Economic Development

Starter:
Do you think the standard of living has increased in
Mongolia over the past 50 years?
Why? How could you measure this?
Homework
Your new homework timetable will be as follows:
Homework will be set every friday and due in for the friday
after.
This way I can remind you during the week and you can ask any
questions before it is handed in.
Examples of ways to measure economic development

- Enrollment in education/adult literacy rates

- Number of patients per doctor/quality of healthcare
- Quality of goods and services
- How ‘free’ are the elections and politics/corruption
3 main ways of measuring economic development

1) Real GDP per capita

2) Human Development Index (HDI)
3) Genuine Progress Indicator (GPI)

We can measure development in the same country

across a number of years or compare countries
Real GDP per capita

Can you guess the top 10 countries for GDP

per capita?
Real GDP per capita

This is a good measurement and will usually show trends

in standard of living.
However, an increase in real GDP may not always cause
an increase in living standards. The extra income may
unevenly distributed, or the extra goods and services may
be demerit goods (cigarettes). Extra output could mean
worse working conditions or more pollution.
If the number of doctors is rising because more people are
getting ill this is also bad etc.
Real GDP per capita

When comparing countries, other factors may be missed out

such as the size of the informal economy which will not
contribute to real gdp.
There are also issues with the exchange rate. A heavily fluctuating
currency can cause real GDP to change drastically, making it hard to
use.
This is why we use PPP (purchasing power parity), to compare how
many goods and services we are able
Human Development Index (HDI)

The HDI was created to give a better overview of economic

development.
The HDI combines real GDP/capita with life expectancy and
education levels.
Genuine Progress Indicator (GPI)

This uses real GDP per capita but applies a weighting to

account for the distribution of wealth.
Other indices

Gender Inequality Index

Happy Life Expectancy Index
Poverty 12/01/21

Starter:
Discuss whether or not the HDI is a good measure of
living standards. (8 marks)

Hint: Think about what makes a good measurement and

what makes a bad measurement of living standards.
Discuss what the HDI is and how it fits into this.
The HDI is a good measure of living standards because it is based on
multiple factors of living standards, including education and life
expectancy alongside real GDP per capita. This takes into account more
factors than just GDP alone and gives a more well rounded view of the
living standards in a certain country. There are many countries which
would score well on the GDP rankings but poorly on the HDI rankings,
showing us that countries with high GDP may not have good human
development.
On the other hand, the HDI has some downfalls. Just like most measures,
it misses out key factors which may have an impact on economic
development such as the environment and political freedom. It also
misses out imbalances in education, income and life expectancy between
men and women, showing that it misses out the key measurement of
gender inequality.
Wealth Distribution vs Income Distribution

Wealth is much more unevenly distributed than

income.
Wealth grows more wealth through investments in
things such as the stock market.
Poverty

There are differences in the definitions of poverty.

Absolute poverty is when people do not have enough money to pay for
their basic needs (healthcare, shelter, food etc.).
The absolute poverty line has been defined as living on less than $1.90 a
day. Around 9.2% of the world or 689 million people live in absolute
poverty.
Relative poverty is when people earn much less than the people in their
country and cannot afford to participate in the normal activities of the
society they live in.
Why do people end up in poverty?

Loss of job - lack of opportunities

Falling ill - poor healthcare
Growing old
Disability
Lack of education
All the problems are cyclical. They cause each other to get
worse.
Multidimensional Poverty Index (MDI)

This index determines the level of poverty in countries and uses the data
to look more in depth at what in going on across the world.
The categories are health, education and standard of living but are all split
up further.
What do you think are some of the possible ways the
government can try to reduce poverty?
Which of these are most important in Mongolia?
Ways to improve poverty
Improving the quality and quantity of education
Promoting economic growth - increasing aggregate
demand to increase employment
Introducing (or raising) a national minimum wage
Encouraging big companies to set up in the area
Benefits
Land reform