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Chapter 1

Economics, Institutions, and Development: A Global Perspective

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All rights reserved.Economic Development • Development = Growth plus Change • Growth: sustained improvement in the level of per capita income • Change: sustained improvement in institutions and organizations that support growth 1-2 Copyright © 2009 Pearson Addison-Wesley. .

Growth • Gross Domestic Product (GDP): Market value of all final goods and services an economy produces in one year • Real GDP: GDP in constant prices • GDP Per Capita = (Real GDP / Population) or income per person • Economic Growth = percentage change in Real GDP per capita Copyright © 2009 Pearson Addison-Wesley. 1-3 . All rights reserved.

Institutions • Family: respect the authority & share resources • Culture: propensity to save & invest • Religion: ability to bring about change • Law: protect property rights and civil liberties and enforce contracts Copyright © 2009 Pearson Addison-Wesley. 1-4 . All rights reserved.

. All rights reserved.Organizations • Government: produce public goods and regulate economic activities • Education: increase productivity and expand the range of economic and social opportunities • Health: enable proactive participation in economic and social activities • Business: provide incentive for profit making. resulting in growth and expansion 1-5 Copyright © 2009 Pearson Addison-Wesley.

000. but happy.000 to $20. rich. the percentage of people who say they are happy tends to increase Copyright © 2009 Pearson Addison-Wesley. 1-6 . All rights reserved.Happiness and Development • There is not a perfect correlation between happiness and per capita income: people could be poor. but and unhappy • Once per capita income increases above $10.

Happiness and Development Factors affecting happiness: • Family relationships • Financial conditions • Work satisfaction • Community and friends • Health and health-care services • Personal freedom • Personal values Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 1-7 .

Income and Happiness Across Countries Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 1-8 .

All rights reserved. health.Three Core Values of Development • Sustenance: The ability to meet basic human needs including shelter. respect. and honor • Freedom from Servitude: To be able to choose the path to prosperity and have the opportunity to improve Copyright © 2009 Pearson Addison-Wesley. food. To live with dignity. 1-9 . safety • Self-Esteem: To be a person with a sense of self-respect and self-worth. education.

1-10 .Objectives of Development • To increase the availability and distribution of basic human necessities • To improve the standard of living for the majority of the people • To expand the range of economic and social choices and opportunities Copyright © 2009 Pearson Addison-Wesley. All rights reserved.

Millennium Development: Goals and Targets for 2015 Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 1-11 .

All rights reserved.Millennium Development Goals and Targets for 2015 Copyright © 2009 Pearson Addison-Wesley. 1-12 .

1-13 . All rights reserved.Economic Development • Inclusion of non-economic variables in designing development strategies • Achieving the Millennium Development Goals • “…One future-or none at all” Copyright © 2009 Pearson Addison-Wesley.