economic development and standard of living

economic development and standard of living

1. Economic development and standard of living By: Dr. Arifa Saeed

2. Standard of living A standard of living refers to the amount and quality of material goods and services available to a given population. The standard of living includes basic material factors such as income, gross domestic product (GDP), life expectancy, and economic opportunity. The standard of living is closely related to  quality of life , which can also include factors such as economic and political stability, political and religious freedom, environmental quality, climate, and safety.

3. An  example  of a high  standard of living  is a wealthy person who can buy anything he wants. An  example  of a low  standard of living  is a poor person who does not have enough food or water.

4. Indicator of standard of living Monetary indicator Non-monetary indicator GDP(gross domestic product) or National income HDI(human development index ) MEW(measure of economic welfare) NEW(net economic welfare) HPI (human poverty index) , later supplanted by MPI (multidimensional poverty index ) Kuznet curve

5. GDP (gross domestic product) It measures how economy is performing GDP is the market value of all the good and services (monetary value) In a specific geographical boundaries In specific time period There are two ways of viewing GDP: Total income of everyone in the economy Total expenditure of on the economy’s output of goods and services.

6. Rule of computing GDP case of re-used item GDP is only measured in the currently produced goods and services Eg . The sale of an old care is just a transfer of an asset, not an addition to the economy.

7. Rule of computing GDP case of intermediate goods GDP only measure the value of final goods Eg . If woodcutter gets wood at 7$ and sell the chair in 15$. Then only 15$ is included in GDP The value of intermediate good is already included as a part of market price of final good.

8. Cont. Gross domestic product (GDP) is the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period. Higher GDP means; More goods and services produces More consumption in the economy More employment generation And thus more taxes are collected and increased in revenue of the govt. Therefore; GDP↑ SOL↑ and GDP↓ SOL↓

9. Key points for GDP. (Recap) GDP provides an economic snapshot of a country, used to estimate the size of an economy and growth rat e. GDP can be calculated in three ways, using expenditures, production, or incomes . It can be adjusted for inflation and population to provide deeper insights. Though it has limitations , GDP is a key tool to guide policymakers, investors, and businesses in strategic decision making.

10. Types of GDP measurements Nominal GDP Goods and services   evaluated at current market prices Real GDP Real GDP is an inflation-adjusted measure that reflects both the value and the quantity of goods and services produced by an economy in a given year.

11. Cont. GDP Growth Rate : The GDP growth rate compares one quarter of a country's GDP to the previous quarter in order to measure how fast an economy is growing. GDP Per Capita : GDP per capita is a measurement of the GDP per person in a country's population; it is a useful way to compare GDP data between various countries.

12. GDP figures are not accurately calculated Double counting problem Black markets False information Inaccessible areas Unrecorded transactions Do it yourself activities Domestic activities

13. GDP The real GDP posted a growth of 0.29% in FY2023. Economy faced tremendous challenges of macroeconomic imbalances, supply shocks, and international economic slowdown which has dampened the economic growth GDP by sector The growth of agriculture sector estimated at 1.55% in FY2023. This growth is mainly driven by some main crops of wheat, sugarcane and maize and livestock. The industrial sector posted a negative growth of 2.94% in FY2023. Industrial sector performance is more dependent on the Manufacturing sector which has a share of 65.0% in the industry. Services sector constitutes the largest share of 58% in GDP for the last several years. The services sector witnessed meager growth of 0.86%. Infation 29.2% during Jul-May, FY 2023 against 11.3% in the comparable period last year. urban food inflation during Jul-May, FY 2023, is recorded at 37.3% and non-food 20.3% as against 12.5% and 10.2% in the corresponding period last year.

14. HDI The  Human Development Index  ( HDI ) is a statistic composite index of  life expectancy ,  education  (Literacy Rate, Gross Enrollment Ratio at different levels and Net Attendance Ratio) , and  per capita income  indicators, which are used to rank countries into four tiers of  human development . LEI (life expectancy index) Life expectancy at birth (66.4 years) Infant mortality rate (61.2/1000) EI (Education index) Mean year of schooling (25 years or +) Expected year of schooling (5 year old ) II (income index)

15. HDI HDI is the geometric mean of these indices HDI=3√LEI. EI . II HDI and SOL relationship ? Value range from 0 to 1 Types of countries HDI Less developed countries 0.1-0.5 Middle income countries 0.6-0.7 Developed countries 0.8-0.99

16. HDI SOL↓ and HDI↓ SOL↑ and HDI↑ However, NI or GDP is not the reliable measure for SOL; Because, cannot calculated accurately Does not count for all the factors that determine SOL

17. Goalposts for calculating HDI Indicator Min value Max value Life expectancy 20 years 83.2 years Mean year of schooling 13.2 Expected year of schooling 20.6 GNI per capita 163 US$ 108211 US$c

18. The  standard of living in Pakistan  differentiates and varies between different classes   of society. Pakistan is a largely developing country  and according to the  Human Development Index , is ranked 147th out of 170 countries, upper side of "low human development."

19. MEW / NEW It is a composite measure of living standards that adjust GDP for factors that reduce or improve the living standards. Monetary value of all those factors which increase SOL will be added and those factors which decrease SOL will be subtracted NEW/MEW= real GDP per capita + factors of SOL increase – factors of SOL decrease Direct relationship exist between MEW and SOL SOL↓ and MEW↓ SOL↑ and MEW↑

20. GENDER INEQUALITY INDEX (GII ) GII is a composite metric of gender inequality using three dimensions: reproductive health, empowerment and labor market. A low GII value indicates low inequality between women and men, and vice-versa .  It ranges from 0, where women and men fare equally, to 1, where one gender fares as poorly as possible in all measured dimensions. GII measure suggested by Seth (2009 )

21. HPI (human poverty index) , later supplanted by MPI (multidimensional poverty index ) OPHID and UNDP, 2010 Measure the indicators of SOL SOL,Education and healthcare