Economics

Study Notes

Can Economic Growth help Development?

Level:
AS, A Level, IB
Board:
AQA, Edexcel, OCR, IB, Eduqas, WJEC

Sustained growth can spur development in several ways:

  • Lifts per capita incomes and raises people out of extreme poverty
  • Increased per capita GDP/GNI gives households and businesses greater financial resources to save (see the Harrod Domar growth model)
  • Creates new jobs providing a flow of incomes for people in work
  • Higher incomes can also reduce income and wealth inequality 
  • Faster economic growth generates higher profits which can then be reinvested – promoting increased productivity and capacity
  • Growth can accelerate changes in patterns of production e.g. a shift away from a dual economy towards investment in manufacturing and services such as business services and tourism
  • Economic growth can generate higher tax revenues for the government – providing more funds to finance public and merit goods and welfare spending

However – it is  important to realise that there are disadvantages from economic growth i.e. economic and social costs.

Growth is probably a necessary but insufficient condition for sustained human development – it can underpin gains in health, education and per capita incomes but many factors determine the development process.

Countries whose HDI ranking is better than their GNI per capita ranking in 2016

HDI ranking Country Human Development Index (HDI)  Life expectancy at birth Expected years of schooling  Mean years of schooling Gross national income (GNI) per capita GNI per capita rank minus HDI rank
68 Cuba 0.775 79.6 13.9 11.8 7,455 48
70 Georgia 0.769 75.0 13.9 12.2 8,856 38
84 Ukraine 0.743 71.1 15.3 11.3 7,361 34
101 Tonga 0.721 73.0 14.3 11.1 5,284 33
120 Kyrgyzstan 0.664 70.8 13.0 10.8 3,097 32
107 Moldova (Republic of) 0.699 71.7 11.8 11.9 5,026 31
129 Tajikistan 0.627 69.6 11.3 10.4 2,601 30

Countries whose HDI ranking is lower than their GNI per capita ranking in 2016

HDI ranking Country Human Development Index (HDI)  Life expectancy at birth Expected years of schooling  Mean years of schooling Gross national income (GNI) per capita GNI per capita rank minus HDI rank
135 Equatorial Guinea 0.592 57.9 9.2 5.5 21,517 -79
51 Kuwait 0.800 74.5 13.3 7.3 76,075 -48
109 Gabon 0.697 64.9 12.6 8.1 19,044 -46
42 United Arab Emirates 0.840 77.1 13.3 9.5 66,203 -35
108 Botswana 0.698 64.5 12.6 9.2 14,663 -33
148 Swaziland 0.541 48.9 11.4 6.8 7,522 -33
33 Qatar 0.856 78.3 13.4 9.8 129,916 -32
111 Turkmenistan 0.691 65.7 10.8 9.9 14,026 -32
119 South Africa 0.666 57.7 13.0 10.3 12,087 -30
121 Iraq 0.649 69.6 10.1 6.6 11,608 -30

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