1. GROWTH & DEVELOPMENT
QUANTITATIVE ANALYSIS
National income as a development
indicator
GDP = Gross Domestic Product =
National income = Output
The value of all final goods &
services produced in a country
in a year
Total income earned in a
country in a year.
PPP (Purschasing Power Parity) = Used
to convert among other years and
countries. determining the relative
value of different currencies
HDI = Human Development Index =
life expectancy, education, and per
capita income.
Measuring income during long
periods of time
Linear Scale
The distance from 1 to 2 is the same as
de distance from 2 to 3.
Ratio Scale (Logarithmic Scale)
The intervals between amounts are
determined by their ratio to each other.
The distance from 1 to 2 is the same
distance from 2 to 4 or from 3 to 6
(representing an increase of 100%).
correlation between two variables
2.
The systematic empirical investigation
of observable phenomena via statistical,
mathematical or computational
techniques.
Used by economists to assign data
magnitudes to the different parts of an
economic model.
Economic models = simplified
representations of reality that can be
used to anayze how economic variables
are determined.
Attribute = characteristic
Variable = operationalised way in
which the attribute is presented for
further data processing.
Its values vary across the
variable domains.
Domain = set of possible values that a
variable is allowed to have.
Types of variables
Continuous variables: unlimited
number of values.
Discrete variables: limited number of
values.
Dummy variables: 2 values
Relationship between two variables
Correlation = degree to which to
variables tend to move together
Correlation Coefficient = degree of
A number between -1 and 1
1 = perfect positive
correlation
-1 = perfect negative
correlation
0 = no tendency for the two
quantities to vary together.
Causation = X Y
Reverse Causation = Y X
Omitted Causation = Z X & Y
Distribution
How data is spread out.
Normal distribution = the bell curve is
formed (symmetrical distribution about
the center)
Mean (expectation) = average
of the numbers = sum / count
Median = middle of a sorted list
of numbers
Mode = the number with
appears most often
Standard Deviation = how spread out
numbers are =
Econometrics
Combination of statistics and
economics.
Framework
Inputs = labor + capital goods &
service (outputs)
Investment = goods & service devoted
to the production of new capital
Productivity = amount of output
produced per each unit of capital =
technology * efficiency.
Technology = available
knowledge about how inputs
can be combined to produce
output
Efficiency = how technology &
inputs are actually used in
producing output
check
3. PHYSICAL CAPITAL
Capital = Tools = Physical objects that
extend our ability or do work for us
Its produced investment
savings
Its productive raises the
amount of output that a worker
produce
It can earn a return
Its use is limited
It wears out = depreciation
4 & 5. OPULATION AND
ECONOMIC GROWTH
Relationship between income per
capita and population growth
Population can be a determinant of
income in two different ways:
size of the population
growth rate of the population
Economic forces kept population
growth inc lose check ! relationship
between population and economy has
changed radically in the last two
centuries.
Determinants: mortality & fertility
The Malthusian Model
Population naturally tends to
increase ! its mine limitation is the
availability of resources (land)
Positive check by nature determines
population ! humans use preventive
Positive check = low population-land
ratio makes people better off
population growth decreasing living
standards limit population growth
Preventive check = humans deliberate
to reduce fertility in order to break
poverty cycle
Breakdown of the Malthusian Model
The model no longer works
Population growth post-1800
Demographic transition: the process
by which a countrys demographic
characteristics are transformed as it
develops.
mortality transition
fertility transition
The incompleteness of the
demographic transition (mortality rates
fall faster than fertility rates)
population growth on the developing
world
Reasons for decline on mortality
rates:
improved nutrition
improved public health
medical advances
Reasons for decline on fertility rates:
contraceptives
declining mortality rate
income effect
substitution effect
(opportunity costs of having
children decreases on
developing children)
quality-quantity trade-off
Measures of fertility
Total Fertility Rate (TFR) = number of
children that a woman would have if she
lived through all of her childbearing
years and experienced the current age-
specific fertility rates at each age
Net Rate of Reproduction (NRR) = the
number of daughters that each girl who
is born can be expected to give birth to
Replacement Fertility Rate (RFR) =
the TFR at which the population
remains constant
Slowdown of Population Growth
The slowdown of population growth
will have a positive effect on countrys
per-capote income
! Lower fertility does not immediately
lead to lower population growth, this
depends also on the number of women
in reproductive age (demographic
momentum)
Population Aging
Causes:
Declining mortality
Declining fertility
Economic effects:
Developed countries
negative growth effect
(demographic burden)
Developing countries
positive growth effect
(demographic gift)
Economic growth effect of age
structure
Living standards depend of both
productivity and the relative share of
economically active population
GDP per capita =
growth rate of GDP p.c. = growth rate of
GDP per worker + growth rate of
working age fraction of population
contributor and a result of
6. HUMAN CAPITAL
The stock of knowledge, habits, social
and personality attributes, including
creativity, embodied in the ability to
perform labor so as to produce
economic value.
productive
produced
earn a return
depreciate
! had one more year of schooling.
directly attached to a person
not only a production factor
Differences in the quality of labor
Labor is constant across countries,
people and over time
! TFP = (total factor productivity) = A
workes can be:
weak / strong
ill / healthy
ignorant / educated
motivated / unmotivated
Human capital in the form of health
Healthier workers:
work harder and longer
are not absent
have better cognitive abilities
Better health >GDP
Measures of malnutrition:
underweight (weigth-for-age)
growth stunting (heigth-for-
age)
wasting (weight-for-height)
Endogenous health advances
Better health also a
higher incomes
Exogenous health advances
Introduction of new vaccines
or medicines
Human capital in the form of
education
In developed economies intellectual is
far more important than physical ability.
Return to education = The increase in
wage that a worker would receive if he
7. PRODUCTIVITY
The effectiveness with which factors of
production are converted into output
Technology = available
knowledge about how inputs
can be combined to produce
output.
Efficiency = how well the
available technology and inputs
into production are actually
used in producing output
Biases in measurement of human
capital
measured in quantity of
education
differences in human capital
between developed and
developing countries is
underestimated
 corruption in developing
countries wrong reporting
difference in physical capital
between rich and poor countries
is underestimated
10. EFFICIENCY
How well the available technology and
inputs into production are actually used
in producing output.

Types of inefficiency

8 & 9. TECHNOLOGY Unproductive Activities

Idle resources
Available knowledge about how inputs Misallocation of factors among sectors
can be combined to produce output. Technology blocking

Technical change is the major driver

of productivity
Technical change allows economies
to transcend the limitations imposed by
the diminishing returns to capital

New ideas

copyrights
trademarks
patents

innovating countries
imitating countries

ideas face similar problems as public

R&D means high initial investments

Barriers to international technology

transfer

Appropriate technology
Tacit knowledge