achieved by expansion of human capabilities and
functioning. The objective of human development is to create an atmosphere in which people can
expand their capabilities and opportunities for the present and future generations. At all the levels
of development the three essential capabilities of human development are leads to long and healthy
lives, to be knowledgeable and to have access to the resources needed for a decent standard of
living. The realm of human development goes further-essential areas of choice, highly valued by
people, range from political, economic and social opportunities for being creative and productive
to enjoy self-respect, empowerment and a sense of belonging to a community.

1.3. Indicators of development

❖ Some of major indicators of development are:
✓ Gross National Product (GNP)
✓ Gross Domestic Product (GDP)
✓ Human Development Index (HDI)
✓ Birth Rates

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 ✓ Death rates
✓ Infant mortality
✓ People per doctor
✓ Literacy rate
✓ Access to safe water
✓ Life expectancy

1. Gross National Product (GNP)

GNP refers to the total annual flow of goods and services in the economy of a nation in monetary
value. It is country's income including net income from foreign investments. This is a sum total,
and shows the overall size of the economy. Gross national income is a measure of the country’s
wealth. It includes income from within and outside of the state.

2. Gross Domestic Product (GDP)

GDP refers to the total value of goods and services produced within a country over a period of
time. It can be calculated by country's income minus foreign investments. It is the total value of
all goods and services produced within a country in a year, minus net income from investments in
other countries.

3. Human Development Index (HDI)

✓ It combined measure that considers life expectancy, GDP & education.
✓ HDI is a summary measure of three dimensions of human development:
• healthy, measured by Life expectancy
• Education, measured by Literacy rate
• standard of living, measured by GDP
It is most powerful individual indicator because it combines together economic and social
measures into one figure.

4. Birth Rates
It indicates the number of babies born per 1000 people per year. Poorest countries have high birth
rates & wealthier countries have lower births rates.

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5. Death rates
It indicates the number of people die per 1000 people per year. This is becoming less useful as a
measure of development, as death rates fall due to imported medicine and technology in many
poorer countries. It would be better to look at cause of death.

6. Infant mortality
It indicates number babies die per 1,000 live births per year. This is a useful measure as it indicates
the medical systems in the country and how well the most vulnerable in society, the very young,
are protected and looked after in their early years.

7. People per doctor

It indicates how many people are there for every doctor in a country. This indicates how much
money is available in a country for the training and recruitment of doctors, which has a direct
knock-on effect on the well-being and quality of life of a person.

8. Literacy rate
It indicates percentage of people in the country who able to read and write as adults. This is
another social measure, and helps to indicate the standard of education within a country or place.

9. Access to safe water

It indicates percentage of people who have access to sanitary and safe water that is free from
bacteria and parasites.

10. Life expectancy

It indicates average age of a person expect to live at birth. This is a very useful indicator as it
reveals how good food security, water quality, shelter and medical care are in a country.

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1.4. Growth and development
Growth and development are different terms. Growth refers to size or physical development.
Growth is a part of developmental process. Growth does not continue throughout life. It stops
when maturity has been attained. Growth is a measure of sustained increases in output (gross
domestic product). It is the rate of change in GDP of a country over a specified time period. It
helps to provide an indication of potential improvements in living standards and quality of life in
the future. Growth was necessary for economic development but was not sufficient. Economic
growth is a measure of the value of output of goods and services within a time period. Development
is a more general and envelop term than growth. Growth is a means to an end. In many countries
where high GDP growth rates have not translated in to improved living conditions for the poor,
this measure cannot be seen as a proxy of development. GDP by itself or growth does not reflect
welfare in the economy. Because the latter depends on up on other factors like leisure, health,
education, and the environment.

Development is a multidimensional process, one that changes the economy, polity and society of
the countries in which it occurs. Development required high rates of growth of per capita, GNP,
of production and of total factor productivity (especially labor productivity). It also required high
rate of structural transformation from agriculture to industry as well as high rates of social,
ideological, and political transformation (through modernization). This in turn involves increases
rationality, planning, equality, and improved institutions and attitudes. It also requires greater
international economic links through increased exports and greater international influence.
Development in its quantitative aspect is termed as growth. Development not includes growth but
also other aspects of improvements. The main difference between them is that growth is usually
quantitative whereas development is usually qualitative. Development is a measure of the welfare
of humans in a society. It is the overall changes in the life of individual. It continues throughout
life and is progressive. Development requires growth and structural change, some measures of
distributive equity, modernization in social and cultural attitudes, a degree of political
transformation and stability, an improvement in health and education so that population growth
stabilizes, and an increase in urban living and employment.

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1.5. Development and Underdevelopment
Development and Underdevelopment takes place when resources are used or not used in their full
socio-economic potential. Development occurs when there is:
1. high rates of growth of per capita GNP,
2. high rate of structural transformation from agriculture to industry

3. high rates of social and ideological transformation

4. greater international economic links through increased exports

5. relatively even distribution of income (improved income for all)

6. democracy (freedom), high degree of political transformation and stability

7. improvements in hygiene and sanitation

8. Equality of women

9. improvement in education so that population growth stabilizes, and an increase in urban living
and employment

As the result of local or regional development, world countries are classified as developed and

underdeveloped because of world consists of a group of rich nations and a large number of poor

nations. Development gap refers to the difference between the standards of living of richer and

poorer countries of the world.

What is underdevelopment?
Underdevelopment refers to the low level of development characterized by low real per capita
income, wide-spread poverty, lower level of literacy, low life expectancy and underutilization of
resources, disparity between their rich and poor populations, and an unhealthy balance of trade etc.
There are two main features of underdevelopment as follows:
A. Underdevelopment is a relative concept
B. Underdevelopment sustains absolute poverty.

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A. Under development is a relative Concept
Because it is the comparison of quality of life between the economies that differentiates them in
underdeveloped and developed.

B. Underdevelopment Sustains Absolute Poverty

Although, concept of underdevelopment is a relative concept but it sustains absolute poverty.
Absolute poverty refers to the state of poverty wherein the people fail to fulfil their basic needs.
Thus, underdevelopment and absolute poverty go together or underdevelopment sustains absolute
poverty.

1.6. Space and development

As economies grow and develop, the spatial distribution of the population, employment, and
production changes. Probably the most prominent feature of this spatial transformation is increased
urbanization. More than half of the world’s population now lives in cities. Urbanization is central
to the development process; and urban areas are major contributors to national economies and are
key nodes for global trade. Urbanization is growing in population size, in new ways of using
natural resources, and interaction between rural and urban economies.

On the other hand, nearly three-fourth of the poor in developing economies is in the rural areas.
Development will be very far from complete where rural areas remain socially and economically
marginalized. Majority of rural population is marginalized in terms of access to assets, institutions,
strategies to cope with shocks, and get out of the poverty trap. The employment and livelihood of
the majority of rural population mainly depends on agriculture and related activities. It is useful to
think of locations as a continuum: going from more rural (smaller and/or less dense) to more urban
(larger and/or denser). The distribution of the population and economic activity along that
continuum changes radically with development, and these changes mark how we view the overall
geography of a country.

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1.7. Classification of countries & their defining characteristics
Countries can be classified based on different criterion. The criterion for classifying world as
Developed & Underdeveloped are:
✓ Per capita income,
✓ Levels of living,
✓ Rate of population growth,
✓ Literacy rate,
✓ Level of technology,
✓ Level of democracy
✓ Dependence on backward agriculture,
✓ Level of unemployment, and so on.

Characteristics of Developed Countries

1. Has a high per capita income.
Developed countries have high per capita incomes each year.

2. Security is guaranteed.
The level of security of developed countries is more secure compared to developing countries.
With sophisticated technology, security facilities and weapons technology also develop for the
better.

3. Guaranteed health.
They are characterized by a variety of adequate health facilities, such as hospitals and medical staff
who are trained and reliable. Mortality rates in developed countries can be suppressed and the life
expectancy of the population can be high.

4. Low unemployment rate.

It is relatively small because every citizen can get a job.

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5. Mastering science and technology.
In daily lives developed countries have used sophisticated technology and modern tools to
facilitate their daily lives.

6. The level of exports is higher than imports.

The level of exports in developed countries is higher than the level of imports because of the
superior human resources and technology possessed. For Example, developed countries include
the United States, Germany, and Japan

Characteristics of underdeveloped Countries

1. Low per capita Income. Annual income in developing countries is not as high as in developed
countries due to the high unemployment rate.

2. Security Not Guaranteed. security in developing countries is still very minimal and
inappropriate. crime rates are relatively high.

3. Minimal Health Facilities. It is relatively minimal. The lack of proper health facilities makes
the population in developing countries more vulnerable to disease. Therefore, the mortality rate in
developing countries is also greater than the mortality rate in developed countries, which then
results in a low life expectancy.

4. Uncontrolled Population Development. Developing countries have a very large average

population because of uncontrolled population development. This is also a result of the lack of
education and health facilities.

5. The Unemployment Rate. In developing countries, the unemployment rate is still relatively
high because the available job vacancies are not evenly distributed. In addition, the level of uneven
education is also one of the factors causing the large unemployment rate.

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6. Imports are higher than exports.
Due to the low management of natural resources and human resources in developing countries,
developing countries more often buy goods from abroad. Examples of developing countries
include Indonesia, Brazil, and almost all African countries.

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 Chapter 2
Sustainable Development

2.1. Meaning of sustainable development

Sustainable development is the development that meets the needs of the present without
compromising the ability of future generations to meet their own needs” (World Commission on
Environment and Develoment, Bruntland Commission1987). It is also developing in a way that
benefits the widest possible range of sectors, across borders and even between generations.
Sustainable development is “Improving the quality of life while living within the earth’s carrying
capacities.” (World Conservation Union, UN Environment Programme and the World-Wide Fund
for Nature,1991). Therefore, the concept of sustainable development must be discussed within a
broad socio-economic as well as environmental context.

ECOLOGICAL DIMENSIONS
Supporting ecosystems are the sole sources of the necessities of life, including air, fresh water,
food, fuel and the materials that are necessary for clothing, housing cooking and heating. It is only
within ecosystems that is vital life-supporting processes like the regeneration of soil for food
cultivation and the global circulation of carbon, oxygen, water and other elements which are
necessary for life can take place.

ECONOMICS DIMENSIONS
Economic sustainability depends upon the relationship between benefits and costs. more precisely,
it requires that benefits exceed or balance costs. Economic sustainability is conditioned by the
availability and cost of inputs, both nature and man-made resources, the cost of extraction and
processing, and the demand for the product. All these factors are highly variable over time and
among the world regions.

TECHNOLOGICAL DIMENSIONS
We should continue to shift to technologies that are cleaner and more efficient, that minimize
consumption of energy and other natural resources especially the inventing new technologies, we

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must also preserve traditional ones that recycle or create few wastes or pollutants. The creation
and adoption of green technologies should be fostered by both government and industry through
legislation, education and enforcement.

SOCIAL DIMENSIONS
Social sustainability reflects the relationship between development and current social norms are
based on religion, tradition and custom, ethics, value systems, education, attitudes, individual and
group behavior that are not primarily motivated by economic considerations.

2.2. Principles of sustainable development

1.Respect and care for all forms of life.
2. Improve the quality of human life.
3. Conserve the earth's vitality and diversity.
4. Minimize the depletion of natural resources.
5. Change personal attitude & practices toward environment
6. Enable communities to care for their own environment.

Pillars of sustainable development

At the core of sustainable development there is the need to consider “three pillars” together:
society, the economy and the environment.

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2.3. Indicators of sustainable development
• Poverty
• Governance
• Health
• Natural hazards
• Economic development
• Global economic partnership
• Land Consumption and Production Pattern
• Education
• Demography
• Fresh water
• Bio diversity

2.4. Sustainable development goals

Goals of sustainable development are the following:
1. Demographic transition to stable population of low birth and death rates.
2. Energy transition to high efficiency in production and use, coupled with increasing reliance on
renewable resources.
3. Resource transition to confidence on nature’s ‘income’ without depleting its capitals.
4.Economic transition to sustainable and a broad sharing of the benefits of development.
5.Political transition to global negotiation grounded in complementary interests between north and
south & east and west.
6.Ethnic and spiritual transition to attitude that do not separate us from nature and each.

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 Chapter Three
Development Problems and Factors Affecting Development
3.1. Development Problems
Poverty, inequality, unemployment and inflation are the problems of development.

3.1.1. Poverty
Poverty is failure to attain a minimal living standard/level of a consumption and it is condition
below that of 'decent' living. Poverty can be seen from two perspectives: absolute and relative
poverty. Absolute poverty refers to the inability to meet minimum human needs such as food, cloth,
health care, shelters, etc. Generally, it is lack of basic necessity for survival. It can be eradicated.
Relative poverty refers to the inability to attain a given current standards of living as determined
by a government. It varies from country to country, sometimes within country. It may never be
eradicated.

Dimensions of poverty
• Lack of employment/low income
• exclusion from well-paid and secure jobs
• concentration in the informal sector
• lack of entrepreneurial skills

Lack of education/training
• low formal education
• weak training capacity of the formal sector

Housing poverty
• low-standard housing, overcrowding
• lack of infrastructure and services

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Health problems
• risky life
• no access to health care
• malnutrition

General lack of security

• no safety nets, protection against income crises
• crimes, drugs and alcohol abuse
• danger of exclusion

Defenselessness and lack of power

• lack of access to the legal system
• no chance of political participation

3.1.2. Inequality
Inequality occurs when individuals do not possess the same level of material wealth or overall
living economic conditions. Development theory has largely been concerned with inequalities in
standards of living, such as inequalities in income/wealth, education, health, and nutrition.
Inequality is one of the most important issues in development. Inequality may be among
individuals, groups, or nations, between classes of people within each country, between urban and
rural areas and between different parts of the world. Inequality which is among individuals (or
households) is most commonly measured within a particular country. There are two types of
inequality. They are vertical and horizontal inequality. Vertical inequality is the difference
between the rich and the poor. Horizontal inequality is an inequality in which peoples of similar
background, status, qualifications, etc. have difference in incomes. Income inequality increases
political tension, conflict and instability.

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 Wealth Incomes

Gender Physical
Inequality
Inequality environment

Assets
Opportunities
• Houses
• Cars • Access to education, work and
housing
• Consumer goods
• Roads • Discrimination on the basis of
race, ethnicity, Gender etc.
• Rails and etc.

3.1.3. Unemployment
Unemployment refers to a situation in which the workers who are capable of working and willing
to work do not get employment. Zero Unemployment is always impossible in a market economy.
An unemployment rate of about 4-6 percent is normal during full employment.

3.1.4. Inflation
In economics, inflation is a rise in the general level of prices of goods and services in an economy
over a period of time. Inflation is defined as a sustained increase in the price level or a fall in the
value of money. When the general price level rises, each unit of currency buys fewer goods and
services. When the level of currency of a country exceeds the levels of production, inflation occurs.
Value of money depreciates with the occurrence of inflation. Inflation leads to uncertainty about
the future purchasing power of money. It also discourages investment and saving. In addition to

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this, it leads to higher income tax rates. Inflation rate in the economy is higher than rates in other
countries; this will increase imports and reduces exports, lead to a deficit in the balance of trade.

3.2. Factors affecting development

Development is often the result of a combination of factors over a long period of time. Such factors
include Socio-Cultural, Historical, Environment, Economic and Political factors.

3.2.1. Socio-Cultural factors

Social norms and cultural beliefs strongly affect people's attitudes towards birth rate and family
size. These affect the level of education of the population, fertility rate and birth control, work
ethics, the provision and accessibility of healthcare services and medical facilities. In the least
developed countries, high birth rates and large family sizes are the norm. large population and a
high birth rate hinder development as resources have to be spent on providing health and medical
care, food and education for the population. With large families, children are less likely to have
educational opportunities, leading to low literacy rates in the country. A low literacy rate has a
negative impact on economic development. because people with little education face difficulties
in learning new skills and accepting modern technology. This leads to a shortage of skilled labor,
which hinders development of secondary and tertiary industries in the country.

3.2.2. Historical factors

Many least developed countries were former colonies and become dependent on their colonial
governments both economically and politically. For example, India, Malaysia and Singapore were
ruled by the British, Indonesia was a Dutch colony and Vietnam was under French rule. The
colonial governments did help to develop their colonies by building basic infrastructure like
railway system in India, rubber plantations & developing tin mines in Malaysia. However, helping
their colonies was not the main purpose of colonization. Colonial governments wanted natural
resources that could be used for their own industrialization and development. The outflow of
resources from the colonies resulted in these colonies unable to fully develop their own economies.

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3.2.3. Environmental factors
Natural disasters like hurricanes, droughts and earthquakes can strike any country regardless of its
level of development. However, responses to these natural disasters differ greatly between the
developed countries and least developed countries. The developed countries usually have the
resources and manpower to deal with natural disasters effectively and help those affected by it to
recover quickly. But least developed countries did not have the necessary manpower nor the
resources to deal with the disaster. So foreign aid is needed. Many least developed countries are
agricultural countries; natural disasters can destroy their harvest and income. Man-made disasters
can also hinder development. For instance, overgrazing, deforestation and poor land management
can lead to severe soil erosion, loss of soil fertility and desertification.

3.2.4. Economic factors

Presence of natural resources (oil, iron ore, coal) in the country helps in its development. The
wealth from the mining industry is invested to develop the country and raise its standard of living.
Quality of labor can hinder development. In the least developed countries, with low literacy rates,
workers earn low wages. Most of the wages will be spent on basic necessities, such as food,
clothing and housing, and they are left with little or no savings. With little savings, there is little
or no money left for education. This results in a vicious cycle of poverty in the country.

3.2.5. Political factors

Government can set development goals, which include economic growth and its evenly distributed
to improve quality of life for population. To achieve these goals, government must be effective,
well-organized, accountable and transparent in policy-making and implementation, free from
corruption and seen to be both fair and just to its people. Government should ensure political
stability so there is a stable and peaceful environment for businesses to develop and carry out their
operations, which in turn attracts foreign investors. Government should implement sound policies.
e.g., investing in education to provide a skilled workforce for the economy and implementing a
comprehensive industrial policy that provides incentives, such as infrastructure and tax relief that
encourages investment.

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 Chapter Four
Theory of Development
All development theories are trying to explain how development does or does not occur and Why
development does or does not occur. The following are development theories.

4.1. Rostow's model

Rostow in his book “the stage of economic growth which entitled a non-communist Manifesto”
discussed development as a linear historical process. He identified five stages through which
developing countries had to pass to reach an advanced economic status. These are traditional
society, preconditions for take-off, take-off, drive to maturity, age of high mass consumption.

Stage 1: Traditional Society

• Dominated by subsistence agriculture
• Agriculture based economy
• Intensive labor and low levels of trading
• Having a population that has no scientific perspective on the world and technology

Stage 2: Preconditions to take -off

• Society begins to develop manufacturing
• Country advances to a more complex economy, beginning of economic development
• Development of levels of technology
• Development of a transport system
• Rostow believed that development could only be reached by a great achievement of a surplus of
wealth.

Stage 3: Take-Off
• Short Period of Extensive growth
• Industrialization begins.
• Manufacturing become more important part of economy.
• Introduction of technical innovations
• Agriculture progressed to commercial rather than subsistence

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 Stage 4: The drive to maturity
• Takes place over a long period of time
• Use of technology increases
• National economy grows and diversifies
• Increased percentage of nation`s wealth which invested in developing its economy
• Standard of living rise

Stage 5: Age of high mass consumption

Development is conceived where the mass of the population could afford to spend large amounts
on consumer products, the economy was largely non-agricultural and very much urban-based.

Advantages
• Highly respected and referred to model
• Primary example of the intersection of Geography, economics and politics
• Most widely cited development theories

Disadvantages
• Has a strong bias towards a western model of modernization
• Assumes that all countries follow the same route of development
• Doesn’t look at variations within a country
• Assumes that each country is economically and politically free

4.2. The Core-Periphery model

It was developed in 1963 by John Friedman. It describes spatially how economic, political, and
cultural authority is spread out in core and periphery regions. It is applicable to different spatial
scales. The core-periphery model works on many scales, from towns and cities to a global scale.
Much like how the core areas are affected by changes in dynamics, the peripheral areas are also
affected by these changes. For example, majority of the people who are moving into the core area
are young adults. The peripheral areas are therefore losing young, potentially educated, adults. In
this theory, Core Countries (e.g., Europe) form an economic core around which the rest of the

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world developed. The Periphery Countries typically were controlled by the Core Countries. The
periphery feeds materials, natural resources and labor to the core.

❖ Areas in the Core have:

 Higher Wages
 Healthcare
 More technologies
 Sufficient food, water, shelter, supplies, etc.
 Scientific Innovations

 Areas in the periphery have:

 Lower Wages
 Less technological advancements
 Reduced access to healthcare
 Sometimes insufficient food, water, shelter, etc.

Criticism
• The core-periphery shows that the logic of fatalism
• Too much emphasis is on economic factors which shows the simplification of the theory
• The real world is much more complicated
• Lack of consideration of cultural globalization

4.3. Modernization theories

Stated advanced capitalist societies as models for all developing nations. All societies go through
the same stages to become developed. Modernization theories specifically addressed the issue of
developing countries & development. They accepted the structure of relationships between the rich
and poor countries and attempted to analyze the ways in which the poor could become rich. In this
sense modernization theories were problem solving. It focuses on how could economies progress
from being traditional and poor to being modern and rich. The transition from the limited economic
relations of traditional societies to the innovative and complex innovative associations depended

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on a change of values, attitudes and norms of people. That is development depended on primitive
values being replaced by modern one. Modernization can also be seen as the increasing
significance of the economic as opposed to social, cultural, ethnic, or religious distinctions.

Advantages of Modernization Theory

• New technology has revolutionized the speed and accuracy of production. Furthermore,

increased global trade allows businesses to sell their products anywhere.

• Natural resources such as wood, water and oil are often processed in modernized society,

and skyscrapers and factories begin to transform the landscape. In many poorer countries,

the discovery of oil and the adoption of new technologies is welcomed for the financial

opportunities it presents.

Limitation of Modernization theories

✓ They were criticized for not really defining the traditional except in relation to the modern
✓ These theories were euro-centric.
✓ Saw development as a linear process

4.4. Dependency theory

In development studies dependency is defined as a situation in which a particular country or region
relies on another for support, “survival” and growth. It viewed underdevelopment in terms of:
international and domestic power relationships, Institutional and structural economic rigidity, The
resulting proliferation of dual economies and dual societies both within and among the nations of
the world. According to this theory failure to develop is due to exploitive external & internal
forces. Dependence theories tended to emphasize on external and internal institutional and political
constraints on economic development. Its emphasis was placed on the need for major new policies
to eradicate poverty, provide more diversified employment opportunities, and reduce income
inequalities.

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Advantages of Dependency Theory
• The theory analyses the inequality existing between the poor and the rich countries,
• Moreover, the theory breaks some political bonds and explains reasons why the wealthy
nations are taking advantage of the poor countries.
• Dependency theory dismisses the neoclassical theory's claim that the existing global
inequality is caused by the poor countries' laziness.

Problems with dependency theories

• Often vague, logical connections unclear
• Put blame for poverty on “outsiders”
• Evidence suggests closing off countries to outside influence and large role of government
are bad for development (at least under some circumstances)

4.5. Theory of Post Modernism

Postmodernism literally means 'after modernism'. The period of postmodernism's dominance
begins early in the Cold War and continues to the present. Modernism is a tendency rooted in the
idea that the "traditional" forms of art, literature, religious faith, social organization and daily life
had become outdated; therefore, it was essential to bend them aside. Modernism encouraged the
re-examination of every aspect of existence with the goal of finding which was "holding back"
progress, and replacing it with new, and therefore better ways of reaching the same end.

Unlike Modernism, Postmodernism starts from the assumption that outstanding ideals are
impossible. Postmodernism is associated with belief and a focus on ideology in the maintenance
of economic and political power. Fundamental difference between modernism and postmodernism
is that modernist thinking is about search of abstract truth of life whereas postmodernist thinkers
believe that there is no universal truth. Central message of postmodernism essentially states
that there is no objective, single truth independent of humans’ capacity to interpret & explain.
Postmodernism is largely a reaction to the assumed certainty of scientific, or objective, efforts to
explain reality.

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 Advantages
• Postmodern theories highlight how modernist theories are out of date
• Raised important questions about cultural change
• Post modernism has tried to interpret the new social and cultural changes such as the
opening up of the Eastern Bloc.
• It has attempted to analyze the growing impact of mass media on society.

Criticisms of postmodernism
✓ it lacks coherence and is hostile to the notion of absolutes, such as truth.

✓ Postmodern philosophy is also a frequent subject of criticism for conservatism and

resistance to reliable knowledge.

✓ They are vague, create confusion, and provoke unnecessary ideological tension.

4.6. New (endogenous) Growth

It argues that improvements in innovation, knowledge, and human capital lead to increased
productivity, positively affecting the economic outlook. It argues that improvements in
productivity can be tied directly to faster innovation and more investments in human capital of
governments and private sector institutions. Thus, it claims that economic growth is primarily the
result of internal forces, rather than external ones. Endogenous growth theories identified two
factors for growth:
1.Technological progress (provide better quality machine & increased technical knowhow)
2. Investment in human capital

Limitation of endogenous growth theory

The theory has been accused of being based on assumptions that cannot be accurately measured.
Next, the major disadvantage of economic growth is the inflation effect. Economic growth will
cause aggregate demand to increase. If aggregate demand increases faster than the increases in
aggregate supply, then there will be an excess demand but a shortage in supply in the economy.

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4.7. Theory of Balanced and Unbalanced Growth
There are two theories concerning strategy of economic development. They are:

1. Theory of Balanced Growth

According to this theory economies should make simultaneous investment in all sectors to achieve
balanced growth. Balance growth means that all sectors of economy should grow simultaneously
so as to keep a proper balance between industry and agriculture and between production for home
consumption and production for exports. Different industries were mutually interdependent, then
all of them should be developed simultaneously.

Advantage of Theory of Balanced Growth

• Better division of labor
• Better use of capital
• Rapid rate of development
• Encouragement of private enterprises
• Breaking vicious circle of poverty
• Encouragement of international specialization

Criticism of Theory of Balanced Growth

• Ignores scarcity of resources
• Ignores the need of planning
• The same policy for developed & underdeveloped countries
• Not supported by history
• Ignores factors of production
• Inflation

2.Theory of Unbalanced Growth

According to this theory, economies should create a situation of unbalance by making large
investment in anyone sector. The theory stresses the need for investment in strategic sectors of the
economy, rather than in the all sectors simultaneously. Unbalanced growth is a situation in which

25
the various sectors of a given economy are not growing at a similar rate. Specific sectors of the
economy will be growing at a rapid rate, while other sectors are either stagnant or experiencing a
significantly reduced rate of growth.

Merits of the Theory of Unbalanced Growth

• Realistic Theory
• More important to basic industries
• Economies of large-scale production
• Encouragement to new inventions
• Self-reliance
• Economic Surplus

Criticisms of the Theory of Unbalanced Growth

• Inflation
• Wastage of resource
• No mentioning of obstacles
• Increase in uncertainty
• Unbalance is not necessary
• Neglect degree of unbalance
• Lack of basic facilities
• Disadvantages of localization

4.8. Coordination Failure: The O-Ring Theory of Economic Development

Michael Kremer formulated the O-ring theory in 1993. O-ring theory takes the name after what
happened to the space shuttle challenger in 1986. The rocket exploded because the part O- Ring-
failed to expand. Coordination failures occur when agents’ inability to coordinate their actions
leads to an outcome that makes all agents worse off. This can occur when actions are
complementary, i.e., actions taken by one agent reinforces incentives for others to take similar
action. Government institutions, Private sectors and Citizens are agents. In the O-ring theory,
productivity is associated with the job rather than with worker. Outputs depends on completion of
a serious of tasks/ processes. Failure at any one of tasks reduce the value of output.

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Chapter five
5. Development Policy and Strategies

5. 1. Development planning and policy making

5.1.1. Meaning of Development Planning

Development planning refers to the strategic measurable goals that a person, organization or
community plans to meet within a certain period of time. Development planning refers to all of
the various activities related to fund raising: grant writing, donor relations, capital campaigns,
annual fund drives and fund-raising events.

5. 1.2. Development Planning Process

Development planning involves gathering and processing of data about the community,
determining and prioritizing the needs and problems to be addressed, identifying development
opportunities which can be harnessed towards the realization of a better quality of life. The
development planning process empowers employees to direct their personal and professional
development within the organization. It is a valuable tool for managing and correcting performance
as well as stretching your team and inspiring growth. It provides an opportunity for employees and
managers to evaluate their own careers and professional goals so they can make more meaningful
and effective contributions.

5.1.3. Types of development Planning

The four major types of development planning are
1. Strategic planning,
2. Tactical planning,
3. Operational planning and
4. Contingency planning.

1. Strategic planning
Strategic planning is the foundation of an organization. Essentially, strategic plans dictate the
important decisions made within a business. Strategic plans can have scopes that range from three

27
years to ten years. These plans include the organization’s mission, values, and vision. The strategic
planning process is the method that organizations use to develop plans to achieve overall, long-term
goals.

2. Tactical Planning
Tactical planning is supportive of the strategic plan. It involves the tactics that will be used to
execute the strategic plan. Within a tactical plan, there are specific questions that need to be
answered about what it will take to accomplish the goals set in the strategic plan; the most important
question being how the company will accomplish the mission. This type of planning is very focused
and short-term. Tactical plans are sometimes flexible and often break the strategy down into several
parts and assign actionable tasks to each part.

3. Operational Planning
Operational planning can be ongoing or single-use. Ongoing plans can include rules and
regulations, procedures, and the day to day running of the company.

4. Contingency planning
A contingency plan is created when the unexpected event occurs or a major change needs to be
made in order to continue towards the goal. Not every change can be anticipated that is why it’s
imperative to have a contingency plan in place.

5.2. Development strategies

5.2.1. Agricultural Development Led
Agricultural Development Led Industrialization is the development strategy that aims to achieve
initial industrialization through robust agricultural growth and close linkage between the
agricultural and the industrial sector. Even though ADLI argues for a mutually re-enforcing
transformation of agriculture and industry, the primary goal of ADLI was:
✓ To alleviate absolute poverty and bring progressively takeover of industry in the national
GDP.
✓ To strengthen the linkages between agriculture and industry

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 -By increasing the productivity of small-scale farmers,
-By expanding large scale private commercial farming, and
-By reconstructing the manufacturing sector in such a way that it can use the country's
human and natural resources.
✓ Increase agricultural output and productivity
✓ Increase industrial output and productivity
✓ Close input-output linkage between the two sectors

5.2.2. Industrial Development Led

Agriculture and industry are complementary to each other. Both operate hand to hand. These
sectors are so attached with each other. It is not possible to increase the growth of one sector
without the improvement of the other sector. The development of one sector depends on the growth
and performance of the other sector. Agriculture regularly supplies raw materials like sugarcane,
jute, tobacco, cotton, oilseeds, tea, spices, wheat, paddy etc. to the consumer goods of industries.
Industry regularly supplies scientific tools and equipment’s like tractors, harvesters, pump-sets
chemical fertilizers etc. to agriculture to increase the per hectare production.

5.2.3. Import substitution

Import substitution industrialization (ISI) is a trade and economic policy that advocates replacing
foreign imports with domestic production. It is based on the premise that a country should attempt
to reduce its foreign dependency through the local production of industrialized products. ISI
policies have been enacted by developing countries with the intention of self-sufficiency by the
creation of an internal market. The advantage of import substitution includes employment creation,
import reduction, and saving in foreign currency that reduce the pressure on foreign reserves. On
the other hand, its disadvantage includes less competition (no comparative advantage or
specialization), inefficiency since product could be imported from more efficient foreign
producers. Large capacity of the domestic market, natural resources, ability to provide investments
in the industry due to raw materials export are the factors contributing to the policy of import
substitution.

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5.2. 4. Export - Oriented Industrialization (EOI)
Sometimes called export substitution industrialization (ESI), export led industrialization (ELI) or
Export-led growth is a trade and economic policy. It aims to speed up the industrialization process
of a country by exporting goods for which the nation has a comparative advantage. Export-led
growth implies opening domestic markets to foreign competition in exchange for market access in
other countries. reduced tariff barriers,a floating exchange rate (a devaluation of national currenc
y is often employed to facilitate exports), and government support for exporting sectors are all an
example of policies adopted to promote EOI and, ultimately, economic development. Export-led
growth is an economic strategy used by some developing countries. Export-led growth is
important for mainly two reasons:
1) Improves the country's foreign-currency finances and materials for the exports exist.
2) Increased export-growth can trigger greater productivity.

5.2.5. Inclusive Growth

Inclusive growth is economic growth that is distributed fairly across society and creates
opportunities for all. It is a concept that advances equitable opportunities for economic participants
during economic growth with benefits incurred by every section of society. Sustainable economic
growth requires inclusive growth. An emphasis on inclusiveness especially on equality of
opportunity in terms of access to markets, resources, and an unbiased regulatory environment is
an essential ingredient of successful growth. The inclusive growth approach takes a longer-term
perspective, as the focus is on productive employment as a means of increasing the incomes of
poor and excluded groups and raising their standards of living.

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6. Development of Ethiopia
6.1. Development trends and status of Ethiopia
Ethiopia has one of the fastest-growing economies in the world. Its 2013 GDP growth rate is 9.7%
and its average rate is 10% for the past decade. Despite high population growth, Ethiopia’s GDP
per capita has more than tripled over the last eight years, from $171 in 2005 to $550 in 2013.
Ethiopia’s national development plans, including the current Growth and Transformation Plan 2010–2015
(GTP), have focused on delivering broad-based development, reducing poverty and achieving the
Millennium Development Goals (MDGs). From 2010 to 2013, total spending on the growth-oriented pro-
poor sectors of education, agriculture and food security, water and sanitation, health and roads amounted
to $12.7 billion.

The consistently high economic growth over the last decade resulted in positive trends in poverty
reduction in both urban and rural areas. The share of the population living below the national
poverty line decreased from 30% in 2011 to 24% in 2016 and human development indicators
improved as well. Ethiopia’s real gross domestic product (GDP) growth slowed down in
FY2019/20 and further in FY2020/21 due to COVID-19, with growth in industry and services
easing to single digits. However, agriculture, where over 70% of the population are employed, was
not significantly affected by the COVID-19 pandemic and its contribution to growth slightly
improved in FY2020/21 compared to the previous year.

6.2. Regional Development Inequalities in Ethiopia

Ethiopia has the lowest inequality and most rapid economic growth in the world (greater than
10%), due to an aggressive economic development policy enacted after 2000 and based on a
principle of improvements in the agricultural sectors and subsequent development in industry
(Bank, 2014; Cornia & Martorano, 2012; Geda, Shimeles, & Weeks, 2009). Ethiopia appears to
be paradoxical. It is one of the world’s poorer countries but is undergoing simultaneously rapid
economic growth and decrease in its inequality. However, these changes are not being perceived
or felt equally across the socioeconomic, urban/rural and ethnic dimensions. The rural sector,
approximately half of Ethiopia’s population, remains highly unequal within its own ranks; there
are few wealthy and many poor farmers.

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Ethiopia’s experience is a case in point for the complex interaction between inequality and growth.
Unlike other rapidly growing economies, the country has not experienced a significant increase in
inequality, as measured by the Gini coefficient, even as poverty reduction occurred at a rapid pace
(IMF African Department, 2015). With a Gini coefficient of 30, Ethiopia remains among the most
equal countries in the world. A special feature of the Ethiopian regional development is the
presence of a group of regions collectively labeled as emerging regions whose performance is
significantly lower than the rest of the country. These regions are Gambella, Benishangul, Afar
and Somali national regional states. They have distinct geographic, demographic and economic
characteristics and were victims of past development policy.

6.3. Challenges and Constraints of Development in Ethiopia

The key challenges and constraints of development in Ethiopia are related to:
✓ Like the rest of the world, Ethiopia has been experiencing the unprecedented social and
economic impact of the COVID-19 pandemic. The COVID-19 shock is expected to be transitory
with potential recovery possible in 2021, but the overall adverse economic impact on Ethiopia will
be substantial. The economic impact of COVID-19 includes the increased price of basic foods,
rising unemployment, slowdown in growth, and increase in poverty.

✓ Ethiopia has been experiencing the worst locust invasion in decades. This may undermine
development gains and threaten the food security and livelihoods of millions of Ethiopians.

✓ Political disruption, associated with social unrest, could negatively impact growth through
lowering foreign direct investment, tourism and exports.

✓ Limited competitiveness, which constrains the development of manufacturing, the creation

of jobs and the increase of exports.

✓ An underdeveloped private sector, which would limit the country’s trade competitiveness
and resilience to shocks.

6.4. Development potentials of Ethiopia

Ethiopia has enormous potentials of natural resources. Of these the country has a few known
reserves of precious metals and other natural resources such as gold, potash, natural gas, copper,
and platinum. Some parts of the country’s geological structure resemble the oil and gas fields of

32
the Middle East, particularly in the Ogaden basin. However, despite the commercially viable
volumes of gas present in the country’s soil, Ethiopian regimes before 1991 have been unable to
put together an arrangement to extract the gas, in part due to the consecutive regimes changes the
country experienced. In 1972, natural gas fields were discovered by an American company,
Tenneco, which was expelled in 1977 by the Derg. Following this expulsion, a former USSR
company, Soviet Petroleum Exploration Expedition (SPEE), started exploring Ethiopia’s gas
fields, but the company’s contractual agreement was also terminated in 1994 after the fall of the
military regime. As a consequence, most of the country’s potential in oil and gas is still untouched.
In addition to all these resources, there is also an extensive potential for the generation of
hydropower.

6.5. Development policies and strategies of Ethiopia

The Federal Democratic Republic of Ethiopia underscores one basic objective with regard to
economic development to build a market economy in which
(i) A broad spectrum of the Ethiopian people are beneficiaries,
(ii) Dependence on food aid is eliminated and,
(iii) Rapid economic growth is assured.

Sustainable Development and Poverty Reduction Program (SDPRP) was formulated in 2002/03-
2004/05. This program sought to promote agricultural development and poverty reduction in rural
areas by:
(i) Strengthening agricultural extension services;
(ii) The training of extension agents in Technical Vocational Education and Training (TVET)
and the training of farmers in Farmers Training Centers (FTC);
(iii) Water harvesting and irrigation;
(iv) improved marketing opportunities;
(v) Restructuring peasant cooperatives; and
(vi) Supporting micro-finance institutions.

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7. Measures of Growth and Development
7.1. Gross Domestic Product (GDP)
Gross domestic product (GDP) is the total monetary or market value of all the finished goods and
services produced within a country’s borders in a specific time period. GDP provides an economic
snapshot of a country, used to estimate the size of an economy and growth rate. It can be adjusted
for inflation and population to provide deeper insights. Though it has limitations, GDP is a key
tool to guide policy-makers, investors, and businesses in strategic decision-making. GDP is one of
the most widely used tools to measure a country’s economy. GDP can be calculated in three ways.
These are Using expenditures, Production and Incomes.

1) Calculation of GDP Based on Expenditures

The Formula for Expenditure GDP
GDP=C+I+G+(X−M) where:
C=Consumer spending on goods and services
I=Investor spending on business capital goods
G=Government spending on public goods and services
X=exports
M=imports
Use the information below to calculate GDP.

Transfer Payments $54

Interest Income $150
Depreciation $36
Wages $67
Gross Private Investment (I) $124
Business Profits $200
Indirect Business Taxes $74
Rental Income $75
Net Exports (X-M) $18
Net Foreign Factor Income $12
Government Purchases (G) $156
Household Consumption (C) $304

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GDP = C + G + I + (X - M)

In this case the C is represented by Household Consumption which is $304.

The G refers to Government Spending which is $156.
“ I” is gross private investment and is $124.
(X - M) is the net exports and in the table is shown to be $18.

Therefore:

GDP = $304 + $156 + $124 + $18

GDP = $602

The expenditure method is based on the idea that all final goods and services produced in an
economy must be purchased by someone. Goods that remain unsold are accounted as purchased
by the producer. Let’s break down each component of the calculation to better understand what
GDP is and why the number is important to economists. Consumption makes up the largest part
of GDP calculation. This is anything a household or individual would spend money on, like
nondurable goods including Food, Clothing and Rent. Note that purchasing property is not
included in consumption. Investment refers to any asset that is obtained for cost on the grounds
that it is expected to provide value in the future that will exceed its initial cost and time to value.
It can also be defined as the commitment of current financial resources in order to achieve higher
gains in the future. For example, a business buys new computers for all of its employees.
Government spending is the sum of everything the government has purchased or spent money on.
This means any physical products the government has purchased, like Fire trucks or aircraft
carriers, Investments the government has made, and Salaries of government employees. This does
not include any payments or programs such as welfare or social security. Exports are all goods that
are produced within the country and sold to other countries. Imports are all the goods that are
produced in other countries and sold to this country.

2) Calculation of GDP Based on Income Approach

This GDP formula takes the total income generated by the goods and services produced.
GDP = Total National Income + Sales Taxes + Depreciation + Net Foreign Factor Income

In this case we use the formula:

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 NI = W + R + i + PR

W is the wages that are represented by $67 in the table.

Rental income is the R and is $75.
Interest income is i and is $150.
PR are business profits and are $200.

Therefore:

NI = $67 + $75 + $150 + $200

NI = $492
GDP = NI + Indirect Business Taxes + Depreciation
GDP = $492 + $74 + $36
GDP = $602

3) Calculation of GDP Based on Production Approach

This is also called a value-added method which takes into account the value-added in various
stages in the process of production of a final product. The Gross value added is being calculated
of all the three sectors namely, the primary, secondary and tertiary sector in order to calculate the
GDP at market price. The GDP can be calculated by the following formula under this method:
GDP = Real GDP (GDP at constant prices) – Taxes + Subsidies.

7.2. Gross National Product

Gross National product is the market value of all the goods and services produced in one year and
property supplied by the citizens of a country. Unlike gross domestic product (GDP), which
defines production based on the geographical location of production, GNP indicates allocated
production based on location of ownership. GNP does not distinguish between qualitative
improvements in the state of the technical arts (e.g., Increasing computer processing speeds), and
Quantitative increases in goods (e.g., number of computers produced), and considers both to be
forms of "economic growth". In order to calculate GNP, we need to know the following:

36
1) The market value of all final goods and services produced within the country's borders in a
given period of time.

2) The market value of all incomes earned by residents of the country, regardless of their
nationality, in a given period of time

3) The market value of all expenditure on final goods and services by residents of the country,
regardless of their nationality, in a given period of time

The gross national product can be calculated using the following formula:
GNP=C+I+G+NX+ZGNP=C+I+G+NX+Z
where:
C = private consumption expenditure
I = gross private domestic investment
G = government expenditure on goods and services
X = exports of goods and services
M = imports of goods and services

Z= Net Factor

Consumer Spending (C)

Consumer spending is the largest component of GNP. It includes expenditures on durable goods,
nondurable goods, and services. Durable goods are items that last more than three years, such as
automobiles and appliances. Nondurable goods are items that last less than three years, such as
food and clothing. Services are activities performed by businesses or individuals for a fee, such
as haircuts and medical care.

Investment Spending (I)

It includes expenditures on residential construction, business equipment, and inventory.
Residential construction includes new home construction and renovations to existing homes.
Business equipment includes the purchase of machinery and tools by businesses. Inventory
consists of the stocks of goods held by businesses.

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Government Spending (G)
Government Spending includes expenditures on goods and services by federal, state, and local
governments. Goods include items such as roads and bridges. Services include activities such as
education and defense.

Net Exports (NX)

Net exports are equal to the value of a country's exports minus the value of its imports. Exports
are goods and services produced in a country and sold to customers in other countries. Imports
are goods and services produced in other countries and sold to customers in the country.
The formula for calculating net exports is:

NX=X−MNX=X−M

where:

X = value of exports

M = value of imports

Net Factor Income (Z)

Net factor income is equal to the value of a country's resident's income earned from abroad minus
the value of foreign income earned within the country's borders. Residents' income earned from
abroad includes interest, dividends, and profits earned by foreigners in the country. Similarly,
foreign income earned within the country's borders includes interest, dividends, and profits earned
by residents of the country in other countries.

A formula for calculating net factor income is:

Z=Y−XZ=Y−X

where:

Y = Resident's income earned from abroad

X = Foreigner income earned domestically within the country's borders

Example
Assume that the following data represents the economic activity of a country in a given year:

38
C = $100,000,000
I = $50,000,000
G = $20,000,000
NX = $10,000,000
Z = $5,000,000
The GNP for this country would be calculated as follows:
GNP=C+I+G+NX+ZGNP=C+I+G+NX+Z
GNP = $100,000,000 + $50,000,000 + $20,000,000 + $10,000,000 + $5,000,000
GNP = $185,000,000

7.3. GDP and GNP per capita

Per capita income (PCI) measures the average income earned per person in a given area (city,
region, country, etc.) in a specified year. It is calculated by dividing the area's total income by its
total population. Per capita income is national income divided by population size. Per capita
income is also often used to measure a country's standard of living. It is usually expressed in terms
of a commonly used international currency such as the euro or United States dollar, and is useful
because it is widely known, is easily calculable from readily available gross domestic product
(GDP) and population estimates, and produces a useful statistic for comparison of wealth between
sovereign territories. This helps to ascertain a country's development status. It is one of the three
measures for calculating the Human Development Index of a country. Per capita income is also
called average income. GDP per capita is simply the total GDP divided by the size of the
population. GDP does not allow us to compare countries based on their living standards, whereas
GDP per capita does.

7.4. Gini Coefficient

Gini coefficient is developed by the Italian statistician Corrado Gini in 1912. The Gini coefficient
(Gini index or Gini ratio) is a statistical measure of economic inequality in a population. The
coefficient measures the dispersion of income or distribution of wealth among the members of a
population. It is developed by the Italian statistician Corrado Gini in 1912. The Gini coefficient is

39
one of the most frequently used measures of Economic inequality, Measuring income distribution,
Wealth distribution among a population. The coefficient can take any values between 0 to 1 (or
0% to 100%). A coefficient of zero indicates a perfectly equal distribution of income or wealth
within a population. A coefficient of one represents a perfect inequality when one person in a
population receives all the income, while other people earn nothing.

7.5. Income Poverty

Income Poverty is a condition in which a person or community lacks the financial resources and
essentials for a minimum standard of living. It is also defined as lack of access to income to satisfy
basic needs. Income poverty is the income which falls below the poverty line. Income or
consumption poverty refers to lack of monetary resources to meet needs. It is takes place when the
income level from employment is so low that basic human needs can't be met. A range of factors
including rising living costs, low pay, lack of work, and inadequate social security benefits causes
income poverty.

7.6. Human Development Index

Human development is the process of enlarging people`s choices. The concept of human
development has two sides. The first one is formation of human capacity such as improved health,
knowledge and skills. The second one is how people make use of these acquired capabilities for
productive purpose, for leisure and for being active in cultural, social and political affairs. Human
development brings together the production and distribution of commodities and the expansion
and use of human capabilities. There are four major elements in the concept of human
development.
1. Productivity
2. Equity
3. Sustainability
4. Empowerment

Indicators of Human Development are:

1. Life expectancy: representing a long and healthy life
2. Educational attainment: representing knowledge

40
3. Gross domestic product: representing a decent standard of living

❖ HDI takes into account:

✓ Health
✓ Education and
✓ Standard of living.

7.7. Multidimensional Poverty Index

Multidimensional Poverty Index is an index that captures the percentage of households in a country
deprived along three dimensions of well-being such as monetary poverty, education, and basic
infrastructure services to provide a more complete picture of poverty. The Multidimensional
Poverty Index (MPI) is published by the UNDP’s Human Development Report Office and tracks
deprivation across three dimensions and ten indicators:

• Health (child mortality, nutrition),

• Education (years of schooling, enrollment), and
• Living standards (water, sanitation, electricity, cooking fuel, floor, assets).

Multidimensional Poverty Indices use a range of indicators to calculate a summary poverty figure
for a given population, in which a larger figure indicates a higher level of poverty. This figure
considers both the proportion of the population that is deemed poor, and the breadth of poverty
experienced by these poor households. The methodology has been mainly, but not exclusively,
applied to developing countries. The Global Multidimensional Poverty Index (MPI) was
developed in 2010 by the Oxford Poverty & Human Development Initiative (OPHI) and the United
Nations Development Programme and uses health, education and standard of living indicators to
determine the incidence and intensity of poverty experienced by a population.

Multidimensional Poverty Indices typically use the household as their unit of analysis. A
household is deprived for a given indicator if they fail to satisfy a given 'cutoff' (e.g., having at
least one adult member with at least 6 years of education).

MPI advocates state that the method can be used to create a comprehensive picture of people living
in poverty, and permits comparisons both across countries, regions and the world and within
countries by ethnic group, urban/rural location, as well as other key household and community

41
characteristics. MPIs are useful as an analytical tool to identify the most vulnerable people - the
poorest among the poor, revealing poverty patterns within countries and over time, enabling policy
makers to target resources and design policies more effectively. The Global MPI uses the following
ten indicators with the following cutoffs.

Dimension Indicators Deprivation Cutoffs

Child Deprived if a child under the age of 18 years has died in the family
mortality in the five years preceding the survey.
Health
Deprived if any adult or child, for whom there is nutritional
Nutrition
information, is undernourished.
Years of Deprived if no household member has completed six years of
schooling schooling.
Education
School No household member aged 'school entrance age + six' years or
attendance older has completed six years of schooling.
Cooking fuel Deprived if the household cooks with dung, wood or charcoal.
Deprived if the household's sanitation facility is either not improved
Sanitation
(according to MDG guidelines), is shared with other households
Deprived if the household does not have access to improved
Drinking drinking water (according to MDG guidelines) or improved
water drinking water is more than a 30-minute walk from home round
Standard of trip.
living Electricity Deprived if the household has no electricity.
Deprived if at least one of the three housing materials for roof, walls
Housing and floor are inadequate: the floor is of natural materials and/or the
roof and/or walls are of natural or rudimentary materials.
Deprived if the household does not own more than one of these
Assets assets: radio, TV, telephone, computer, animal cart, bicycle,
motorbike or refrigerator and does not own a car or truck.

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