Rural Development

Lecture plan

1. Introduction
Chapter two
2. Measures of the level of rural development
3. Measures of distribution of income

Measures of Rural Development & 4. Measures of rural poverty

it’s Determinants 5. Determinants of rural development

Dr Sisay D.
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Introduction

 Qualitative measurement of the level &

1. Introduction pace of rural development is needed to
indicate
 the extent of economic & social well-being of
rural people,
#. What is the importance of rural development
 to serve as benchmark for future planning,
measurement?
 to serve as instruments of monitoring,
#. What are the indicators of rural development? evaluation & control of ongoing programs,
 to facilitate spatial & temporal comparisons
of development,
 to serve as criteria for advancing loans.

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Introduction… Introduction…

The measures must be consistent with the

A variety of indicator have been used by

objectives of rural development in all 
societies, irrespective of their economic, economists to reflect the multiplicity of
political & socio-cultural system. goals of rural development.
 The main objectives are:  The indicators of rural development can
1. To increase the availability & improve the distribution be categorized into two classes:
of life sustaining goods- food, clothes, shelter, health
& security 1. Measures of the level of rural
2. To raise per capita purchasing power & improve its development.
distribution, 2. Measures of distribution of income.
3. To protect from servitude & dependence.

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Rural Development

Measures of the level of rural development

 The following measures are commonly used

2.Measures of the level of rural development to measure the level of rural development:
1) Per Capita Gross National Product in rural areas
2) Per Capita Consumption Expenditure of rural
#.What are commonly used measurements of rural
people
development? 3) Per Capita Public Expenditure on community
facilities & services in rural areas
4) Physical Quality of Life Index (PQLI)
5) Human Development Index (HDI)

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1. Per Capita Gross National Product in rural areas 2. Per Capita Consumption Expenditure of rural people

 Gross National Product (GDP) is the market Per Capita Consumption Expenditure is the
value of all final goods & services that are

ratio of total consumption expenditure to
produced within a county’s boundary during total population.
a year.
It’s a reasonably good proxy variable than
Per Capita Gross National Product is ratio

per capital income.

of GDP to total population,
 It’s the most widely used measures of the  Like real income, consumption expenditure
economic well-being of people. should also be adjusted for change in the
general price index for comparison across
It computed for rural people separately, it
period of time.

could be used as a measure of economic
components of rural development.
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3. Per Capita Public Expenditure on community

4. Physical Quality of Life Index (PQLI)
facilities & services in rural areas

 The level of rural development in a country is a  This measure was developed by Morris &
function of Per Capita Public Expenditure of McAlpin to determine the impact of
Government in the rural areas. development project on their target groups.
It’s the total expenditure of various services,
PQLI has three components:

facilities & civic amenities such as schools,


hospitals, roads, parks, police protection & 1. Infant mortality

street lights that are provided by the 2. Life expectancy at age one &
government in rural areas. 3. Basic literacy
 Per Capita Public expenditure on such services
& amenities is a good measure of socio-
economic welfare of rural areas.
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Rural Development

4.Physical Quality of Life Index (PQLI)….. 4. Physical Quality of Life Index (PQLI)…..

 PQLI used indexing system which ranges  The PALI index is calculated according to the
from zero to 100 Where following formula:
 Zero represent an absolutely defined worst a) Year of life expectancy are converted to an
performance & index:
 100 represent the best performance.  (Life expectancy at age 1-38)/ 0.39
b) Infant mortality rate converted to index
 Once the performance of each indicator is (229- Infant mortality rate per 1000)/ 2.22
computed,


c) Literacy Index number correspond to the

 PQLI index is calculated by averaging the actual data
three indicators by giving equal weight to
 Then the sum of three index & divided by 3 * 100.
each of them.
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4.Physical Quality of Life Index (PQLI)….. 5. Human Development Index (HDI)

Example: Estimation of Physical Quality of life Index  HDI refers to the process of increasing
well being of people’s.
Life expectancy
 It stressed that the most critical choice
that people should have in life which
at age 1 Infant mortality Literacy PQLI
Per 1000

Country Year
Index
no.
live
births
Index
no. Percent
Index
no. includes:
A 49 28 180 22 25 22 25  long & healthy life,
knowledge, &
B 72 87 16 99 99 99 94

 access to the assets, employment & income
needed for a decent standard of living.

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5. Human Development Index (HDI)… 5. Human Development Index (HDI)…

 The HDI is calculated as follows:  The HDI composed of three indicators:

 Maximum & minimum values are fixed for 1. Life expectancy
the four basic variables on the basis of 2. Education literacy
historical data & rational envisions. Education Index = 2/3(Adult literacy index) + 1/3 (Gross Enrolment
Index)
I. Life expectancy- 85 & 25 years
3. Income or GDP expressed in logs
II. Adult literacy & Gross enrolment – 100% & 0%
III. Mean year of schooling- 15 & 0 year  Calculation of Human Development Index
IV. Income adjusted for differences in purchasing
power & expressed in terms of PPP (Purchasing HDI = (life expectancy + Education literacy + Income) / 3
Power Parity) - $40000 & $ 100

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Rural Development

5. Human Development Index (HDI)… 5. Human Development Index (HDI)…

I. Calculating the Life Expectancy Index II. Calculating the Education Index
The education index measures a country’s relative
This index measures the relative achievement

 achievement in both adult literacy & combined
of a county in life expectancy at birth. primary, secondary & tertiary gross enrolment.

Example: Costa Rica

Example:
For Costa Rica, with adult literacy rate of 95.8 % in 2002
 With a life expectancy of 78 year in 2002 & a combined gross enrolment ratio of 69%
 Adult literacy index = (95.8-0)/(100-0)= 0.958
 Life Expectancy Index = (78-25)/(85-25) = 0.884
 Gross Enrolment index = (69-0)/(100-0)= 0.60
Education Index = 2/3(Adult literacy index)+ 1/3 (Gross
Enrolment Index)
= 2/3 (0.958) +1/3 (0.690)= 0.870
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5. Human Development Index (HDI)…

III. Calculating the Income or GDP index

 The Income index is calculated using 3.Measures of distribution of income
adjusted per capita income (PPP $)
Example: Costa Rica
 A GDP per capita of $8840 in 2002, #.What are commonly used measurements of distribution
 Income or GDP Index of income in rural areas?

= (log (8840) – log (100)/(Log (40000)- log (100) = 0.788

 HDI is the simple average of three indicators
HDI = (0.884+ 0.870+ 0.748)/3 = 0.834

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Measures of distribution of income Measures of distribution of income…

 There are wide variety of measures which  A good measure of income distribution should
are used by economist to measure income possess the following two characteristics:
distribution:  It should be unaffected by equal proportional
 The most commonly used measures are: increase in all incomes.
1. The Lorenz Curve  It should be sensitive to disproportionate
2. The Gini Concentration Ratio (GCR) changes at all levels of income.

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Rural Development

I. Lorenz curve I. Lorenz curve…

 It’s graphical representation of the Size  With the % of income on the Y-axis & the %
Distribution of Personal Income of rural of income recipients on the X-axis, the
people. diagonal represents perfect equality.
 It depict the variance of the size
distribution of income from perfect  The further the Lorenz curve is away from
equality line. the diagonal, the greater the degree of
 Show the actual quantitative relationship income inequality.
between the % of income recipients & the %
of total income they received during a time
period (year).
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I. Lorenz curve… I. Lorenz curve…

Procedure:
1. Arrange the population according to the
share of income they receive, from lowest
to highest.
2. Calculate cumulative percentages (the
lowest 5%, the lowest 45%, etc.)
3. Plot the cumulative percentage of
households against the cumulative
percentage of the income they earn.

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I. Lorenz curve… I. Lorenz curve…

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Rural Development

I. Lorenz curve… I. Lorenz curve…

Example

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I. Lorenz curve… I. Lorenz curve…

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I. Lorenz curve… I. Lorenz curve…

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II. Gini Concentration Ratio (GCR) II. Gini Concentration Ratio (GCR)…

Is measured graphically by dividing the area

This ratio was developed by Corrado Gini in

 between the perfect equality line & the Lorenz
1913 & is the most commonly used measure curve by the total area lying to the right of the
of income inequality. equality line in a Lorenz curve diagram
 This ratio developed based on the Lorenz  Coefficients between 0.50 & 0.70 are
curve graph. considered to mean a highly unequal distribution
 If we denote the area inside the Lorenz of income.
curve as “A” & outside the Lorenz curve as Coefficients between 0.20 & 0.35 are
“ B” , the ratio would be A/(A+B).

considered to represent relatively equitable
 The GCR ranges from 0 to 1, distributions of income.
 0 being perfectly equality & 1 perfectly inequality
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II. Gini Concentration Ratio (GCR)…

4. Measures of rural poverty

#. Explain the concepts of rural poverty?

#.What are commonly used measurements of
rural poverty?

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Concepts of poverty Concepts of poverty …

 The term rural poverty is the opposite of  Rural Poverty can also be conceived as a
the term rural development. situation consisting of;
 Poverty implies a condition of life Deficiency in consumption;
characterized by inability to lead a decent


High level of morbidity & mortality;

life.


 Poor sanitary & housing condition; &

 It’s a multidimensional concept &  Low levels of education. Etc.

phenomenon.  Rural Poverty could be defined as:

 Poverty affects many aspects of human Absolute poverty
conditions like economic, social, physical, Relative poverty
moral & psychological, political etc. Subjective poverty
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Rural Development

Concepts of poverty … Concepts of poverty …

Absolute poverty Relative poverty

 It can be viewed us the inability to secure  It can be viewed a person’s access to the
the minimum basic needs for human survival. basic access of life is relatively lower as
Is implies a person’s lack of access to compared to some reference group of
people.

objectively determined, reasonably
adequate quantity of goods & services, to  It is a state of having welfare level (
satisfy his/ her material & non-material measured in income or expenditure or other
needs. wellbeing indicators) less than other.

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Concepts of poverty … Measures of rural poverty

Subjective poverty  The magnitude of poverty at any point in

The concept of subjective poverty is based on
time depends on the criteria used to define
poverty or to determine the poverty line.

the premise that people are the best judges of
their own situation & their opinions should  There are two criteria used to define rural
ultimately be the decisive factor in defining poverty line:
welfare & poverty. 1. Based on the concept of a nutritionally
 It implies that poverty is subjective judgments adequate diet of food;
people place on what constitutes a socially 2. Based on the concept of a minimum level of
acceptable minimum standard of living in their living- either income or consumption
own socialites.

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Measures of rural poverty… Measures of rural poverty…

Housing Index
 In addition, there are a number of single
varieties of measures of rural poor indicators.  Gibbons (1997) proposed this index as a cost-
effective measure for identifying the poor.
They include:
 The Housing Index include three components,

 Life expectancy,
namely:
 Literacy rate,
i. The size of the house;
 Birth & death rates,
ii. The physical condition of the house- as
 Infant mortality rate & reflected in the materials used in the
 Housing index. construction; &
iii. The types of materials used for making the
roof of the house.
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Measures of rural poverty … Measures of rural poverty …

 Some of the important commonly used I. Poverty Ratio or Poverty Head Count
measures/ indicators of rural poverty are
This measures estimates the percentage
the following:

of population below poverty line.
1. Poverty Ratio or Poverty Head Count
Identifying the number of individual or
Human Poverty Index (HPI)

household having an income or
2.

consumption below certain standard,

usually, usually known as poverty line.

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Measures of rural poverty … Measures of rural poverty …

II. Human Poverty Index (HPI) I. A long & healthy life- P α 1

 HPI measures deprivation in the three basic  Vulnerability to death at a relatively early
dimensions of human development in the HDI.
age.
A long & healthy life- P α 1
As measured by the probability at birth of
1.

2. Knowledge - P α 2 not surviving to age 40.
3. A decent standard of living- P α 3
 Calculation of HPI is based on the following
formula:
HPI= 1/3 ( P α 1+ P α 2 +P α 3) α is 3
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Measures of rural poverty … Measures of rural poverty …

II. Knowledge- P α 2 III. A decent standard of living- P α 3

 Lack of access to overall economic
 Exclusion from the world of reading & provisioning,
communications,
 As measured by the un-weighted average of
 As measured by the adult illiteracy rate. two indicators:
 The percentage of the population without
sustainable access to an improved water sources &
 The percentage of children under-weight for age.

= ½ (% of population without suitable access to improved

sources)+ ½ ( % of children underweight for age)

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Rural Development

Determinants of rural development

The main factors that determine the extent

5.Determinants of rural development

of rural developments are the variation of
utilization of the following main factors:
1) Natural resources
#.What are main factors determining rural 2) Technology
development? 3) Capital
4) Human resource
5) Institutional & organizations

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Individual assignment

 Review main determinants of rural

development in Ethiopian context

 After 2 weeks you are expected to

deliver your individual assignment

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