Human Development Index

Human Development Index

The Human Development Index (HDI) is a composite statistic used as an index/glossary to rank countries by level of "human development" and separate developed (high development), developing (middle development), and underdeveloped (low development) countries. The statistic is composed from statistics for Life Expectancy, Education, Standard of living and GDP collected at the national level using the formula given in the Methodology section below.

Origins of the HDI

The origins of the HDI are to be found in the United Nations Development Programme's (UNDP) Human Development Reports (HDRs). These were devised and launched by Pakistani Economist Mahbub ul Haq in 1990 and had the explicit purpose: ‘‘to shift the focus of development economics from national income accounting to people centered policies.’’ To produce the HDRs, Haq brought together a group of well known development economists including: Paul Streeten, Frances Stewart, Gustav Ranis, Keith Griffin, Sudhir Anand, and Meghnad Desai. But it was Amartya Sen’s work on capabilities and functionings that provided the underlying conceptual framework. Haq was sure that a simple composite measure of human development was needed in order to convince the public, academics, and policy-makers that they can and should evaluate development not only by economic advances but also improvements in human well-being. Sen initially opposed this idea, but he went on to help Haq develop the Human Development Index (HDI). Sen was worried that it was difficult to capture the full complexity of human capabilities in a single index but Haq persuaded him that only a single number would shift the attention of policy-makers from concentration on economic to human well-being.


The HDI has been used since 1990 by the United Nations Development Programme for its annual Human Development Reports.


Three dimensions in the HDI

The HDI combines three dimensions:

Life expectancy at birth, as an index of population health and longevity

Knowledge and education, as measured by the adult literacy rate (with two-thirds weighting) and the combined primary, secondary, and tertiary gross enrollment ratio (with one-third weighting).

Standard of living, as measured by the natural logarithm of gross domestic product per capita at purchasing power parity.

Methodology


HDI trends between 1975 and 2004 OECD

Central and eastern Europe, and the CIS

Latin America and the Caribbean

East Asia Arab States

South Asia

ub-Saharan Africa

The formula defining the HDI is promulgated by the United Nations Development Programme (UNDP)[4] In general, to transform a raw variable, say x, into a unit-free index between 0 and 1 (which allows different indices to be added together), the following formula is used:

x-index =

where and are the lowest and highest values the variable x can attain, respectively.


The Human Development Index (HDI) then represents the uniformly weighted sum with ⅓ contributed by each of the following factor indices:

Life Expectancy Index =

Education Index =

Adult Literacy Index (ALI) =

Gross Enrollment Index (GEI) =

GDP =

2009 report

Main article: List of countries by Human Development Index

The 2009 report was released on October 5, 2009, and covers the period up to 2007. It was titled "Overcoming barriers: Human mobility and development". The top countries by HDI were grouped in a new category called "Very High Human Development". The report refers to these countries as "developed countries".They are:



Norway 0.971 (▲ 1)

Australia 0.970 (▲ 2)

Iceland 0.969 (▼ 2)

Canada 0.966 (▼ 1)

Ireland 0.965 (▬)

Netherlands 0.964 (▬)

Sweden 0.963 (▬)

France 0.961 (▲ 3)

Switzerland 0.960 (▬)

Japan 0.960 (▬)

Luxembourg 0.960 (▼ 3)

Finland 0.959 (▲ 1)

United States 0.956 (▼ 1)

Austria 0.955 (▲ 2)

Spain 0.955 (▬)

Denmark 0.955 (▼ 2)

Belgium 0.953 (▬)

Italy 0.951 (▲ 1)

Liechtenstein 0.951 (▼ 1)

New Zealand 0.950 (▬)

United Kingdom 0.947 (▬)

Germany 0.947 (▬)

Singapore 0.944 (▲ 1)

Hong Kong 0.944 (▼ 1)

Greece 0.942 (▬)

South Korea 0.937 (▬)

Israel 0.935 (▲ 1)

Andorra 0.934 (▼ 1)

Slovenia 0.929 (▬)

Brunei 0.920 (▬)

Kuwait 0.916 (▬)

Cyprus 0.914 (▬)

Qatar 0.910 (▲ 1)

Portugal 0.909 (▼ 1)

United Arab Emirates 0.903 (▲ 2)

Czech Republic 0.903 (▬)

Barbados 0.903 (▲ 2)

Malta 0.902 (▼ 3)


In this report, five countries were promoted from the "medium" category to the "high development" category: Grenada, Peru, Colombia, Turkey, and Lebanon. Furthermore Angola, Lesotho, Uganda and Nigeria left the "low" category and are now in the "medium" group.


Countries not included

The following nations are not ranked in the 2009 Human Development Index, for being unable or unwilling to provide the necessary data at the time of publication.

Africa
Zimbabwe
Asia
Iraq
North Korea
Taiwan
Europe
Monaco
San Marino
Vatican City
Oceania
Fiji
Kiribati
Marshall Islands
Micronesia

Nauru

Palau

Tuvalu





2008 statistical update

List of countries by Human Development Index

A new index was released on December 18, 2008. This so-called "statistical update" covers the period up to 2006 and was published without an accompanying report on human development. The update is relevant due to newly released estimates of purchasing power parities (PPP), implying substantial adjustments for many countries, resulting in changes in HDI values and, in many cases, HDI ranks.[6]



Iceland 0.968 (▬)

Norway 0.968 (▬)

Canada 0.967 (▲ 1)

Australia 0.965 (▼ 1)

Ireland 0.960 (▬)

Netherlands 0.958 (▲ 3)

Sweden 0.958 (▼ 1)

Japan 0.956 (▬)

Luxembourg 0.956 (▲ 9)

Switzerland 0.955 (▼ 3)

France 0.955 (▼ 1)

Finland 0.954 (▼ 1)

Denmark 0.952 (▲ 1)

Austria 0.951 (▲ 1)

United States 0.950 (▼ 3)

Spain 0.949 (▼ 3)

Belgium 0.948 (▼ 1)

Greece 0.947 (▲ 6)

Italy 0.945 (▲ 1)

New Zealand 0.944 (▼ 1)

United Kingdom 0.942 (▼ 4)

Hong Kong 0.942 (▼ 1)

Germany 0.940 (▼ 1)

Israel 0.930 (▼ 1)

South Korea 0.928 (▲ 1)

Slovenia 0.923 (▲ 1)

Brunei 0.919 (▲ 3)

Singapore 0.918 (▼ 3)

Kuwait 0.912 (▲ 4)

Cyprus 0.912 (▼ 2)

United Arab Emirates 0.903 (▲ 8)

Bahrain 0.902 (▲ 9)

Portugal 0.900 (▼ 4)





[edit] Countries not included

The following nations are not ranked in the 2008 Human Development Index, for being unable or unwilling to provide the necessary data at the time of publication.



Africa



Somalia

Zimbabwe

Asia



Taiwan

Europe



Andorra

Liechtenstein

Monaco

San Marino

Vatican City

Oceania



Kiribati

Marshall Islands

Micronesia

Nauru

Palau

Tuvalu



2007/2008 report

The report for 2007/2008 was launched in Brasilia, Brazil, on November 27, 2007. Its focus was on "Fighting climate change: Human solidarity in a divided world."[7] Most of the data used for the report are derived largely from 2005 or earlier, thus indicating an HDI for 2005. Not all UN member states choose to or are able to provide the necessary statistics.



The report showed a small increase in world HDI in comparison with last year's report. This rise was fueled by a general improvement in the developing world, especially of the least developed countries group. This marked improvement at the bottom was offset with a decrease in HDI of high income countries.



A HDI below 0.5 is considered to represent "low development". All 22 countries in that category are located in Africa. The highest-scoring Sub-Saharan countries, Gabon and South Africa, are ranked 119th and 121st, respectively. Nine countries departed from this category this year and joined the "medium development" group.



A HDI of 0.8 or more is considered to represent "high development". This includes all developed countries, such as those in North America, Western Europe, Oceania, and Eastern Asia, as well as some developing countries in Eastern Europe, Central and South America, Southeast Asia, the Caribbean, and the oil-rich Arabian Peninsula. Seven countries were promoted to this category this year, leaving the "medium development" group: Albania, Belarus, Brazil, Libya, Macedonia, Russia and Saudi Arabia.



On the following table, green arrows (▲) represent an increase in ranking over the previous study, while red arrows (▼) represent a decrease in ranking. They are followed by the number of spaces they moved. Blue dashes (▬) represent a nation that did not move in the rankings since the previous study.





Iceland 0.968 (▲ 1)

Norway 0.968 (▼ 1)

Australia 0.962 (▬)

Canada 0.961 (▲ 2)

Ireland 0.959 (▼ 1)

Sweden 0.956 (▼ 1)

Switzerland 0.955 (▲ 2)

Japan 0.953 (▼ 1)

Netherlands 0.953 (▲ 1)

France 0.952 (▲ 6)

Finland 0.952 (▬)

United States 0.951 (▼ 4)

Spain 0.949 (▲ 6)

Denmark 0.949 (▲ 1)

Austria 0.948 (▼ 1)

Belgium 0.946 (▼ 4)

United Kingdom 0.946 (▲ 1)

Luxembourg 0.944 (▼ 6)

New Zealand 0.943 (▲ 1)

Italy 0.941 (▼ 3)

Hong Kong 0.937 (▲ 1)

Germany 0.935 (▲ 1)

Israel 0.932 (▬)

Greece 0.926 (▬)

Singapore 0.922 (▬)

South Korea 0.921 (▬)

Slovenia 0.917 (▬)

Cyprus 0.903 (▲ 1)

Portugal 0.897 (▼ 1)

Brunei 0.894 (▲ 4)





[edit] Past top countries

The list below displays the top-ranked country from each year of the index. Canada has been ranked the highest eight times, followed by Norway at seven times. Japan has been ranked highest three times and Iceland twice.



[edit] In each original report

The year represents when the report was published. In parentheses is the year for which the index was calculated.



2009 (2007)– Norway

2008 (2006)– Iceland

2007 (2005)– Iceland

2006 (2004)– Norway

2005 (2003)– Norway

2004 (2002)– Norway

2003 (2001)– Norway

2002 (2000)– Norway

2001 (1999)– Norway

2000 (1998)– Canada

1999 (1997)– Canada

1998 (1995)– Canada

1997 (1994)– Canada

1996 (1993)– Canada

1995 (1992)– Canada

1994 (????)– Canada

1993 (????)– Japan

1992 (1990)– Canada

1991 (1990)– Japan

1990 (????)– Japan





 2009 revision

The 2009 Report calculated HDIs for past years using a consistent methodology and data series. They are not strictly comparable with those in earlier Human Development Reports. The index was calculated using data pertaining to the year shown.



2007– Iceland

2006– Norway

2005– Norway

2000– Canada

1995– Canada

1990– Canada

1985– Canada

1980– Canada





Criticims
The Human Development Index has been criticised on a number of grounds, including failure to include any ecological considerations, focusing exclusively on national performance and ranking, and not paying much attention to development from a global perspective. Two authors claimed that the human development reports "have lost touch with their original vision and the index fails to capture the essence of the world it seeks to portray".[8] The index has also been criticized as "redundant" and a "reinvention of the wheel", measuring aspects of development that have already been exhaustively studied.[9][10] The index has further been criticised for having an inappropriate treatment of income, lacking year-to-year comparability, and assessing development differently in different groups of countries.[11]



Economist Bryan Caplan has criticised the way scores in each of the three components are bounded between zero and one, so rich countries effectively cannot improve their ranking in certain categories, even though there is a lot of scope for economic growth and longevity left. "This effectively means that a country of immortals with infinite per-capita GDP would get a score of .666 (lower than South Africa and Tajikistan) if its population were illiterate and never went to school."[12] He argues, "Scandinavia comes out on top according to the HDI because the HDI is basically a measure of how Scandinavian your country is."[12]



The HDI has been criticised as a redundant measure that adds little to the value of the individual measures composing it; as a means to provide legitimacy to arbitrary weightings of a few aspects of social development; as a number producing a relative ranking which is useless for inter-temporal comparisons, and difficult to compare a country's progress or regression because the HDI for a country in a given year depends on the levels of, say, life expectancy or GDP per capita of other countries in that year.[13][14][15][16] However, each year, UN member states are listed and ranked according to the computed HDI. If high, the rank in the list can be easily used as a means of national aggrandizement; alternatively, if low, it can be used to highlight national insufficiencies. Using the HDI as an absolute index of social welfare, some authors have used panel HDI data to measure the impact of economic policies on quality of life.



Ratan Lal Basu criticises the HDI concept from a completely different angle. According to him the Amartya Sen-Mahbub ul Haq concept of HDI considers that provision of material amenities alone would bring about Human Development, but Basu opines that Human Development in the true sense should embrace both material and moral development. According to him human development based on HDI alone, is similar to dairy farm economics to improve dairy farm output. To quote: ‘So human development effort should not end up in amelioration of material deprivations alone: it must undertake to bring about spiritual and moral development to assist the biped to become truly human.’ For example, a high suicide rate would bring the index down.



A few authors have proposed alternative indices to address some of the index's shortcomings.[19] However, of those proposed alternatives to the HDI, few have produced alternatives covering so many countries, and that no development index (other than, perhaps, Gross Domestic Product per capita) has been used so extensively - or effectively, in discussions and developmental planning as the HDI.



However, there has been one lament about the HDI that has resulted in an alternative index: David Hastings, of the United Nations Economic and Social Commission for Asia and the Pacific published a report geographically extending the HDI to 230+ economies, where the UNDP HDI for 2009 enumerates 182 economies

Physical Quality of Life Index

The Physical Quality of Life Index (PQLI) is an attempt to measure the quality of life or well-being of a country. The value is the average of three statistics: basic literacy rate, infant mortality, and life expectancy at age one, all equally weighted on a 0 to 100 scale.


It was developed for the Overseas Development Council in the mid-1970s by Morris David Morris, as one of a number of measures created due to dissatisfaction with the use of GNP as an indicator of development. PQLI might be regarded as an improvement but shares the general problems of measuring quality of life in a quantitative way. It has also been criticized because there is considerable overlap between infant mortality and life expectancy.

The UN Human Development Index is a more widely used means of measuring well-being.

Steps to Calculate Physical Quality of Life:

1) Find percentage of the population that is literate (literacy rate).

2) Find the infant mortality rate. (out of 1000 births) INDEXED Infant Mortality Rate = (166 - infant mortality) × 0.625

3) Find the Life Expectancy. INDEXED Life Expectancy = (Life expectancy - 42) × 2.7


4) Physical Quality of Life =


(Literacy Rate + INDEXED Infant Mortality Rate + INDEXED Life Expectancy)

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FEATURES OF DEVELOPING ECONOMIES OR UNDER DEVELOPED COUNTRIES

Low per capita income :-The overall poverty ratio may have declined to 21.8% in 2004-05 from 26.1% in 1999-2000 as per the report of National Sample Survey (NSS) released by the Planning Commission but the per capita income per month is still as low as Rs 292.95 in rural Andhra Pradesh against the national average of Rs 356.30 and Rs 378.84 in urban Assam against the national average of Rs 538.60.



The per capita income in rural areas is maximum at Rs 478.02 in Uttarakhand while the highest per capita income in urban areas is Maharashtra and also in Dadra and Nagar Haveli and Goa at Rs 665.90. The tie among the three territories is because the report has used the same estimation for the three of them. Another interesting fact that the figures in the report show is that though Uttarakhand has the highest per capita income in rural areas it has as many as 27.11 lakh people living below poverty line in rural areas at 40.8% which is almost double the national average of 28.3%.






The state has the fourth largest number of people living below poverty line at 39.6% both in rural and urban areas in 2004-05. This has been calculated using the uniform recall period methodology


predominance on Agriculture:- Agriculture in India is one of the most important sectors of its economy. It is the means of livelihood of almost two thirds of the work force in the country and according to the economic data for the financial year 2006-07, agriculture accounts for 18% of India's GDP. About 43 % of India's geographical area is used for agricultural activity. Though the share of Indian agriculture in the GDP has steadily declined, it is still the single largest contributor to the GDP and plays a vital role in the overall socio-economic development of India.



One of the biggest success stories of independent India is the rapid strides made in the field of agriculture. From a nation dependent on food imports to feed its population, India today is not only self-sufficient in grain production but also has substantial reserves. Dependence of India on agricultural imports and the crises of food shortage encountered in 1960s convinced planners that India's growing population, as well as concerns about national independence, security, and political stability, required self-sufficiency in food production. This perception led to a program of agricultural improvement called the Green Revolution. It involved bringing additional area under cultivation, extension of irrigation facilities, the use of improved high-yielding variety of seeds, better techniques evolved through agricultural research, water management, and plant protection through judicious use of fertilisers, pesticides and cropping practices. All these measures had a salutary effect and the production of wheat and rice witnessed quantum leap.




To carry improved technologies to farmers and to replicate the success achieved in the production of wheat and rice a National Pulse Development Programme, covering 13 states, was launched in 1986. Similarly, a Technology Mission on Oilseeds was launched in 1986 to increase production of oilseeds in the country and attain self-sufficiency. Pulses were brought under the Technology Mission in 1990. After the setting up of the Technology Mission, there has been consistent improvement in the production of oilseeds. A new seeds policy has been adopted to provide access to high-quality seeds and plant material for vegetables, fruit, flowers, oilseeds and pulses, without in any way compromising quarantine conditions. To give fillip to the agriculture and make it more profitable, Ministry of Food Processing Industries was set up in July 1988. Government has also taken initiatives to encourage private sector investment in the food processing industry.



However, there are still a host of issues that need to be addressed regarding Indian agriculture. Indian agriculture is heavily dependent on monsoons. The monsoons play a critical role in determining whether the harvest will be rich, average, or poor. The structural weaknesses of the agriculture sector are reflected in the low level of public investment, exhaustion of the yield potential of new high yielding varieties of wheat and rice, unbalanced fertilizer use, low seeds replacement rate, an inadequate incentive system and post harvest value addition.




There is an urgent need for second green revolution in Indian agriculture and taking it to a higher trajectory of 4 per cent annual growth. Following steps need to be taken to achieve this objective:


Doubling the rate of growth of irrigated area;


Reclaiming degraded land and focusing on soil quality;


Improving water management, rain water harvesting and watershed development;


Bridging the knowledge gap through effective extension services;


Diversifying into high value outputs, fruits, vegetables, flowers, herbs and spices, medicinal plants, bamboo, bio-diesel, but with adequate measures to ensure food security;


Providing easy access to credit at affordable rates.


Huge Population Pressue:-
            The problem with a large population in India is probably due to the government's inability to implement FAMILY PLANNING policies. successive governments have failed to tackel this issue which has resulted in a tremendous rise in population in the country. Politicians don't seem to be interested in the welfare of the country and more often than not relegate such issues as unimportant while trying to (or pretending to) deal with other issues, scarcely realising that most of the problems the country faces today are in large part due to the huge population.Implementing the single child and child tax strategies like those of China could have a benificial impact. But, looking at the flip side of things this policy in China has been blamed for a increasingly skewed male- female sex ration in the country.Lack of education in the India also has a huge role to play in the population explosion that has followed since independence. Providing access to sex education and having adult education programs is the least the government could to curb the rise of population. Another factor contributing to the population growth, according to me, is the issue of child marriage. Though the government has an anti child marriage policy and has specified minimum ages for both males and females to get married at, this policy isn't being strictly implemented at the grass root level. Child marriage is still rampant in India.These are just a few of the issues i think the country needs to resolve before embarking on any other mission so to speak. The root cause of most of the problems India faces is population and one this is dealt with other things should fall into place.


As according Census 2001 it  is about 102 crs, it was 84.5 crs in 1991......

CHARACTERISTICS OF DEVELOPING COUNTRIES

The common characteristics of developing countries.
The law levels of living are manifested qualitatively and quantitatively in form of law incomes, inadequate housing, poor health, limited or no education, high infant mortality, low life and work expectancy, and in many cases, a general sense of malouse and hopelessness. For example in 1988, 81% of the world’s total income (US 12,650 billion) was produced by less than 23% of worlds total population living in the economically developed countries.
Law levels of productivity.
Developing countries have relatively low levels of labour productivity, i.e. output per unit of labour. This is mainly due to the absence or severe lack of complementary factor inputs such as physical, capital and / or experienced management to raise labour productivity, there is need to mobilize savings and foreign finance in order to generate new investments in physical capital goods, and build up the stock of human capital through investment in education and training.
In addition, institutional changes in land tenure, credit and banking structures, honest and efficient administrations and the restructuring of educational and training programmes should be tailored to the needs of the developing societies.
High rate of population growth and dependence burdens:
In 1990, the world’s population was estimated at 5.3 billion, of which more than 3/4 lived in the less developed countries. Almost all the developing countries possess high population growth potential characterized by high birth rate and high but declining death rate. Death rates in developing countries have fallen, compared to the past, due to improved health conditions and control of major infectious diseases. On the average annual population growth rate in developing countries is 2% as compared with about 0.7% in developed countries. Birth rates are generally high in the order of 30-40 per 1000 whereas those for advanced countries are less than half that figure.
An important consequence of high birth rate is that a larger proportion of the total population is the younger age groups. This leads to a higher economic dependency burden since about 40% of the population in developed countries. With many dependants to support, it becomes difficult for the workers to save and invest in productive assets.
Developing countries also have a shorter life expectancy averaging 51 years as compared with 75 years for developed countries, implying that a smaller fraction of their population is available as an effective labour force.
Substantial dependence on agricultural produce and export of primary products:
The majority of the people in developing countries live and work in rural areas. Over 75% of the population in African and 63% in Asia are dependant on agriculture compared to only 5.5% in North America. Agriculture contributes well over 20% of GDP for most developing countries compared to only 3% in developed countries.
In Uganda agriculture contributes a bout 45% of GDP and close to 90% of the population like and work in rural areas, heavily dependent on subsistence agriculture for a livelihood and the production of a few cash crops for an income.
The basic reasons for the concentration of people are basic needs of food, clothing and shelter.
Agriculture productivity is low because of primitive technology, poor organization and limited physical and human capital inputs.
Primary products account for over 60% of all exports in developing countries and over 94% of total export earnings in sub- Saharan Africa.
Other factors include:
1. Dominance, dependence, and vulnerability in international relations.
2. High and rising levels of unemployment and under employment.
3. A dualistic economy.
4. technological backwardness. 

Differences Between Developed and Developing Countries

Differences Between Developed and Developing Countries Birth Rates Developing countries have high birth rates because Many parents will have a lot of children in the expectation that some will die because of the high infant mortality rate Large families can help in looking after the farm The children will be able to look after their parents if they become old or sick; there may not be a old age pension scheme There may be a shortage of family planning facilities and advice This scattergraph shows that a country with a high infant mortality (many children dieing young) will tend to have a higher birth rate. Developed countries have low birth rates because It is expensive to look after large families More women prefer to concentrate on their careers Increasing sexual equality has meant women have more control over their own fertility There is a ready availability of contraception and family planning advice Death Rates Developing countries have high death rates because, in many cases, there are Dirty, unreliable water supplies Poor housing conditions Poor access to medical sevices Endemic disease in some countries Diets that are short in calories and/or protein Developed countries have low death rates because, in many cases, there are Good housing conditions Safe water supplies More than enough food to eat Advanced medical services which are easy to access Some developed countries have a high death rate as they have an ageing population with many older people.

Meaning and Definition of Developing economies or Under developed countries

Developing country is a term generally used to describe a nation with a low level of material well being. There is no single internationally-recognized definition of developed country, and the levels of development may vary widely within so-called developing countries, with some developing countries having high average standards of living.Countries with more advanced economies than other developing nations, but which have not yet fully demonstrated the signs of a developed country, are grouped under the term newly industrialized countries.

Definition

Kofi Annan, former Secretary General of the United Nations, defined a developed country as follows. "A developed country is one that allows all its citizens to enjoy a free and healthy life in a safe environment.But according to the United Nations Statistics Division,

There is no established convention for the designation of "developed" and "developing" countries or areas in the United Nations system.

And it notes that

The designations "developed" and "developing" are intended for statistical convenience and do not necessarily express a judgement about the stage reached by a particular country or area in the development process.

The UN also notes

In common practice, Japan in Asia, Canada and the United States in northern America, Australia and New Zealand in Oceania, and Europe are considered "developed" regions or areas. In international trade statistics, the Southern African Customs Union is also treated as a developed region and Israel as a developed country; countries emerging from the former Yugoslavia, except for Slovenia, are treated as developing countries; and countries of eastern Europe and the Commonwealth of Independent States (code 172) in Europe are not included under either developed or developing regions.^[9]

According to the classification from IMF before April 2004, all the countries of Eastern Europe (including Central European countries which still belongs to "Eastern Europe Group" in the UN institutions) as well as the former Soviet Union (U.S.S.R.) countries in Central Asia (Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan and Turkmenistan) and Mongolia, were not included under either developed or developing regions, but rather were referred to as "countries in transition"; however they are now widely regarded (in the international reports) as "developing countries". In the 21^st century, the original Four Asian Tiger regions (Hong Kong, Singapore South Korea, and Taiwan) are considered "developed" region or areas, along with Cyprus Israel, Malta, and Slovenia, are considered "newly developed countries".
The IMF uses a flexible classification system that considers "(1) per capita income level, (2) export diversification—so oil exporters that have high per capita GDP would not make the advanced classification because around 70% of its exports are oil, and (3) degree of integration into the global financial system."
The World Bank classifies countries into four income groups. Low income countries have GNI per capita of US$975 or less. Lower middle income countries have GNI per capita of US$976–$3,855. Upper middle income countries have GNI per capita between US$3,856–$11,905. High income countries have GNI above $11,906. The World Bank classifies all low- and middle-income countries as developing but notes, "The use of the term is convenient; it is not intended to imply that all economies in the group are experiencing similar development or that other economies have reached a preferred or final stage of development. Classification by income does not necessarily reflect development status."

How to measure the level of development (made easier)

These are the ways in which you can measure the level of development in a country:

Total population=The number of people who live in a country.
Life expectancy=The average age a person lives to in a country.
Birth rate=The number of children born per 1000 of the population per year.
Death rate=The number of people who die per 1000 of the population per year.
GDP per capita=Gross Domestic Produce per person/a measure of wealth per person.
Unemployment rate=The % of people in a country who don't have a job.
Adult literacy=The % of people in a country who can read and write.
Population per doctor=The number of people per doctor.

Measure and concept of development

The development of a country is measured with statistical indexes such as income per capita (per person) (GDP), life expectancy, the rate of literacy, et cetera. The UN has developed the HDI, a compound indicator of the above statistics, to gauge the level of human development for countries where data is available.
Developing countries are in general countries which have not achieved a significant degree of industrialization relative to their populations, and which have, in most cases a medium to low standard of living. There is a strong correlation between low income and high population growth.
The terms utilized when discussing developing countries refer to the intent and to the constructs of those who utilize these terms. Other terms sometimes used are less developed countries (LDCs), least economically developed countries (LEDCs), "underdeveloped nations" or Third World nations, and "non-industrialized nations". Conversely, the opposite end of the spectrum is termed developed countries, most economically developed countries (MEDCs), First World nations and "industrialized nations".
To moderate the euphemistic aspect of the word developing, international organizations have started to use the term Less economically developed country (LEDCs) for the poorest nations which can in no sense be regarded as developing. That is, LEDCs are the poorest subset of LDCs. This may moderate against a belief that the standard of living across the entire developing world is the same.
The concept of the developing nation is found, under one term or another, in numerous theoretical systems having diverse orientations — for example, theories of decolonization, liberation theology, Marxism, anti-imperialism, and political economy.

Criticism of the term 'developing country'

There is criticism of the use of the term ‘developing country’. The term implies inferiority of a 'developing country' compared to a 'developed country', which many such countries dislike. It assumes a desire to ‘develop’ along the traditional 'Western' model of economic development which a few countries, such as Cuba, have chosen not to follow. Thus Cuba remains classed as 'developing' due to its low gross national income but has a lower infant mortality rate than the USA.
The term 'developing' implies mobility and does not acknowledge that development may be in decline or static in some countries, particularly those southern African states worst affected by HIV/AIDS. In such cases, the term developing country may be considered a euphemism. The term implies homogeneity between such countries, which vary widely. The term also implies homogeneity within such countries when wealth (and health) of the most and least affluent groups varies widely.

World Bank's classification of countries by per capita income

The world bank classifies all its member countries (185 of them) and all economies with a population of 30,000 or more (another 24; altogether 209) by various classification.
One of the most commonly referred to classifications is by per capita income (GNI per capita).
There are four classifications based on income - high income, upper middle income, middle income and low income. The current basis of the classification is data from 2007.
Incomes below $935 fall under low income economies. $936 to $3,705 falls under lower middle income economies. $3706 to $11,455 of per capita income is classified as upper middle income economies and above $11,455 of per capita GNI qualifies as a high income economy.
At today's (Nov. 14, 2008) exchange rate (Rs. 49.46 to the USD), that would be - Below Rs. 46, 245 for low income, from there to Rs. 1,83,249 for lower middle income economies, and from there to Rs. 5, 66,564 for upper middle income economies and beyond that for high income economies.
The world Bank, further divides high income economies into two - OECD economies and non- OECD economies. OECD is the Organisation for Economic Cooperation and development

sustainable development

Sustainable development is a pattern of resource use that aims to meet human needs while preserving the environment so that these needs can be met not only in the present, but also for future generations. The term was used by the Brundtland Commission which coined what has become the most often-quoted definition of sustainable development as development that "meets the needs of the present without compromising the ability of future generations to meet their own needs.



Sustainable development ties together concern for the carrying capacity of natural systems with the social challenges facing humanity. As early as the 1970s "sustainability" was employed to describe an economy "in equilibrium with basic ecological support systems."Ecologists have pointed to The Limits to Growth,[citation needed] and presented the alternative of a “steady state economy” in order to address environmental concerns.

The field of sustainable development can be conceptually broken into three constituent parts: environmental sustainability, economic sustainability and sociopolitical sustainability.


Scope and definitions



A representation of sustainability showing how both economy and society are constrained by environmental limits (2003)[5]

Scheme of sustainable development: at the confluence of three constituent parts.(2006)

The natural resource of wind powers these 5MW wind turbines on this wind farm 28 km off the coast of Belgium.The concept has included notions of weak sustainability, strong sustainability and deep ecology. Sustainable development does not focus solely on environmental issues.


In 1987, the United Nations released the Brundtland Report, which defines sustainable development as 'development which meets the needs of the present without compromising the ability of future generations to meet their own needs.'


The United Nations 2005 World Summit Outcome Document refers to the "interdependent and mutually reinforcing pillars" of sustainable development as economic development, social development, and environmental protection.

Indigenous peoples have argued, through various international forums such as the United Nations Permanent Forum on Indigenous Issues and the Convention on Biological Diversity, that there are four pillars of sustainable development, the fourth being cultural. The Universal Declaration on Cultural Diversity (UNESCO, 2001) further elaborates the concept by stating that "...cultural diversity is as necessary for humankind as biodiversity is for nature”; it becomes “one of the roots of development understood not simply in terms of economic growth, but also as a means to achieve a more satisfactory intellectual, emotional, moral and spiritual existence". In this vision, cultural diversity is the fourth policy area of sustainable development.


Economic Sustainability: Agenda 21 clearly identified information, integration, and participation as key building blocks to help countries achieve development that recognises these interdependent pillars. It emphasises that in sustainable development everyone is a user and provider of information. It stresses the need to change from old sector-centred ways of doing business to new approaches that involve cross-sectoral co-ordination and the integration of environmental and social concerns into all development processes. Furthermore, Agenda 21 emphasises that broad public participation in decision making is a fundamental prerequisite for achieving sustainable development.[10]


According to Hasna Vancock, sustainability is a process which tells of a development of all aspects of human life affecting sustenance. It means resolving the conflict between the various competing goals, and involves the simultaneous pursuit of economic prosperity, environmental quality and social equity famously known as three dimensions (triple bottom line) with is the resultant vector being technology, hence it is a continually evolving process; the ‘journey’ (the process of achieving sustainability) is of course vitally important, but only as a means of getting to the destination (the desired future state). However,the ‘destination’ of sustainability is not a fixed place in the normal sense that we understand destination. Instead, it is a set of wishful characteristics of a future system.[11]


Solar towers utilize the natural resource of the sun, and are a renewable energy source. From left: PS10 and PS20 solar towers.Green development is generally differentiated from sustainable development in that Green development prioritizes what its proponents consider to be environmental sustainability over economic and cultural considerations. Proponents of Sustainable Development argue that it provides a context in which to improve overall sustainability where cutting edge Green development is unattainable. For example, a cutting edge treatment plant with extremely high maintenance costs may not be sustainable in regions of the world with fewer financial resources. An environmentally ideal plant that is shut down due to bankruptcy is obviously less sustainable than one that is maintainable by the community, even if it is somewhat less effective from an environmental standpoint.


Some research activities start from this definition to argue that the environment is a combination of nature and culture. The Network of Excellence "Sustainable Development in a Diverse World", sponsored by the European Union, integrates multidisciplinary capacities and interprets cultural diversity as a key element of a new strategy for sustainable development.


Still other researchers view environmental and social challenges as opportunities for development action. This is particularly true in the concept of sustainable enterprise that frames these global needs as opportunities for private enterprise to provide innovative and entrepreneurial solutions. This view is now being taught at many business schools including the Center for Sustainable Global Enterprise at Cornell University and the Erb Institute for Global Sustainable Enterprise at the University of Michigan.


The United Nations Division for Sustainable Development lists the following areas as coming within the scope of sustainable development.

Sustainable development is an eclectic concept, as a wide array of views fall under its umbrella. The concept has included notions of weak sustainability, strong sustainability and deep ecology. Different conceptions also reveal a strong tension between ecocentrism and anthropocentrism. Many definitions and images (Visualizing Sustainability) of sustainable development coexist. Broadly defined, the sustainable development mantra enjoins current generations to take a systems approach to growth and development and to manage natural, produced, and social capital for the welfare of their own and future generations.



During the last ten years, different organizations have tried to measure and monitor the proximity to what they consider sustainability by implementing what has been called sustainability metrics and indices[14].

Sustainable development is said to set limits on the developing world. While current first world countries polluted significantly during their development, the same countries encourage third world countries to reduce pollution, which sometimes impedes growth. Some consider that the implementation of sustainable development would mean a reversion to pre-modern lifestyles.
Others have criticized the overuse of the term:

"[The] word sustainable has been used in too many situations today, and ecological sustainability is one of those terms that confuse a lot of people. You hear about sustainable development, sustainable growth, sustainable economies, sustainable societies, sustainable agriculture. Everything is sustainable (Temple, 1992)."

Environmental sustainability



Water is an important natural resource that covers 71% of the Earth's surface. Image is the Earth photographed from Apollo 17.Environmental sustainability is the process of making sure current processes of interaction with the environment are pursued with the idea of keeping the environment as pristine as naturally possible based on ideal-seeking behavior.


An "unsustainable situation" occurs when natural capital (the sum total of nature's resources) is used up faster than it can be replenished. Sustainability requires that human activity only uses nature's resources at a rate at which they can be replenished naturally. Inherently the concept of sustainable development is intertwined with the concept of carrying capacity. Theoretically, the long-term result of environmental degradation is the inability to sustain human life. Such degradation on a global scale could imply extinction for humanity.


The notion of capital in sustainable development


The sustainable development debate is based on the assumption that societies need to manage three types of capital (economic, social, and natural), which may be non-substitutable and whose consumption might be irreversible.[16] Daly (1991),[17] for example, points to the fact that natural capital can not necessarily be substituted by economic capital. While it is possible that we can find ways to replace some natural resources, it is much more unlikely that they will ever be able to replace eco-system services, such as the protection provided by the ozone layer, or the climate stabilizing function of the Amazonian forest. In fact natural capital, social capital and economic capital are often complementarities. A further obstacle to substitutability lies also in the multi-functionality of many natural resources. Forests, for example, not only provide the raw material for paper (which can be substituted quite easily), but they also maintain biodiversity, regulate water flow, and absorb CO2. Another problem of natural and social capital deterioration lies in their partial irreversibility. The loss in biodiversity, for example, is often definite. The same can be true for cultural diversity. For example with globalisation advancing quickly the number of indigenous languages is dropping at alarming rates. Moreover, the depletion of natural and social capital may have non-linear consequences. Consumption of natural and social capital may have no observable impact until a certain threshold is reached. A lake can, for example, absorb nutrients for a long time while actually increasing its productivity. However, once a certain level of algae is reached lack of oxygen causes the lake’s ecosystem to break down suddenly.

 Market failure


Before flue gas desulfurization was installed, the air-polluting emissions from this power plant in New Mexico contained excessive amounts of sulfur dioxide.If the degradation of natural and social capital has such important consequence the question arises why action is not taken more systematically to alleviate it. Cohen and Winn (2007)[18] point to four types of market failure as possible explanations: First, while the benefits of natural or social capital depletion can usually be privatized the costs are often externalized (i.e. they are borne not by the party responsible but by society in general). Second, natural capital is often undervalued by society since we are not fully aware of the real cost of the depletion of natural capital. Information asymmetry is a third reason—often the link between cause and effect is obscured, making it difficult for actors to make informed choices. Cohen and Winn close with the realization that contrary to economic theory many firms are not perfect optimizers. They postulate that firms often do not optimize resource allocation because they are caught in a "business as usual" mentality.


 The business case for sustainable development


The most broadly accepted criterion for corporate sustainability constitutes a firm’s efficient use of natural capital. This eco-efficiency is usually calculated as the economic value added by a firm in relation to its aggregated ecological impact.[19] This idea has been popularised by the World Business Council for Sustainable Development (WBCSD) under the following definition: “Eco-efficiency is achieved by the delivery of competitively-priced goods and services that satisfy human needs and bring quality of life, while progressively reducing ecological impacts and resource intensity throughout the life-cycle to a level at least in line with the earth’s carrying capacity.” (DeSimone and Popoff, 1997: 47)[20]



Similar to the eco-efficiency concept but so far less explored is the second criterion for corporate sustainability. Socio-efficiency [21] describes the relation between a firm’s value added and its social impact. Whereas, it can be assumed that most corporate impacts on the environment are negative (apart from rare exceptions such as the planting of trees) this is not true for social impacts. These can be either positive (e.g. corporate giving, creation of employment) or negative (e.g. work accidents, mobbing of employees, human rights abuses). Depending on the type of impact socio-efficiency thus either tries to minimize negative social impacts (i.e. accidents per value added) or maximise positive social impacts (i.e. donations per value added) in relation to the value added.



Both eco-efficiency and socio-efficiency are concerned primarily with increasing economic sustainability. In this process they instrumentalize both natural and social capital aiming to benefit from win-win situations. However, as Dyllick and Hockerts[21] point out the business case alone will not be sufficient to realise sustainable development. They point towards eco-effectiveness, socio-effectiveness, sufficiency, and eco-equity as four criteria that need to be met if sustainable development is to be reached.



Critique of the concept of sustainable development


Deforestation and increased road-building in the Amazon Rainforest are a significant concern because of increased human encroachment upon wilderness areas, increased resource extraction and further threats to biodiversity.The concept of “ Sustainable Development ” raises several critiques at different levels.


Purpose


Various writers have commented on the population control agenda that seems to underlie the concept of sustainable development. Maria Sophia Aguirre writes.


"Sustainable development is a policy approach that has gained quite a lot of popularity in recent years, especially in international circles. By attaching a specific interpretation to sustainability, population control policies have become the overriding approach to development, thus becoming the primary tool used to “promote” economic development in developing countries and to protect the environment."




Mary Jo Anderson suggests that the real purpose of sustainable development is to contain and limit economic development in developing countries, and in so doing control population growth.[23] It is suggested that this is the reason the main focus of most programs is still on low-income agriculture. Joan Veon, a businesswoman and international reporter, who covered 64 global meetings on sustainable development posits that



"Sustainable development has continued to evolve as that of protecting the world's resources while its true agenda is to control the world's resources. It should be noted that Agenda 21 sets up the global infrastructure needed to manage, count, and control all of the world's assets."


Consequences
The retreat of Aletsch Glacier in the Swiss Alps (situation in 1979, 1991 and 2002), due to global warming.John Baden[25] views the notion of sustainable development as dangerous because the consequences have unknown effects. He writes: "In economy like in ecology, the interdependence rule applies. Isolated actions are impossible. A policy which is not carefully enough thought will carry along various perverse and adverse effects for the ecology as much as for the economy. Many suggestions to save our environment and to promote a model of 'sustainable development' risk indeed leading to reverse effects."[26] Moreover, he evokes the bounds of public action which are underlined by the public choice theory: the quest by politicians of their own interests, lobby pressure, partial disclosure etc. He develops his critique by noting the vagueness of the expression, which can cover anything : . It is a gateway to interventionist proceedings which can be against the principle of freedom and without proven efficacy. Against this notion, he is a proponent of private property to impel the producers and the consumers to save the natural resources. According to Baden, “the improvement of environment quality depends on the market economy and the existence of legitimate and protected property rights.” They enable the effective practice of personal responsibility and the development of mechanisms to protect the environment. The State can in this context “create conditions which encourage the people to save the environment.”


Vagueness of the term


A sewage treatment plant that uses environmentally-friendly solar energy, located at Santuari de Lluc monastery.Some criticize the term “sustainable development”, stating that the term is too vague. For example, both Jean-Marc Jancovici[28] or the philosopher Luc Ferry[29] express this view. The latter writes about sustainable development: "I know that this term is obligatory, but I find it also absurd, or rather so vague that it says nothing." Luc Ferry adds that the term is trivial by a proof of contradiction: "who would like to be a proponent of an “untenable development! Of course no one! [..] The term is more charming than meaningful. [..] Everything must be done so that it does not turn into Russian-type administrative planning with ill effects."


Basis


Sylvie Brunel, French geographer and specialist of the Third World, develops in A qui profite le développement durable (Who benefits from sustainable development?) (2008) a critique of the basis of sustainable development, with its binary vision of the world, can be compared to the Christian vision of Good and Evil, a idealized nature where the human being is an animal like the others or even an alien. Nature – as Rousseau thought – is better than the human being. It is a parasite, harmful for the nature. But the human is the one who protects the biodiversity, where normally only the strong survive



Moreover, she thinks that the ideas of sustainable development can hide a will to protectionism from the developed country to impede the development of the other countries. For Sylvie Brunel, the sustainable development serves as a pretext for the protectionism and “I have the feeling about sustainable development that it is perfectly helping out the capitalism



"De-growth"


The proponents of the de-growth reckon that the term of sustainable development is an oxymoron. According to them, on a planet where 20% of the population consumes 80% of the natural resources, a sustainable development cannot be possible for this 20%: “According to the origin of the concept of sustainable development , a development which meets the needs of the present without compromising the ability of future generations to meet their own needs, the right term for the developed countries should be a sustainable de-growth.


Sustainable development in economics


The Venn diagram of sustainable development shown above has many versions,but was first used by economist Edward Barbier (1987However, Pearce, Barbier and Markandya (1989criticized the Venn approach due to the intractability of operationalizing separate indices of economic, environmental, and social sustainability and somehow combining them. They also noted that the Venn approach was inconsistent with the Brundtland Commission Report, which emphasized the interlinkages between economic development, environmental degradation, and population pressure instead of three objectives. Economists have since focused on viewing the economy and the environment as a single interlinked system with a unified valuation methodology (Hamilton 1999Dasgupta 2007Intergenerational equity can be incorporated into this approach, as has become common in economic valuations of climate change economics (Heal,2009)ruling out discrimination against future generations and allowing for the possibility of renewable alternatives to petro-chemicals and other non-renewable resources, efficient policies are compatible with increasing human welfare, eventually reaching a golden-rule steady state (Ayong le Kama, 2001and Endress et al.2005[Thus the three pillars of sustainable development are interlinkages, intergenerational equity, and dynamic efficiency (Stavins, et al. 2003).



Arrow et al. (2004)and other economists (e.g. Asheim,1999 and Pezzey, 1989 and 1997 have advocated a form of the weak criterion for sustainable development – the requirement than the wealth of a society, including human-capital, knowledge-capital and natural-capital (as well as produced capital) not decline over time. Others, including Barbier 2007,[ continue to contend that strong sustainability – non-depletion of essential forms of natural capital – may be appropriate.

Economic development

Economic development is the increase in the amount of people in a nation's population with sustained growth from a simple, low-income economy to a modern, high-income economy.[1][2] Its scope includes the process and policies by which a nation improves the economic, political, and social well-being of its people.[3]




Gonçalo L Fonsesca at the New School for Social Research defines economic development as "the analysis of the economic development of nations."[4]



The University of Iowa's Center for International Finance and Development states that:



"'Economic development' or 'development' is a term that economists, politicians, and others have used frequently in the 20th century. The concept, however, has been in existence in the West for centuries. Modernization, Westernization, and especially Industrialization are other terms people have used when discussing economic development. Although no one is sure when the concept originated, most people agree that development is closely bound up with the evolution of capitalism and the demise of feudalism."[5]

The study of economic development by social scientists encompasses theories of the causes of industrial-economic modernization, plus organizational and related aspects of enterprise development in modern societies. It embraces sociological research on business organization and enterprise development from a historical and comparative perspective; specific processes of the evolution (growth, modernization) of markets and management-employee relations; and culturally related cross-national similarities and differences in patterns of industrial organization in contemporary Western societies. On the subject of the nature and causes of the considerable variations that exist in levels of industrial-economic growth and performance internationally, it seeks answers to such questions as: "Why are levels of direct foreign investment and labour productivity significantly higher in some countries than in others?"[6]



Mansell and Wehn state that development has been understood since the second World War to involve economic growth, increases in per capita income, and attainment of a standard of living equivalent to that of industrialized countries.[7][8]



Economy Development can also be considered as a static theory that documents the state of economy at a certain time. According to Schumpeter (2003)[9] the changes in this equilibrium state to document in economic theory can only be caused by intervening factors coming from the outside.



Contents [hide]

1 Economic growth versus economic development

1.1 Intensive versus extensive growth

1.2 Does growth create development?

2 Models of economic development

2.1 Harrod–Domar model

2.2 Exogenous growth model

2.3 Information-led development

3 Measuring Economic Development

4 GDP

5 Regional policy

5.1 Economic developers

6 See also

7 Institutions

8 References

9 External links





[edit] Economic growth versus economic development

Economic development refers to social and technological progress. It implies a change in the way goods and services are produced, not merely an increase in production achieved using the old methods of production on a wider scale. Economic growth implies only an increase in quantitative output; it may or may not involve development. Economic growth is often measured by rate of change of gross domestic product (eg., percent GDP increase per year.)[10] Gross domestic product is the aggregate value-added by the economic activity within a country's borders.



Economic development typically involves improvements in a variety of indicators such as literacy rates, life expectancy, and poverty rates. GDP does not take into account other aspects such as leisure time, environmental quality, freedom, or social justice; alternative measures of economic wellbeing have been proposed (more).



A country's economic development is related to its human development, which encompasses, among other things, health and education.



[edit] Intensive versus extensive growth

A closely related idea is the difference between extensive and intensive economic growth. Extensive growth is growth achieved by using more resources (land, labour and capital). Intensive growth is growth achieved by using a given amount of resources more efficiently (productively). Intensive growth requires development. personal safety and freedom from fear of physical harm, and the extent of participation in civil society.



[edit] Does growth create development?

Dependency theorists argue that poor countries have sometimes experienced economic growth with little or no economic development; for instance, in cases where they have functioned mainly as resource-providers to wealthy industrialised countries. There is an opposing argument, however, that growth causes development because some of the increase in income gets spent on human development such as education and health.



According to Ranis et al. (2000)[11], we view economic growth to human development as a two-way relationship. Moreover, Ranis suggested that the first chain consist of economic growth benefiting human development with GNP. Namely, GNP increases human development by expenditure from families, government and organizations such as NGOs. With the increase in economic growth, families and individuals will likely increase expenditures with the increased in incomes, which leads to increase in human development. Further, with the increased in expenditures, health, education tend to increases in the country and later will contribute to economic growth.



In addition to increasing private incomes, economic growth also generate additional resources that can be used to improve social services (such as healthcare, safe drinking water etc...). By generating additional resources for social services, unequal income distribution will be limited as such social services are distributed equally across each community; benefiting each individual. Thus, increasing living standards for the public.[12]



To summarize, as noted in Anand’s article (1993)[13], we can view the relationship between human development and economic development in three different explanations. First, increase in average income leading to improved in health and nutrition (known as Capability Expansion through Economic Growth). Second, it is believed that social outcomes can only be improved by reducing income poverty (known as Capability Expansion through Poverty Reduction). Thirdly, (known as Capability Expansion through Social Services), defines the improvement of social outcomes with essential services such as education, health care, and clean drinking water.



[edit] Models of economic development

The 3 building blocks of most growth models are:



the production function,

the saving function

the labor supply function (related to population growth).

Together with a saving function, growth rate equals s/β (s is the saving rate, and β is the capital-output ratio). Assuming that the capital-output ratio is fixed by technology and does not change in the short run, growth rate is solely determined by the saving rate on the basis of whatever is saved will be invested.



[edit] Harrod–Domar model

The Harrod–Domar model delineates a functional economic relationship in which the growth rate of gross domestic product (g) depends positively on the national saving ratio (s) and inversely on the national capital/output ratio (k) so that it is written as g = s / k. The equation takes its name from a synthesis of analysis of growth by the British economist Sir Roy F. Harrod and the Polish-American economist Evsey Domar. The Harrod–Domar model in the early postwar times was commonly used by developing countries in economic planning. With a target growth rate, and information on the capital output ratio, the required saving rate can be calculated.



[edit] Exogenous growth model

The exogenous growth model (or neoclassical growth model) of Robert Solow and others places emphasis on the role of technological change. Unlike the Harrod-Domar model, the saving rate will only determine the level of income but not the rate of growth. The sources-of-growth measurement obtained from this model highlights the relative importance of capital accumulation (as in the Harrod–Domar model) and technological change (as in the Neoclassical model) in economic growth. The original Solow (1957) study showed that technological change accounted for almost 90 percent of U.S. economic growth in the late 19th and early 20th centuries. Empirical studies on developing countries have shown different results (see Chen, E.K.Y.1979 Hyper-growth in Asian Economies).



Also see, Krugman (1994), who maintained that economic growth in East Asia was based on perspiration (use of more inputs) and not on inspiration (innovations) (Krugman, P., 1994 The Myth of Asia’s Miracle, Foreign Affairs, 73).



Even so, in our postindustrial economy, economic development, including in emerging countries is now more and more based on innovation and knowledge. Creating business clusters is one of the strategies used. One well known example is Bangalore in India, where the software industry has been encouraged by government support including Software Technology Parks.



However, when looking at the growth rate put forward from the neoclassical growth model, it seems to suggest that countries with same characteristics and technology will eventually converge to the same rate of growth. However, one should know that the knowledge presented in countries that promotes technological advancement is not stationary. Meaning that knowledge are linked to individual and not to the country.



According to Lucas Jr (1988)[14] to compensate the movement of knowledge, we should implement factors such as labour factor to predict immigration flow. With labour movement coming into factor, we can then predict the flow of knowledge which can then successfully lead to increase in technology.



[edit] Information-led development

Information-led development (ILD) most commonly refers to a development strategy whereby a developing country makes as a primary economic policy focus the creation and development of a national information technology (IT) sector with the express aim of relying on this sector as an engine of growth. Notable examples of such countries are India and the Philippines.



More recently, a new formulation of ILD has emerged. With origins in community economic development in the United States, the new ILD model describes the use of data to generate actionable information or information solutions to development challenges. Examples of this include the inclusion of non-financial payment obligations in consumer credit files, also known as alternative data, and the use of this information in underwriting, as a means to reduce financial exclusion in the United States, where an estimated 54 million Americans are shut out of mainstream credit access as there is insufficient information about them in their credit files to be scored by a credit scoring model. This variant of ILD was pioneered by PERC, a non-profit policy research organization and development intermediary headquartered in Chapel Hill, North Carolina[15] . Other US-based organizations, including Social Compact[16] and the Local Initiatives Support Corporation[17], employ variants of ILD, but none has applied this internationally except for PERC.



This development model is gaining traction in emerging markets such as Colombia and South Africa, where the data is being used to reduce financial exclusion and facilitate credit access as a means to build wealth and form assets. It is also attracting increasing attention from development agencies, including USAID, the International Finance Corporation, the World Bank Group, and the Consultative Group to Assist the Poor.



[edit] Measuring Economic Development

[edit] GDP

Main article: List of countries by GDP (real) growth rate



World map showing GDP real growth rates for 2008.North America, even though one of the slowest growing continents, has stable growth. Most of the faster growing economies are in the Caribbean.



South America has a Boom and Bust growth with high followed by recession growth, most notable in Brazil, however growth has been stabilizing and the whole continent is growing.



Africa has seen the fastest growing but also the slowest growing/declining. From the oil fields which made Angola the 3rd fastest growing country in the world, to Zimbabwe the slowest growing and declining country in the world. Oil in Africa has created 'wealth spots' were a few countries have exceeded their neighbors in wealth. Out of the 10 fastest growing countries in the world, 3 were African. Some countries have in the past been the fastest growing in the world. Equatorial Guinea reached 75% growth in 2004 because of oil reserves.



Europe has one of the most stable growth rates. After the fall of the Soviet Union, there was a period of economic decline in Eastern Europe over the 1990s, followed by recovery in the 2000s. The region is now experiencing growth, particularly in those countries that have recently joined the European Union. If the Caucasus were included, Europe would be one of the fastest growing continents in the world. Most countries are growing at a medium speed; however, many smaller countries exceed 7% and grow exceptionally faster than their neighbors. Out of the 10 fastest growing countries in the world, only 1 is in Europe.



Overall in the 20th century Asia was seen as the area with most growth; however, in the 21st century, most of this has been dominated by China. Some spots of growth are starting to appear in East and even South Asia. Most nations with high populations have seen high growth especially. Out of the 10 fastest growing countries 3 were directly in Asia, and 3 indirectly or partially.



Meanwhile Oceania has seen moderate growth. The only exceptional growth in Oceania has been on Vanuatu.



Some countries have negative growth, most often due to ongoing wars or hyperinflation. These countries include Palestinean territories, Zimbabwe, Fiji and Chad.



Other sources of information can also be used to demonstrate economic development. These include GVA, Unemployment and Business Data.



[edit] Regional policy

In its broadest sense, policies of economic development encompass three major areas:



Governments undertaking to meet broad economic objectives such as price stability, high employment, and sustainable growth. Such efforts include monetary and fiscal policies, regulation of financial institutions, trade, and tax policies.

Programs that provide infrastructure and services such as highways, parks, affordable housing, crime prevention, and K–12 education.

Job creation and retention through specific efforts in business finance, marketing, neighborhood development, small business development, business retention and expansion, technology transfer, and real estate development. This third category is a primary focus of economic development professionals.

[edit] Economic developers

Economic development, which is thus essentially economics on a social level, has evolved into a professional industry of highly specialized practitioners. The practitioners have two key roles: one is to provide leadership in policy-making, and the other is to administer policy, programs, and projects. Economic development practitioners generally work in public offices on the state, regional, or municipal level, or in public-private partnerships organizations that may be partially funded by local, regional, state, or federal tax money. These economic development organizations (EDO's) function as individual entities and in some cases as departments of local governments. Their role is to seek out new economic opportunities and retain their existing business wealth.



There are numerous other organizations whose primary function is not economic development work in partnership with economic developers. They include the news media, foundations, utilities, schools, health care providers, faith-based organizations, and colleges, universities, and other education or research institutions.



With more than 20,000 professional economic developers employed world wide in this highly specialized industry, the International Economic Development Council [IEDC] [3] headquartered in Washington, D.C. is a non-profit organization dedicated to helping economic developers do their job more effectively and raising the profile of the profession. With over 4,500 members across the US and internationally, serving exclusively the economic development community. Membership represents the entire range of the profession ranging from regional, state, local, rural, urban, and international economic development organizations, as well as chambers of commerce, technology development agencies, utility companies, educational institutions, consultants and redevelopment authorities. Many individual states also have associations comprising economic development professionals and they work closely with IEDC.



There is intense competition between communities, states, and nations for new economic development projects in today's globalized world, and the struggle to attract and retain business is further intensified by the use of many variations of economic incentives to the potential business such as; tax incentives, help with investment capital, donated land and many others. IEDC places significant attention on the various activities undertaken by economic development organizations to help them compete and sustain vibrant communities.



Additionally, the use of community profiling tools and database templates to measure community assets versus other communities is also an important aspect of economic development. Job creation, economic output, and increase in taxable basis are the most common measurement tools. When considering measurement, too much emphasis has been placed on economic developers for "not creating jobs." However, the reality is that economic developers do not typically create jobs, but facilitate the process for existing businesses and start-ups to do so. Therefore, the economic developer must make sure that there are sufficient economic development programs in place to assist the businesses achieve their goals. Those types of programs are usually policy-created and can be local, regional, statewide and national in nature.