The costs and benefits of

economic growth in
developing countries
Real GDP growth in Vietnam from 2003 to
2010
 Benefits
• Increase in goods available for consumption:
more goods and services are being produced
and consumed
• Improvements in living standards: increase in
infrastructure- roads, rails, energy, water...
and luxury goods: airways, cinema, travelling
abroad....
• Rising employment
Labour force in Vietnam from 2003 to 2010
• Improvements in welfare, education, health
services: growing economic boots government
tax revenue and provide government with more
money to finance merit goods like education
and health care...and welfare like pensions,
housing, money for the unemployment,
homeless, orphant...
• Greater business confidence: the growth has a
positive impact on company profits & business
confidence to enter the market – good news for
the stock market and for the growth of small
and large businesses.
 Costs
• Environmental impact: Fast growth of production and
consumption can create negative externalities such as increased
noise and air pollution and road congestion.
The pollution in Hanoi and Ho Chi Minh City are PM10 levels of
about 80 micrograms per cubic meter, double the current level
in Bangkok and well above the guideline of 20 set by the World
Health Organization.
• Inequalities of income and wealth: We
can see a rise in real GDP but also
growing income and wealth inequality in
society which is reflected in an increase
in relative poverty.
• Widen the gap between rich and poor.
 Opportunity cost of economic growth:
By producing more luxury goods that
need to be used for the wealth
generation – will mean a reduction in
Luxury Goods
the number of consumer goods
available (the opportunity cost). Such
K2 a reduction can be very damaging to a
country already suffering a lack of
basic essentials.
Gain

K1

Sacrifice

C2 C1 Consumer Goods