Economic Development Indicators: Real Per Capita GNP and Human Development Index, Slides of Human Resource Management

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Aggregate Indicators of Economic Development

"Not everything that counts is countable and not everything that is countable counts." Albert Einstein

Fall 2010

Meaning and Measurement

What do we mean by economic development?

Why do we need indicators?

Does it matter how we measure it?

PPP Example 1

Two countries and two goods

Computers Ice Cream Price of Price of Country Produced Produced Computers Ice Cream per Capita per Capita Local Units Local Units Canada 12 4 2 4 Mexico 3 1 1 1

Huw Lloyd-Ellis () Docsity.com

PPP Example 2

What if consumption baskets are not proportional?

DVDs Hair Cuts Price of Price of Country Produced Produced DVDs in Hair Cuts in per Capita per Capita Local Currency Local Currency USA 9 4 2 4 China 3 4 10 10

Huw Lloyd-Ellis () Docsity.com

Figure: Parade of World Income (Weil, 2009)

Dangers of looking only at per capita GNP

Paraguay South Africa Per capita GNP 4,642 11, Education enrollment 69.1% 77.0% No Access to Safe Water 14% 12% Share below $2 per day 29.8% 34.1% Life Expectancy 71.3 50. Fraction of not reaching 40 9.7% 31.7% Adult literacy 93.5% 82.4% % under 5 who are underweight 5% 12%

The Human Development Index

An attempt to take account of other factors:

HDI = 13 (longevity) + 13 (knowledge) + 13 (standard of living)

where for country A

longevity = life expectancy in A 25 max. life expectancy 25 knowledge =

(adult literacy index) +

(enrollment rate)

standard of living =

log (per capita GNP of A) log( 100 ) log (max per capita GNP) log( 100 )