University of Puthisastra

Economic Development
Lecture 2: Comparative
Economic Development

Professor: Hong Muyheng

October 25 , 2016

(Week 2)
Review Week 1

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We Divided World Into Two:
1. Rich 2. Absolute Poverty

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1. What are the conditions of the
first half world?

More than enough

Comfortable home Financial security
to eat and clothes

Healthy
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1. How the Other Half Live?

Inadequate foods Maybe not know how

and shelters Poor health to read nor write

The unemployment
Part of a condition of
group with income less
than 2$ per day absolute poverty.
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1. What is the meaning of
absolute poverty?

A situation of people
being unable to the Foods, Clothing,
minimum levels of income

Healthcare, Shelter, Other essentials

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1. How the Other Half Live?
• What is the meaning of
development?
• The process of improving the quality
of all human lives and capabilities by
raising people’s levels of living, self-
esteem, and freedom.

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2. Economics and Development Studies
• So why do we need to study economics
development?
1. Understand economies of DNs
2. The issues in those DNs
3. How to deal with those issues
4. Trend of globalization
5. The social economic systems (life, work,
authority, bureaucratic, legal, admins, religion,
culture, gov’t agencies, social class, economic)
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3. What Do We Mean by Development?
• How can we measure development?
• Traditional Economic Measures of
Development:
1. Income per capita
2. Real per capita of GNI (economic well-
being of a population)
3. GDP & GNI/GNP
4. Productions and unemployment rate
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3. What Do We Mean by Development?
• New Economic Measures of Development:
1. ‘’Redistribution’’
2. Capacity in functioning (ability to enhance
standard of living)
3. Real income level
4. Level of Happiness.

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The Main Objectives of Development:
1. To increase the availability and widen the
distribution of basic life-sustaining goods: such as
foods, shelter, health, and protection.
2. To raise level of living: including to higher income,
providing more jobs, better education, greater
attention to cultural and human values, and generate
individual and national self-esteems.
3. To expand the range of economic and social choices:
available to individuals and nations by freeing them
from slavery and dependence.

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 5. Sustainable Development Goals
• The UN in September 2015 adapted new SDGs which
targets to be achieved by 2030 within 17 goals.

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Preliminary Case 1:
Brazil
Go to page 28 - 33

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 Group Discussion!
• Form of a group of 4: Share the part and then do
presentation.
• The group will got 3 credit for this activities.
• The Best team will get 5 credits.
• Each group have 15mns to prepare.
• Each team has 5-7 minutes to present.
• Good luck!!!!

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 Week 2
Ready! Go!

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 Ch2: Comparative Economic
Development
1. Introduction
2. Defining the Developing World
3. Basic Indicators of Development: Real Income,
Health, and Education
4. Holistic Measures of Living Levels and
Capabilities
5. Characteristics of the Developing World
6. How Low-Income Countries today differ from
Developed Countries in Their Earlier Stages.
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 1. Introduction
• What are the common feature of developing
countries?
1. Lower levels of living and productivity
2. Lower levels of human capital
3. Higher levels of inequality and absolute
poverty
4. Higher population growth rates
5. Greater social fractionalization

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 1. Introduction
• What are the common feature of developing
countries? (con’t.)
6. Larger rural populations but rapid rural-to-urban
migration
7. Lower levels of industrialization
8. Adverse geography (unfavorable)
9. Underdeveloped financial and other markets
10. Remaining colonial impacts such as poor
institutions and often external dependence.

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2. Defining the Developing World
• How can we define the developing world?
• Per capita income (World Bank)
1. Low-income countries (LICs) [0$ – 1035$]
2. Lower-middle-income countries (LMCs) [1036$-4088$]
3. Upper-middle-income countries (UMCs) [4089$-12615$]
4. High-income OECD countries [12616$-up]

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2. Defining the Developing World by
World Bank
Lower-
Low-income middle-
countries income
(LICs) countries
(LMCs)

Upper-
middle- High-income
income OECD
countries countries
(UMCs)

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2. Defining the Developing World
• How can we define the developing
world?
• Per capita income
• Among 4 above categories, which levels
are group that consider as the
developing countries?
1. Low, lower-middle,
2. Upper-middle incomes.
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 Let’s see per capital
income of some countries.

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3. Basic Indicators of Development
• What are the basic indicators of development?
1. Purchasing power parity
2. Health
3. Education
• How to measure purchasing power parity (PPP) (as
Development Indicator)?
• The calculation of GNI (Gross National Income) using a
common set of international prices for all goods and
services. It provide more accurate comparisons of
living standards. See table 2.2
• GNI per capita (measure overall level of economic
activity or well-being of people in different nation) 26
3. Basic Indicators of Development
• What is the meaning Gross National Income (GNI)?
• The total of domestic and foreign output claimed by
residents of a country, consisting of gross domestic
product (GDP) plus factor incomes earned by foreign
residents, minus income earned in the domestic
economy by nonresidents.
• GNI = GDP + FId (Investment & Income) – Fif
• Now challenging question.
• Make a group of 2 then go to internet. Quickly find
Cambodian’s GNI or GNP in 2013.
• Answer by WB’ data:
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3. Basic Indicators of Development
• What is the meaning Gross Domestic Products
(GDP)?
• The total final output of goods and services
produced by the country’s territory by
residents and nonresidents, regardless of its
allocation between domestic and foreign
claims.
• GDP measure the total value for final use of
output produced by an economy, by both
residents and nonresidents.
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3. Basic Indicators of Development
• How to measure the health (as indicator of
development)?
1. Life expectancy
2. Undernourishment (Starvation)
3. Child mortality rate or Crude birth rate.

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3. Basic Indicators of Development
• What is life expectancy?
• Life expectancy is the average number of year
newborn children would live if subjected to the
mortality risk prevailing (current) for their group at
the time of their birth.

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3. Basic Indicators of Development
• What is undernourishment (Starvation)?
• Undernourishment means consuming too little food
to maintain normal levels of activity; it is what is
often the problem of hunger.

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3. Basic Indicators of Development
• What is Birth Rate?
• Birth rate is reports as among of new baby born
comparing to the population size.

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3. Basic Indicators of Development
• How can we measure education (as development
indicator)?
1. Literacy
2. Schooling.

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3. Basic Indicators of Development
• What is the meaning of literacy rate?
• Literacy is the fraction of adult males and females
reported or estimated to have basic abilities to read
and write.

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3. Basic Indicators of Development
• What is the meaning of schooling rate?
• Schooling measure by the rate of children in the
standard age attending the school particularly in the
primary education and secondary education.

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 4. How to measure living levels and
capabilities?
• What is Human Development Index (HDI)?
• HDI is an index measuring national socioeconomic
development, based on combining measures of
education, health, and adjusted real income per
capita.
• By formula: HDI = 1/3(Income Index) + 1/3(Life
Expectancy Index) + 1/3(Education Index)
• HDI scale [0 – 1] lowest to highest
• How to calculate Income Index?
• Based on UNDP: Income Index = [log(real income per
capita) – log(100)]/[log($40,000) – log(100)]
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 4. How to measure living levels and
capabilities?
• How to calculate Life Expectancy Index or health proxy
index?
• Based on UNDP: Life Expectancy Index = [(current life
expectancy at birth) – (25)]/[(maximum exp. life
expectancy) – (25)]
• How to calculate Education index?
• Based on UNDP: Education Index =2/3(adult literacy
Index) + 1/3(gross school enrollment Index)
• How to calculate Adult literacy index?
• Based on UNDP: Adult literacy Index = [(Estimated adult
literacy) – (0)]/[(gross school enrollment=100) – (0)]

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 4. How to measure living levels and
capabilities?
• How to calculate Gross Enrollment index?
• Based on UNDP: Gross Enrollment Index =
[(Estimated gross enrollment) – (0)]/[(gross total
school enrollment=100) – (0)]

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 Exercises 1
• Calculate the HDI for Cambodia in 2000.
– Suppose that PPP GDP per capita 820$ and life
expectancy in 1999 is 52 with estimated maximum
of 65.
– Suppose estimated adult literacy is 60% and
estimated gross enrollment is 70%.

HDI =

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 Exercises 2
• Calculate the HDI for Myanmar in 2013.
– Suppose that PPP GDP per capita 930$ and life
expectancy in 2012 is 58 with estimated maximum
of 70.
– Suppose estimated adult literacy is 61% and
estimated gross enrollment is 74%.

HDI =

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Let’s HDI and Ranking of some countries.

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 5. New HDI
• What is New Human Development Index (NHDI)?
• The UNDP, November 2010, introduced NHDI index
to replace old one which based on standard of living,
education and health.
• HDI = 1/3(Income Index) + 1/3(Life Expectancy Index)
+ 1/3(Education Index)
• HDI scale [0 – 1] lowest to highest
• How to calculate Income Index?
• Income Index = [log(GNI income per capita) –
log(163)]/[log($108,211) – log(163)]

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 5. New HDI
• How to calculate Life Expectancy Index ?
• Life Expectancy Index = [(life expectancy at
birth) – (20)]/[(maximum life expectancy) –
(20)]
• How to calculate Education index?
• Education Index =[[1/2(mean year of schooling
Index) + 1/2(expected year of schooling index)]
-0] / (gross school enrollment Index= 0.951) - 0

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 5. New HDI
• How to calculate Mean year of schooling index?
• Mean Year of Schooling Index = [(mean year of
schooling) – (0)]/[(Max year of schooling=13.2) – (0)]

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 5. New HDI
• How to calculate Expected Year of Schooling index?
• Expected Year of Schooling Index = [(Expected Year of
schooling) – (0)]/[(Max exp. year of schooling=20.6) –
(0)]

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 Exercises 3
• Calculate the NHDI for China.
– Suppose that PPP GNI per capita 7,263$ and life
expectancy at birth (years) is 73.5 with estimated
maximum of 83.2.
– Suppose mean year of schooling (years) is 7.5 and
expected year of schooling (years) is 11.4.

NHDI = 0.66

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 Exercises 4
• Calculate the NHDI for Japan.
– Suppose that PPP GNI per capita 50,263$ and life
expectancy at birth (years) is 80 with estimated
maximum of 87.2.
– Suppose mean year of schooling (years) is 12.5
and expected year of schooling (years) is 18.

NHDI = 0.90

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Let’s see NHDI index of some
countries.

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THANKS YOU!
សូមអរគុណ!

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