Economic Growth &

Development

Economic growth vs Economic

Development
Economic growth refers to increases in output and

incomes over time, often measured on a per capita basis.

On the other hand, Economic development refers to a
process that leads to improved standards of living for a
population as a whole.
Increasing levels of output and incomes resulting from
economic growth mean that societies can better satisfy the
needs and wants of their populations and secure
improvements in their standards of living. However, while
economic growth can make improved levels of living
possible, it does not by itself guarantee that this will occur

Economic Development
Economic development implies changes in
income, savings and investment along with
Implications progressive changes in socio-economic
structure of country (institutional and
technological changes).
Development relates to growth of human
capital indexes, a decrease in inequality
Factors figures, and structural changes that improve
the general population's quality of life.
Qualitative. HDI (Human Development
Index), gender- related index (GDI), Human
Measurement
poverty index (HPI), infant mortality, literacy
rate etc.
Brings qualitative and quantitative changes in
Effect
the economy
Economic development is more relevant to
measure progress and quality of life in
Relevance developing nations.

Scope

Concerned with structural changes in the

economy

Economic Growth
Economic growth refers to an increase in
the real output of goods and services in
the country.

Growth relates to a gradual increase in

one of the components of Gross
Domestic Product: consumption,
government spending, investment, net
exports.
Quantitative. Increases in real GDP.

Brings quantitative changes in the

economy
Economic growth is a more relevant
metric for progress in developed
countries. But it's widely used in all
countries because growth is a necessary
condition for development.
Growth is concerned with increase in the
economy's output

What is Economic development?

Economic development is a broad term that does not have a single, unique
definition.

Economist Michael Todaro specified three objectives of development:

1.
Life sustaining goods and services: To increase the availability and widen the
distribution of basic life-sustaining goods such as food, shelter, health and
protection.

2.

Higher incomes: To raise levels of living, including, in addition to higher

incomes, the provision of more jobs, better education, and greater attention to
cultural and human values, all of which will serve not only to enhance material
well-being but also to generate greater individual and national self-esteem

3.

Freedom to make economic and social choices: To expand the range of

economic and social choices available to individuals and nations by freeing them
from servitude and dependence not only in relation to other people and nationstates but also to the forces of ignorance and human misery.

Sources of Economic Growth

Natural Factors- increasing the quantity of natural factors
is mucho difficult. That is why nations focus on
improving the quality of natural factors rather than the
quantity. Quality over quantity. They do this by better
farming techniques, investment in infrastructure and
capital goods to be better equipped.
Human Capital Factors- The most obvious way would be
to aim to increase the population but LEDCs would
rather not. Most of the labour available in LEDCs is not
skilled so training programs, improved health care,
improved educations system.

 Physical Capital and technological factors- improving the

countrys infrastructure. Capital widening involves greater
investment to make use of existing technology. Capital
deepening attempts to increase output through better
technology and using the same amount of inputs. i.e. it
attempts to make capital more productive.

Institutional Factors- must have a good central bank.

Good laws. Good government and stable political
situations and a good education system.

Does economic growth lead to

economic development?
Jes, jes it does.

1.

Economic growth means higher GDP meaning higher GDP per capita. Higher incomes
usually indicate a better standard of living. Though this might be problematic as
growing GDPs dont always mean better standard of living primarily due to the
presence of income inequality.

2.

Data indicates that higher GDP usually leads to better HDI hence improved economic
indicators of welfare.

3.

Rising GDP means more monies for governments. The increased tax revenue can be
utilised on public services to further development.

4.

Increased inequality especially if growth is achieved through market-based initiatives.

Developing countries might experience trickle down effect (The trickle-down effect is
an economic phenomenon whereby low-income groups benefit indirectly from the
accumulation of wealth of those having higher incomes; that is, the income is said to
"trickle down" from the rich to the poor. This phenomenon happens as a result of
economic growth.)

5.

Negative externalities and much pollution

U.N. Millennium Development

Goals
1. Reduce poverty & hunger from 17% to 8% of worlds
population
2. All children complete primary school
3. Gender equality in education & literacy
4. Reduce 5-year mortality (now 88 p 1000 LDCs)
5. Reduce maternal death rate (now 1/48)
6. Reduce HIV/AIDS
7. Progress in environmental sustainability
8. Global partnership for development