Chapter 2.pptx - Lecture Note Chapter 2 Comparative...

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Lecture Note Chapter 2 Comparative Economic Development University of Waterloo Department of Economics Econ 207: Economic Growth and Development 1 Spring 2017
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Chapter 2 1. country level classification -definition of developing countries 2. Measure the level of development across countries –based on income -based on human development index(HDI) 3. Characteristics of the developing countries There is no universally acceptable definition of the developing world The most common way to define developing countries is by per capita income [indicator: GNI or GNP per capita] There are two measures to compare GNI/GNP per capita across countries Official exchange rate method The purchasing power parity method(PPP) Problems with official exchange rate method: 1. the purchasing power of US $ is not same across countries 2. GNI/GNP per capita is an average and sensitive to cultures 3. GNI/GNP may not be the best indicator for sustainable development The purchasing power parity method The law of one price The purchasing power parity condition
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Topics Covered Defining the developing world. Quantitative comparison methods: - International comparison of income based on exchange rate and PPP conversion method. - Human Development Index (HDI & NHDI). Characteristics of the developing world. Extreme contrasts between developed and developing countries and between different developing countries.
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Defining the Developing World There is no universally accepted definition of less developed countries (LDCs). Generally speaking, the countries of Sub-Saharan Africa, North Africa and the Middle East, Asia (less Japan), Latin America and the Caribbean, and the transition economies of Eastern Europe and Central Asia including countries of former Soviet Union are regarded as developing countries.
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Defining the Developing World Therefore, in attempting to define LDCs, it would be helpful to have an acceptable measure of development. The most common way to define the developing world is by per capita real income.
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Defining the Developing World In the past, the preferred measure of development was the income per capita (in US dollars). However, in recent years, a consensus has been gathering around the HDI as a preferred measure of development.
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Defining the Developing World In this section, we examine these two approaches to summarizing development levels across countries: per capita real income adjusted for purchasing power and the Human Development Index , a measure that equally weights average income, health, and educational attainments. Per capita real income approach 213 economies with a population of at least 30,000 are ranked by their levels of GNI per capita.
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Defining the Developing World World Bank Scheme - ranks countries on GNP (or GNI) per capita Low-income countries (LICs) are defined by the World Bank as having a per capita gross national income in 2011 of $1,075 or less; lower-middle-
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