What economic development means and how it differs from growth

Overview

Economic development, economic growth and developed economy typically look like.

What you need to know

Answer each one before you reveal it.

Questions from this subtopic

Each one with the model answer underneath.

1. 1

   What is economic development?

   Model answer

   Economic development is a sustained improvement in the material and social wellbeing of a population, involving rising real incomes together with better health, education, security and freedom of choice. It is concerned with the standard of living people actually experience and with the widening of the options available to them, not only with the quantity of output an economy produces.

2. 2

   What is economic growth, and how does it differ from economic development?

   Model answer

   Economic growth is an increase in the real value of the goods and services an economy produces over a period, measured by the change in real gross domestic product. Development is broader: it asks whether the extra output translates into longer, healthier, better-educated and freer lives, and how it is distributed. Growth is a change in a single quantitative measure; development is a change in the quality of life across several dimensions at once.

3. 3

   Explain how an economy can experience strong economic growth without much economic development.

   Model answer

   Growth concentrated in a capital-intensive enclave, such as an oil field or a mine operated by a foreign company, can raise measured output while employing few local people and sending most of the profit abroad. If the additional national income accrues to a narrow elite and is not translated into schools, clinics, clean water or infrastructure, the majority of the population sees no improvement in health, education or living standards. Growth may also come at the cost of pollution, displacement or resource depletion, which reduces wellbeing even as output rises.

4. 4

   Can economic development occur without economic growth?

   Model answer

   Some development can occur without growth, because better allocation of existing income towards primary health care, vaccination, sanitation, female education and basic literacy can raise life expectancy and school enrolment substantially at modest cost. There are documented cases of countries achieving health and education outcomes far above what their income level would predict. However, sustained development is very difficult without growth in the long run, because rising living standards eventually require more resources than redistribution alone can provide, and because the tax base for public services depends on national income.

5. 5

   What does a developed economy typically look like?

   Model answer

   A developed economy typically has high real income per head, high life expectancy and low infant mortality, near-universal literacy and long average schooling, a large service sector with a small share of employment in subsistence agriculture, extensive infrastructure and access to clean water, sanitation and electricity, well-functioning financial and legal institutions, and comparatively low absolute poverty. It also has a high proportion of the workforce in formal, taxed employment, which supports the public revenue that funds these services.

6. 6

   What features are commonly found in a less developed economy?

   Model answer

   Common features include low real income per head, a large share of the labour force in subsistence or low-productivity agriculture, high birth rates and a young population, low average schooling and high adult illiteracy, poor access to clean water, sanitation and reliable electricity, a large informal sector outside the tax system, weak infrastructure and thin financial markets, and dependence on a narrow range of primary exports. Absolute poverty is widespread and there is often high underemployment rather than measured unemployment.

Other ways to work this

The same content, four other ways.

What is inside Levo

Six ways to work the same material.