ECONOMIC DEVELOPMENT Development economics is the study of how

economies are transformed from stagnation

What is Development?
to growth and from low income to high-
Development is a process where nations income status, and overcome problems of
achieve higher standards of living, happiness, absolute poverty.
and fulfillment often through economic
Development economics has an even greater
growth.
scope. In addition to being concerned with
Development is a progressive process. It the efficient allocation of existing scarce (or
involves the interaction of different factors. It idle) productive resources and with their
is progressive progress of improving human sustained growth over time, it must also deal
conditions such as the reduction or with the economic, social, political, and
elimination of poverty, unemployment, institutional mechanisms, both public and
illiteracy, inequality, disease, and private, necessary to bring about rapid (at
exploitations. least by historical standards) and large-scale
improvements in levels of living.
Basic Economic Problems
Traditional Economic Measures
Scarcity of resources is a problem that always
confronts the production of goods and Increase in Income per Capita: Achieving
services. But while the availability of sustained rates of growth of income per
resources is limited, human wants are capita to enable a nation to expand its output
insatiable. That is when economics comes in at a rate faster than the growth rate of its
to harmonize human wants with what he population.
has. There are three fundamental economic
Rapid Industrialization: Planned alteration of
questions that society is confronted with.
the structure of production and employment
Each society is faced with these basic
so that agriculture’s share of both declines
problems upon which the answers depend
and that of the manufacturing and service
upon the type of economic system that it is
industries increases.
using.
Trickle Down Effect: An economic
1. What to produce? - refers to the kinds of
phenomenon in which rapid gains in overall
goods and services that society needs to
and per capita GNI growth would either
produce.
“trickle down” to the masses in the form of
2. How to produce? - refers to the
jobs and other economic opportunities or
combination of various resources and
create the necessary conditions for the wider
techniques to be used in production.
distribution of the economic and social
3. For whom to produce? - refers to how to
benefits of growth.
divide up what has been produced among
consumers of an economy.
What is Development Economics?

Development is the process of improving the

quality of all human lives and capabilities by
raising people’s levels of living, self-esteem,
and freedom.
Growth without Development respect, dignity, integrity, and self-
determination.
Economic growth is visible and measurable. It
is the result of the process of development
Freedom from servitude: To be able to
which is progressive and dynamic. It is
choose A situation in which a society has at
possible to attain economic growth without
its disposal a variety of alternatives from
development, i.e., an increase in GDP, but
which to satisfy its wants and individuals
most people don’t see actual improvements
enjoy real choices according to their
in living standards. This could occur due to:
preferences.
•Economic growth may only benefit a small
percentage of the Three Objectives of Development
• population
• Corruption 1. To increase the availability and widen the
• Environmental problems distribution of basic life-sustaining goods
• Congestion such as food, shelter, health, and protection
• Production not consumed 2. To raise levels of living, including, in
• Military spending addition to higher incomes, the provision of
more jobs, better education, and greater
Economic Growth & Development attention to cultural and human values, all of
which will serve not
only to enhance
material wellbeing
but also to generate
greater individual and
national self-esteem
3. To expand the
range of economic
and social choices
available to
individuals and
nations by freeing
them from servitude
Three Core Values of Development and dependence not only in relation to other
people and nation-states but also to the
Sustenance: The ability to meet basic needs forces of ignorance and human misery
The basic goods and services, such as food,
clothing, and shelter, that are necessary to Development Objectives
sustain an average human being at the bare
minimum level of living.  Philippine Development
 Plan Ambisyon Natin 2040
Self-esteem: To be a person The feeling of  Sustainable Development Goals
worthiness that a society enjoys when its
social, political, and economic systems and
institutions promote human values such as
Philippine Development Plan 2023-2028 Ambisyon Natin 2040

The PDP 2023-2028 is a plan for deep It represents the collective long-term vision
economic and social transformation to and aspirations of the Filipino people for
reinvigorate job creation and accelerate themselves and for the country in the next 25
poverty reduction by steering the economy years. It describes the kind of life that people
back on a high-growth path. This growth want to live, and how the country will be by
must be inclusive, building an environment 2040. It is a picture of the future, a set of life
that provides equal opportunities to all goals and goals for the country.
Filipinos, and equipping them with skills to It is different from a plan, which defines the
participate fully in an innovative and globally strategies to achieve the goals. A plan
competitive economy. describes the way to get to the destination; it
is the vision that guides the future and is the
anchor of the country’s plans.
1. Develop and Protect Capabilities of
“Matatag, Maginhawa, at Panatag na Buhay”
Individuals and Families

a. Promote Human and Social Development Sustainable Development Goals

b. Reduce Vulnerabilities and Protect
Purchasing Power The 2030 Agenda for Sustainable
c. Increase Income-earning Ability Development, adopted by all United Nations
Member States in 2015, provides a shared
2. Transform Production Sectors to Generate blueprint for peace and prosperity for people
More Quality Jobs and Competitive Products and the planet, now and into the future. At
a. Modernize Agriculture and Agribusiness its heart are the 17 Sustainable Development
b. Revitalize Industry Goals (SDGs), which are an urgent call for
c. Reinvigorate Services action by all countries - developed and
d. Advance Research & Development, developing - in a global partnership. They
Technology and Innovation recognize that ending poverty and other
e. Promote Trade and Investments deprivations must go hand-in-hand with
f. Promote Competition and Improve strategies that improve health and
Regulatory Efficiency education, reduce inequality, and spur
economic growth – all while tackling climate
3. Enabling Environment change and working to preserve our oceans
a. Ensure Macroeconomic Stability and and forests.
Expand Inclusive and Innovative Finance
b. Expand and Upgrade Infrastructure Basic Indicators of Development
c. Ensure Peace and Security, and Enhance  Real income per capita adjusted for
Administration of Justice purchasing power
d. Practice Good Governance and Improve -Gross national income (GNI)
Bureaucratic Efficiency The total domestic and foreign
e. Accelerate Climate Action and Strengthen output claimed by residents of a
Disaster Resilience country, consisting of gross domestic
product (GDP) plus factor incomes
earned by foreign residents, minus
 income earned in the domestic Measures of Living Levels and Capabilities
economy by nonresidents.
-Gross domestic product -Human Development Index (HDI) An index
(GDP) The total final output of goods measuring national socioeconomic
and services produced by the development, based on combining measures
country’s economy within the of education, health, and adjusted real
country’s territory by residents and income per capita.
nonresidents, regardless of its
allocation between domestic and -Inequality Poverty rate is the ratio of the
foreign claims. number of people (in a given age group)
-Purchasing power parity whose income falls below the poverty line;
(PPP) Calculation of GNI using a taken as half the median household income
common set of international prices of the total population.
for all goods and services, to provide -Poverty Threshold is the minimum
more accurate comparisons of living income/expenditure required for a
standards. family/individual to meet the basic food and
 Health as measured by life non-food requirements
expectancy, undernourishment, and
child mortality Features of Developing Countries
-Life expectancy is the
average number of years newborn a. Lower levels of living and productivity
children would live if subjected to b. Lower levels of human capital
the mortality risks prevailing for their c. Higher levels of inequality and absolute
cohort at the time of their birth. poverty
-Undernourishment means d. Higher population growth rates
consuming too little food to maintain e. Greater social fractionalization
normal levels of activity; it is what is f. Larger rural populations but rapid rural-to-
often called the problem of hunger. urban migration
High fertility can be both a cause and g. Lower levels of industrialization
a consequence of h. Adverse geography
underdevelopment, so the birth rate i. Underdeveloped financial and other
is reported as another basic markets
indicator. j. Lingering colonial impacts such as poor
-Literacy is the fraction of institutions and often external dependence.
adult males and females reported or
estimated to have basic abilities to Difference of Low Income from Developed
read and write; functional literacy is Countries in their Early Stages
generally lower than the reported
numbers. We can identify eight significant differences
 Educational attainments as measured in initial conditions that require a special
by literacy and schooling analysis of the growth prospects and
requirements of modern economic
Classification by Income development:
1. Physical and human resource endowments Compared with developed countries,
2. Per capita incomes and levels of GDP in much of the developing world has lagged in
relation to the rest of the world its average levels of nutrition, health (as
3. Climate measured, for example, by life expectancy or
4. Population size, distribution, and growth undernourishment), and education
5. Historical role of international migration (measured by literacy).
6. International trade benefits The well-performing developing
7. Basic scientific and technological research countries are much closer to the developed
and development capabilities world in health and education standards than
8. Efficacy of domestic institutions they are to the lowest income countries.

• Higher Levels of Inequality and Absolute

Diversity within Commonality
Poverty
The enormous gap in per capita
•Lower Levels of Living and Productivity incomes between rich and poor nations is not
the only manifestation of the huge global
There is a vast gulf in productivity economic disparities. To appreciate the
between advanced economies and breadth and depth of deprivation in
developing nations. All countries with developing countries, it is also necessary to
averages below what is defined as high look at the gap between rich and poor within
income are considered developing in most individual developing countries.
taxonomies. We cannot confine our attention to
Poverty Trap (Circular and averages; we must look within nations at
Cumulative Causation) by Gunnar Myrdal At how income is distributed to ask who
very low income levels, in fact, a vicious circle benefits from economic development and
may set in, whereby low income leads to low why.
investment in education and health as well as
plant and equipment and infrastructure, • Higher Population Growth Rates
which in turn leads to low productivity and
economic stagnation. In recent decades, most population
One common misperception is that growth has been centered in the developing
low incomes result from a country’s being world. Compared with the developed
too small to be selfsufficient or too large to countries, which often have birth rates near
overcome economic inertia. However, there or even below replacement (zero population
is no necessary correlation between country growth) levels, the low-income developing
size in population or area and economic countries have very high birth rates. More
development (in part because each has than five-sixths of all the people in the world
different advantages and disadvantages that now live in developing countries.
can offset each other). A major implication of high birth
rates is that the active labor force has to
• Lower Levels of Human Capital support proportionally almost twice as many
children as it does in richer countries. By
Human capital such as health, contrast, the proportion of people over the
education, and skills are vital to economic age of 65 is much greater in the developed
growth and human development. nations. Both older people and children are
often referred to as an economic poorer and tend to suffer from missing
dependency burden in the sense that they markets, limited information, and social
must be supported financially by the stratification. A massive population shift is
country’s labor force (usually defined as also under way as hundreds of millions of
citizens between the ages of 15 and 64). people are moving from rural to urban areas,
Not only are developing countries fueling rapid urbanization, with its own
characterized by higher rates of population attendant problems.
growth, but they must also contend with
greater dependency burdens than rich • Lower Levels of Industrialization and
nations. The circumstances and conditions Manufactured Exports
under which population growth becomes a
deterrent to economic development is a Along with lower industrialization,
critical issue. developing nations have tended to have a
higher dependence on primary exports. Most
• Greater Social Fractionalization developing countries have diversified away
from agricultural and mineral exports to
Fractionalization refers to the some degree. The middle-income countries
significant ethnic, linguistic, and other social are rapidly catching up with the developed
divisions within a country. world in the share of manufactured goods in
Ethnic and religious diversity need their exports, even if these goods are
not necessarily lead to inequality, turmoil, or typically less advanced in their skill and
instability, and unqualified statements about technology content. However, the low
its impact cannot be made. There have been income countries, particularly those in Africa,
numerous instances of successful economic remain highly dependent on a relatively small
and social integration of minority or number of agricultural and mineral exports.
indigenous ethnic populations in countries as
diverse as Malaysia and Mauritius. And in the • Adverse Geography
United States, diversity is often cited as a
source of creativity and innovation. Many analysts argue that geography
The broader point is that the ethnic must play some role in problems of
and religious composition of a developing agriculture, public health, and comparative
nation and whether or not that diversity underdevelopment more generally.
leads to conflict or cooperation can be Landlocked economies, common in Africa,
important determinants of the success or often have lower incomes than coastal
failure of development efforts. economies.
Resource endowment refers to a
• Larger Rural Populations but Rapid Rural- nation’s supply of usable factors of
Urban Migration production including mineral deposits, raw
materials, and labor. The extreme case of
One of the hallmarks of economic favorable physical resource endowment is
development is a shift from agriculture to the oil-rich Persian Gulf states. At the other
manufacturing and services. In developing extreme are countries like Chad, Yemen,
countries, a much higher share of the Haiti, and Bangladesh, where endowments of
population lives in rural areas. Although raw materials and minerals and even fertile
modernizing in many regions, rural areas are land are relatively minimal. In the case of the
Democratic Republic of Congo, high mineral
wealth is no guarantee of development
success. Conflict over the profits from these • Lingering Colonial Impacts and Unequal
industries has often led to a focus on the International Relations
distribution of wealth rather than its creation
and to social strife, undemocratic Colonial Legacy: Despite important
governance, high inequality, and even armed variations that proved consequential, colonial
conflict, in what is called the “curse of era institutions often favored extractors of
natural resources.” wealth rather than creators of wealth,
harming development then and now.
• Underdeveloped Markets Colonial history matters not only or even
primarily because of stolen resources but
Imperfect markets and incomplete also because the colonial powers determined
information are far more prevalent in whether the legal and other institutions in
developing countries, with the result that their colonies would encourage investments
domestic markets, notably but not only by (and in) the broad population or would
financial markets, have worked less instead facilitate exploitation of human and
efficiently. In many developing countries, other resources for the benefit of the
legal and institutional foundations for colonizing elite and create or reinforce
markets are extremely weak. extreme inequality.
Some aspects of market External Dependence: Relatedly,
underdevelopment are that they often lack: developing countries have also been less well
organized and influential in international
(1) a legal system that enforces contracts and relations, with sometimes adverse
validates property rights; consequences for development. For example,
(2) a stable and trustworthy currency; agreements within the World Trade
(3) an infrastructure of roads and utilities Organization (WTO) and its predecessors
that results in low transport and concerning matters such as agricultural
communication costs so as to facilitate subsidies in rich countries that harm
interregional trade; developing country farmers and onesided
(4) a well-developed and efficiently regulated regulation of intellectual property rights have
system of banking and insurance, with broad often been relatively unfavorable to the
access and with formal credit markets that developing world. During debt crises in the
select projects and allocate loanable funds on 1980s and 1990s, the interests of
the basis of relative economic profitability international banks often prevailed over
and enforce rules of repayment; those of desperately indebted nations. More
(5) substantial market information for generally, developing nations have weaker
consumers and producers about prices, bargaining positions than developed nations
quantities, and qualities of products and in international economic relations.
resources as well as the creditworthiness of
potential borrowers; and
(6) social norms that facilitate successful
long-term business relationships.