Economic development

• World bank (GDP per capita)

High income > $12,615

Middle income > $1,035

Low income < $1,035

Income

• To take price-level differences into account, the GDP per capita is sometimes measured using a common standard of international prices, such as prices for foodstuffs, rent, haircuts, movie tickets, legal fees etc. This unit of account is called GDP per capita at Purchasing Power Parity. (PPP)

GDP per capita at Purchasing Power Parity

• The richer parts of the world tend to be more urban; the poorer parts of the world tend to be more rural.

• The Americas are very highly urbanized so-cieties, with generally 80% or more of the population living in urban areas.

• Tropical Africa is still quite rural, with around 25% - 35% of the population living in urban areas

Urban/Rural Divide

• All future population growth on the planet is urban population growth. The proportion of the world living in urban areas is going to rise from around 53% in 2013 to around 60% by 2030 and 67% by 2050.

• Prosperous, healthy, and resilient cities are going to be a core challenge of sustainable development.

Future

• The Gini coefficient varies between 0.0 and 1.0, with 0.0 meaning complete equality of income (every person or household has the same income), and 1.0 signifying complete inequality (all income is owned by one per-son or household, with all the rest having no income).

Income inequality within countries

• History – Slaves, indigenous populations.• Access to education • Urban-rural divide• Discrimination• Government policies – favored insiders

Reasons for inequality

• Human Development Index HDI• It uses the logarithm of income per capita.

Using the logarithm, each higher level of in-come boosts the HDI by a smaller increment.

• The HDI also uses indicators of educational attainment, such as mean and expected years of schooling, and indicators of health, e.g. life expectancy

Measuring wellbeing

• 27th in GDP per capita• 12th in the HDI

• Kuwait is 3rd in GDP per capita and 54th in the HDI

South Korea

World happiness report

• Industrial revolution – divergence• Imperialism – divergence• End of Imperialism after World War 2 – con-

vergence• Technological developments – convergence• Economic reforms – convergence e.g. China

now $10,000 GDP per person.

Convergence or divergence?

Why do some countries stay poor?

• Geography – Temperate zones or costal zones developed faster. Disease areas.

• Imperialism

Clinical economics

• The modern economist - Instead of offering one simplistic diagnosis (“stop your corrup-tion”), one prescription (“cut government spending”), or one referral (“go the IMF for treatment”), the effective development practi-tioner should make a diagnosis that is accu-rate for the conditions, history, geography, culture, and economic structure of the coun-try in question.

Clinical economics

1. Poverty trap e.g. Africa

2. Bad economic policies

3. Financial insolvency of government.

4. Physical geography e.g. Haiti

5. Poor governance

6. Cultural barriers

7. Geopolitics e.g. Afghanistan

Poverty Checklist

Geography

• Landlocked – Build roads, internet and rela-tions

• Water stressed - Irrigation• Heavy disease burden – Public health• Natural Hazards – Detection and preparation• Lack of fossil fuels – energy efficiency and

renewable energy

Policy

Culture

Pisa Education rankings

• On list (2) bad policies; (3) financial insol-vency; (5) poor governance; and (7) adverse geopolitics.

Role of politics

• Role of government in • Infrastructure development e.g. China• Health, education and social services• Rule of law e.g. deregulation of finance.

Corruption perceptions index

• Sub – Saharan Africa• Landlocked countries e.g. Afganisatan,

Nepal, Mongolia, Laos

Countries still in poverty