ECONOMIC DEVELOPMENT

Prof. Rayner Christopher C. Mantos

2
 THE TRADITIONAL ECONOMIC MEASURES

1. Gross National Income (GNI) - The total domestic and foreign output claimed by
residents of a country. It comprises gross domestic product (GDP) plus factor
incomes accruing to residents from abroad, less the income earned in the domestic
economy accruing to persons abroad.

2. Gross Domestic Product (GDP) - The total final output of goods and services
produced by the country’s economy, within the country’s territory, by residents and
nonresidents, regardless of its allocation between domestic and foreign claims.
 INDIAN ECONOMY

TOP 5 HIGHEST GDP IN 2024

 THE TRADITIONAL ECONOMIC MEASURES

LDC means less developed countries

Developing countries - According to the UN, a developing country is a country with

a relatively low standard of living, undeveloped industrial base, and moderate to low
Human Development Index (HDI)
 THE TRADITIONAL ECONOMIC MEASURES

“The questions to ask about a country’s development are therefore: What has been
happening to poverty? What has been happening to unemployment? What has
been happening to inequality? If all three of these have declined from high levels,
then beyond doubt this has been a period of development for the country concerned.
If one or two of these central problems have been growing worse, especially if all
three have, it would be strange to call the result “development” even if per capita
income doubled.”

- Dudley Seers
 THE TRADITIONAL ECONOMIC MEASURES

CHALLENGES:

1. Religion
2. Cultural traditions
3. Intergrity of government
 ECONOMIC
DEVELOPMENT
 Good life as well as development means different
things to different people representing respective
values and value judgment. Therefore, the nature and
character of development and the meaning we attach
to it must be carefully spelled out.

 Development - The process of improving the quality of

all human lives and capabilities by raising people’s
levels of living, self-esteem, and freedom.
 ECONOMIC DEVELOPMENT

> Development must therefore be conceived of as a multidimensional

process involving major changes in social structures, popular attitudes,
and national institutions, as well as the acceleration of economic
growth, the reduction of inequality, and the eradication of poverty.
 ECONOMIC DEVELOPMENT

Amartya Sen’s CAPABILITY approach:

 Poverty cannot be properly measured by income alone.

 What matters fundamentally is not the things a person has—or the
feelings these provide—but what a person is, or can be, and does,
or can do.
 Functionality - What people do or can do with the commodities of
given characteristics that they come to possess or control.
 ECONOMIC DEVELOPMENT

Five sources of disparity:

1. Personal heterogeneities
2. Environmental diversities
3. Variations in social climate
4. Distribution within family
5. Differences in relational perspectives
 THREE CORE VALUES OF DEVELOPMENT
(Michael Todaro)

1.Sustenance: The Ability to Meet Basic Needs

2. Self-Esteem: To Be a Person
3. Freedom from Servitude: To Be Able to Choose
 THREE CORE VALUES OF DEVELOPMENT
(Michael Todaro)

1.Sustenance: The Ability to Meet Basic Needs

2. Self-Esteem: To Be a Person
3. Freedom from Servitude: To Be Able to Choose
 THREE OBJECTIVES OF DEVELOPMENT
(Michael Todaro)

1. To increase the availability and widen the distribution of basic life-sustaining

goods.

2. To raise the levels of living.

3. To expand the range of economic and social choices

Economic growth is the quantitative measure that considers the rise
in the output produced in an economy in a particular period in its
monetary value. The key parameter is the Gross Domestic Product
(GDP) and at times the Gross National Product (GNP) which indicates
the size of the economy.
Economic development projects a broader picture of an economy
which aside from taking into account the increase in the production
of an economy considers also the improvement in the living standard
of its citizens. It considers the socioeconomic factors and in some cases
the environment rather than just quantitative increase in production.
Apart from using the GDP, economic development also uses the
Human Development Index (HDI) as a tool for measurement.
 WHAT IS THE ECONOMIC
EFFECT/S TO PASIG LGU
MENTIONED DUE TO
CLOSURE OF POGO?

DO YOU AGREE WITH WHAT

MAYOR VICO DID? WHY?
INCORPORATE YOUR
ANSWER TO OUR
DISCUSSION AS MUCH AS
POSSIBLE
SUSTAINABILITY and
ECONOMIC
DEVELOPMENT
 Sustainability and Economic Development

In 1987, the World Commission on Environment and Development came up with the
Bruntland Report also known as the Common Future, and it defined sustainable
“development which meets the needs
development as:
of the present without compromising the ability
of future generations to meet their own needs”.
 Sustainability and Economic Development

does not mean decrease in consumption nor production. Neither does

it mean sacrificing the happiness of current population for the future
generations. Sustainable develop wants economies to grow by
expanding companies, providing people with jobs, bountiful agricultural
harvest, progressive education for all, and freedom without violence.
Sustainable development is all for innovative technologies that are
espoused without harming the environment.
Three Components of Sustainable Developments

1. Economic Growth
2. Environmental
Stewardship
3. Social Inclusion
Three Components of Sustainable Developments

1. Economic Growth
2. Environmental
Stewardship
3. Social Inclusion
 GOALS OF SUSTAINABLE DEVELOPMENT

1. To minimize the depletion of natural resources when creating new

developments

2. To create development that can be maintained and sustained

without causing further harm to the environment

3. To provide methods for retrofitting existing developments to make

them into environmentally friendly projects
 MEASURING
THE ECONOMY
Prof. Rayner Christopher C. Mantos
GROSS DOMESTIC PRODUCT (GDP)
• Refers to the market value of all final goods and
services produced domestically in a given period of
time.
• is used to calculate the total value of the goods and
services produced within a country’s borders.
• The value is in monetary terms which, in our case, is
expressed in Philippine Peso.
LIMITATIONS OF GDP
• It does not reflect the externalities.
• It measures the level of production but does not reflect the
distribution of goods, services, and income.
• It does not reflect the underground economy.
• GDP reflects the economy not the people comprising the
economy.
• Excludes second-hand sale.
• Excludes unpaid productive productive activities.
REAL GDP vs. NOMINAL GDP
• Nominal GDP is the value at current price of final goods and services
within a country for a specific period of time.

Nominal GDP =
Price x Quantity
REAL GDP vs. NOMINAL GDP
• Real GDP is the value at a constant price of final goods and services
produced within a country for a specific period of time.

Real GDP = Nominal GDP x 100

Price Index

*Price index – is the ratio of the price of the current year and the price
of the base year multiplied by 100.
REAL GDP vs. NOMINAL GDP
Real GDP
= Nominal GDP x 100
Price Index

Price Index
= Price of current year x 100
Price of base year

GDP Deflator
= Nominal GDP x 100
Real GDP
APPROACHES TO GDP ACCOUNTING
• Industrial Origin
Approach
- Sums up the market
value of the total
production of all the
major economic
sectors of the country.
APPROACHES TO GDP ACCOUNTING
• Expenditure Approach
- Sums up the expenses of the industrial sectors:
households, private corporations, government
corporations, and its general government plus their
expenditures in other regions of the world
APPROACHES TO GDP ACCOUNTING
C+I+G+X-M

Where:
C – consumption or household final consumption
I – investment or GDP Capital Formulation
G – government final consumption expenditure
E – exports
M - imports
GDP per Capita
•Gross domestic product per capita is a
country's economic output per person
and is calculated by dividing the GDP of
a country by its population.
Case Study / Seatwork:
GROSS NATIONAL PRODUCT (GNP)
• the value of final goods and services produced by
the citizens both domestically and abroad.
• measures the total economic output of a country of
nationals. That is, of the citizens of a country,
regardless of where they are located.

GNP = GDP + income made by firms/citizens abroad -

income earned by foreign firms/nationals.
QUIZ
LESSON 3:THEORIES OF
DEVELOPMENT
FIVE MAJOR APPROACHES
1. Linear-Stages Theory
2. Structural-Change Model
3. International-Dependence Revolution
4.Neoclassical Counterrevolution
5.New Growth Theory
Linear-Stages Theory
This school of thought viewed the process of development as a series
of successive stages of economic growth through which all countries
must pass. This development approach theorizes that all that was
needed for growth are the right quantity and mixture of savings,
investment, and foreign aid.
Rostow’s Stages of Growth
Rostow’s Stages of Growth Critics:

• Difficult to test
• Stages not unique
• How does economy move to the next stage?
• Is this a Western model in disguise?
Harrod-Domar Growth Model

• Named after two famous economists: Sir Roy Harrod of England

and Prof. Evesey Domar of the US who independently formulated
the model in the early 1950s

• Harrod-Domar Equation of economic development that states

that: The rate of growth of GDP (∆Y/Y) is determined jointly by the
national saving ratio (usually expressed as a percentage), s, and the
national capital-output ratio (expressed as an integer), k.
Structural-Change Model
Structural change model focuses on the mechanism by which
underdeveloped economies transform their domestic
economic structures from a heavy emphasis on traditional
subsistence agriculture to a more modern, more urbanized
and more industrially diverse manufacturing and service
economy
 The Lewis Theory of Development
• Focuses on the sequential process
through which the economic, industrial,
and institutional structure of an
underdeveloped economy is transformed
over time to permit new industries to
replace traditional agriculture as the
engine of economic growth
• Arthur Lewis in his model, presents a
dualistic economy consisting of rural
agriculture and urban manufacturing
sectors.
• Surplus labor - labour performed in excess of
This Photo by Unknown Author is licensed under CC BY-NC-ND

the labour necessary to produce the means of

livelihood of the worker
The Law of Diminishing Marginal Productivity
and the Structural Change Model
The International Dependence Revolution

International dependence models view developing

countries as overwhelmed by institutional, political,
economic rigidities, both domestic and international,
and caught up in a dependence and dominance
relationship with rich countries.
The Neocolonial Dependence Model
“Certain groups in the developing countries (including landlords,
entrepreneurs, military rulers, merchants, salaried public officials and trade
union leaders)who enjoy high incomes, social status, and political power
constitute a small elite ruling class whose principal interest, knowingly or
not, is in the perpetuation of the international capitalist system of inequality
conformity by which they are rewarded. Directly or indirectly they serve and
are rewarded by international special-interest power groups including
multinational corporations, national bilateral aid-agencies and are tied by
allegiance or funding to the wealthy capitalist countries. The elites’ activities
and viewpoints often serve to inhibit any genuine reform efforts that might
benefit the wider population and in some cases actually lead to even lower
levels of living and to the perpetuation of underdevelopment. “ (Todaro)
The False-Paradigm Model
• Attributes underdevelopment to faulty and inappropriate
advice provided by “well-meaning” but often uninformed/
wrongly informed, biased, and ethno-centric expert advisers.

• These experts offer sophisticated concepts, elegant theoretical

frameworks, and complex econometric models that often lead to
inappropriate or incorrect policies.
The Neoclassical Counterrevolution

• In developed nations, this counterrevolution favored supply-

side macroeconomic policies, rational expectations theories,
and the privatization of public corporations. In developing
nations, it called for freer markets and the dismantling of
statist/central planning, and very rigid government
regulation of economic activities.
This Photo by Unknown Author is licensed under CC BY-NC-ND

• Contrary to the dependence model advocates, it argues

that underdevelopment is not due to the predatory
activities of the developed world but rather because of the
heavy hand of the state and the corruption, inefficiency ,
and lack of economic incentives that is wide spread among
This Photo by Unknown Author is licensed under
the LDCs.
CC BY-NC
The New Growth Theory

• The new growth theory holds that economic growth

comes primarily from endogenous rather than
exogenous forces.

• It argues that improvements in productivity can be tied

directly to faster innovation and more investments in
human capital from governments and private sector
institutions.
Poverty and Inequality
Prof. Rayner Christopher C. Mantos, MA
POVERTY
In basic understanding, poverty refers to a
situation where a person is lacking enough
resources to provide the necessities of life- food
(including clean water), shelter and clothing.
Common perceptions of poverty consider income
and consumption alone.
Every country has its own
measure of poverty. However,
there is a widely recognized
standard measure set by the
World Bank. WB keeps a metric
$2.15
per day or equivalent to
Php 123.77 as of 2023
called the International Poverty
Line.
Absolute Poverty - when a
person or household does not
have the minimum amount of
income needed to meet the
minimum living requirements
needed over an extended period
$2.15
per day or equivalent to
of time. Php 123.77 as of 2023

- Severe deprivation of basic

human needs.
Absolute poverty is when household income is
below a certain income level (poverty threshold)
that will not suffice to meet a person/ basic needs
including food, clothing and shelter. In this state of
poverty, economic growth will have no or will have
very little effect on their living condition.

Relative poverty is when households have some

money for the basic needs but not enough for
anything more than that. Some experts would say
that relative poverty is when households receive
50% less that the average household income.
Relative poverty is changeable depending on the
growth of the economy. If there is a significant
growth, there is a possibility that there will be a
trickle-down effect that will reach this group.
In the Philippines, the National Economic and
Development Authority (NEDA) has estimated the
poverty threshold to be Php 13,797 per month for
a family of five.
POVERTY LINE
- Also called as poverty threshold. s the minimum
level of income deemed adequate in a particular
country.

POVERTY INCIDENCE
- is the number of individuals with income below
the per capita poverty thresholds divided by the
total number of individuals.
POVERTY INCIDENCE
- is the number of individuals with income below
the per capita poverty thresholds divided by
the total number of individuals.
- Whose per capita income is not sufficient to
meet their basic food and non-food needs.

POVERTY SUBSISTENCE
- Not enough even to buy the basic food needs
WHO ARE MORE
VULNERABLE TO
POVERTY?
 01 02 03
Agriculture / Rural Women Ethnic Minorities /
Folks Indigenous People
 AGRICULTURAL / RURAL FOLKS

Due to the lower value of agricultural goods (as compared to

manufactured or service), lower wage, and landlessness, a
great portion of those residing in rural areas suffer from
poverty; they are the subsistence farmers and the landless
agricultural workers. Another contributory factor is the
attention given to city development that leaves out the rural
areas in terms of infrastructure, social services and job-
generation.
RICE TARRIFICATION LAW
- - The RA 11203 was sponsored and authored by Sen.
Cynthia Villar.
- - The law replaces the system of quantitative restriction (QR)
on rice importation with a purely tariff system.
- - Allows the private sector to freely import rice subject to a
tariff.
- Creates the Rice Competitiveness Enhancement Fund
(RCEF) or Rice Fund with a P10 billion annual appropriation
for the next six years for the farmers.
Rice Competitiveness Enhancement Fund (RCEF)
- it was made to improve the competitiveness of rice farmers and increase their income
amidst liberalization of the Philippine rice trade.

> Rice farm machinery and equipment (50%) - will be released to and implemented by
the Philippine Center for Postharvest Development and Mechanization (PhilMech)

> Rice seed development, propagation, and promotion (30%) - will be released to and
implemented by the Philippine Rice Research Institute (PhilRice)

>Expanded rice credit assistance (10%) - will be made available in the form of a credit
facility with minimal interest rates and minimum collateral requirements to rice farmers and
cooperatives to be managed equally by the Land Bank of the Philippines (LBP) and the
Development Bank of the Philippines (DBP)

> Rice extension services (10%) – will be made available for extension services provided
by the PhilMech, PhilRice, Agricultural Training Institute (ATI), and Technical Education
and Skills Development Authority (TESDA).
 WOMEN
Due to gender inequality, women
are more likely to experience
poverty than its male counterpart.
This inequality gives rise to; lower
wages, lack of decent work
(because of lack of education),
unpaid work hours, and longer work
hours.
 A UN research found out that in every country included
in the study, indigenous peoples (IP)are always poorer
Ethnic Minorities / and that not only are there more IP than non-IP
classified as poor, but that their poverty is more severe.
Reasons cited for this manifestation are; insecure land
Indigenous People and property rights, discrimination, heightened
vulnerability to risk and climate change, and urban-rural
disparities that lead to health and education problems.
INEQUALITY
 INCOME INEQUALITY
Income inequality is an extreme disparity of income
distribution with a high concentration of income or wealth
usually held by a small percentage of the population. When
there is income inequality, there is a large gap between the
wealth of one population segment as compared to another.
The way the income was received/derived whether it from
salary, interest, profit, gift or inheritance does not matter, the
only relevant matter is the amount. They are measured via Gini
Coefficient and Lorenz Curve.
 GINI COEFFICIENT
The Gini coefficient/index was developed by Corrado Gini in 1912. The
coefficient ranges from 0 (or 0%) to 1 (or 100%), with 0 representing
perfect equality and 1 representing perfect inequality. Thus, a country
in which residents have the same income will have a Gini coefficient
of 0. A country in which one resident holds all the income/wealth in
the economy, while everyone else gets nothing, will have a coefficient
of 1.

Note: a high-income country and a low-income country can have the

same Gini coefficient as long as incomes are distributed similarly
within each country.
 2024 GDP Coefficients
TOP 10 HIGHEST TOP 10 LOWEST
 LORENZ CURVE
➢ developed by Max O. Lorenz in 1905 is a way of showing the distribution of
income/wealth within an economy. The curve shows the cumulative share
of income from different sections of the population.
➢
➢ The Lorenz Curve is usually used to calculate the Gini coefficient.
INTERPRETING THE
LORENZ CURVE
 PHILIPPINE INCOME INEQUALITY

According to the Forbes Magazine 2019 list of the world’s

billionaires, 17 tycoons from the Philippines and their families
are among the wealthiest on the planet. These select group of
individuals had an estimated combined fortune about 14% of
the country’s GDP.
TOP 10 RICHEST FILIPINOS
POOR vs. NOT POOR
POLICIES
 1. Altering the functional distribution of
income through policies designed to change
relative factor prices.
 2. Modifying the size distribution through
progressive redistribution of asset ownership.
3. Reducing the size distribution at the upper
levels through progressive income taxes.
4. Increasing the size distribution at the lower
levels through direct transfer payments and
the public provision of goods and services.
 4. Increasing the size distribution at the lower levels
through direct transfer payments and the public provision
of goods and services.

Direct money transfers ( ie. Conditional

cash transfer, 4Ps) for urban and rural
poor , as well as direct government
intervention to keep the prices of
essential food low.
LESSON 4: EDUCATION, HEALTH, AND DEVELOPMENT
“ECONOMIC GROWTH WITHOUT INVESTMENT
IN HUMAN DEVELOPMENT IS UNSUSTAINABLE
AND UNETHICAL “ – AMARTYA SEN
• Most economists argue that it is
the human resources of a nation,
not its physical capital or its
natural resources, that ultimately
determine the character and pace
of its economic and social
development
• Less developed countries
looking up to the experiences
of the more developed
economies, believe that the
rapid and massive provision
of educational opportunities
to its population is the key to
national development
But then, as we study economic development, it is
very crucial that the quality of education should be
defined. Formal education should not be just about
facts, details, and theories. It should also impart
values, ideas, attitudes, and aspirations that may or
may not be according to the government’s agenda.
PUBLIC EDUCATION EXPENDITURE

• Though the government is allotting more and more funds for

education, it should be stressed that the population is also
growing.
• Thus, not because more money goes to building schools,
hiring more teachers, and producing more educational
materials does it mean that the government is providing
more education to more young people.
  “ as a rule of thumb, not less than 6
percent of GNP should be devoted to
education, in those countries which have not
yet attained that target… Promoting

HOW MUCH IS education can if fact do so much to alleviate

the causes of insecurity: unemployment,
exclusion, disparities in development
ENOUGH? between nations, and ethnic and religious
conflicts” - Jacques Delors
 The Delors Index was later on carried
out in different countries as the “Six will Fix”
campaign
 Funding is not enough. The allocation of the funding is just
as important. In the same Delors Report, it was pointed out
that “in all cases, emphasis is to be placed on student-teacher
relations, since the most advanced technologies can be no more that
a back-up to the relationship… need to improve their training, status,
and conditions of work are stressed.”
CHALLENGE TO THE UNIVERSITIES
It is perceived that the main vehicle in delivering education that will develop the
skills and provide knowledge is the formal educational system
▪ To prepare students for research and teaching
▪ To provide highly specializing training courses adapted to the needs of
economic and social life
▪ To be open to all, so as to cater for the many aspects of lifelong
education in the widest sense
▪ International cooperation
CHALLENGE TO THE UNIVERSITIES

“ universities should also be able to speak out on ethical and

social problems as entirely independent and fully responsible
institutions exercising a kind of intellectual authority that society
needs to help it to reflect, understand, and act”.
SEATWORK: Check if the Philippines is adhering to the “Six will Fix”
recommendation of the International Commission. Complete the table
below for years 2010 - 2023

Year GNP Education Budget as Delors Gap

Budget Percentage of
GNP

2012
…
2023
STATE OF PHILIPPINE
EDUCATION:
COHORT SURVAVAL
RATE

Cohort Survival Rate is defined as

the percentage of enrollees at the
beginning grade in a given school
year who reached the final grade.
STATE OF PHILIPPINE
EDUCATION:
FUNCTIONAL
LITERACY RATE
According to UNESCO, this refers
to the capacity of a person to
engage in all those activities in
which literacy is required for
effective function of his or her
group and community and also for
enabling him or her to continue to
use reading, writing and calculation
for his or her own and the
community's development.
STATE OF
PHILIPPINE
EDUCATION:
DROP OUT RATE

Presented as percentage
  Low household demand for
Education
 Inadequate School Inputs
CHALLENGES IN  Ineffective Pedagogy
EDUCATION  Low Quality of School
Governance
 Educated unemployed
 Brain-drain
CHILD LABOR

What is considered as child labor?

The International Labor Organization (ILO) C 138 of 1973 qualified child
labor as any work performed by children under the age of 12, non-light
work done by children aged 12-14, and hazardous work done by
children aged 15-17. Light work as defined by the international body, as
any work that does not harm a child’s health and development, and
that does not interfere with the child’s attendance at school.
CHILD LABOR

A more comprehensive definition of child: “the right of the

child to be protected from economic exploitation and from
performing any work that is likely to be hazardous or to
interfere with the child’s education, or to be harmful to the
child’s health or physical, mental, spiritual, moral or social
development” – 1990 UN Convention on the Right of the Child
Further, ILO and UNICEF threshold for the inclusion of unpaid household
services in the measurement of child labor. UNICEF’s standard indicator is as
follows:
• Age 5-11 y/o: at least 1 hour of economic work (paid work) or 21 hours of
unpaid household services per week
• Age 12- 14 y/o: at least 14 hours of economic work or 21 works of unpaid
household services per week
• Age 15 to 17 y/o: at least 43 hours of economic work per week
POINT TO PONDER:
Given this table, were you “abused” by your parents?
POLICY OPTIONS
▪ Bundles of reforms are introduced into
school systems around the world every
year in curriculum pedagogy,
governance, technology, and so on.
Unfortunately, most fail to achieve the
substantial improvements in student
achievement that their advocated had
hoped for.
FOR DISCUSSION:
Think of national policies that the government
can/should adopt for education to be a real vehicle
for economic reform. Explain your suggested policy.
Think of local (PLV) can/should adopt for education
to be a real vehicle for economic reform. Explain
your suggested policy.
HEALTH AND DEVELOPMENT
• Improved health has been one of the main benefits of
development.

• This benefit could largely be from an increase in income

allowing people to better food, and partly from scientific
progress in the fight against diseases and illnesses.

• Reciprocally, health helps in creating development.

• Better health is central to human happiness and well-being.

Healthy population live longer
• Investment in health is not only a
desirable, but also an essential priority for
most societies.

 However, our health systems face tough

and complex challenges, in part derived
from new pressures, such as ageing
populations, growing prevalence of chronic
illnesses, and intensive use of expensive
yet vital health technologies.
Prof. Fogel in 1993 made these conclusions:

✓Studying the case of Great Britain (1775-1975) he

concluded that “improved gross nutrition accounts
for roughly 30 percent of the growth of per capita
income”.
✓ In the case of South Korea during the spectacular
economic growth from 1962 to 1995, caloric
consumption rose by 44 percent.
Today, malnutrition is
rare in MDCs, but it
doesn’t mean that they
have no health problems;
obesity is now a
widespread problem.
SELECTED PHILIPPINE HEALTH STATISTICS
Thank you!!
 The real wealth of a nation is its people. And LESSON 6
the purpose of development is to create an
enabling environment for people to enjoy Environment and Development
long, healthy, and creative lives. This simple
but powerful truth is too often forgotten in
Economic and environmental
the pursuit of material and financial wealth.
performance must go hand in hand.
The natural environment is central to
-Mahbub ul Haq
economic activity and growth. It
provides the resources we need to
produce goods and services, but sadly it absorbs and process the unwanted by-
products of our economic activities in the form of pollution and waste. Environmental
assets contribute in managing risks created by economic and social activity; it helps to
regulate flood risks, regulating the local climate (both air quality and temperature), and
it provides the supply of clean water and other resources. This underpins economic
activity and wellbeing, and so maintaining the condition of natural assets is a key factor
in sustaining growth for the longer term. Correspondingly, economic growth contributes
to the investment and dynamism needed to develop and deploy new technology, which
is fundamental to both productivity growth and managing environmental assets.
(Ishwaran ,2010)

Urbanization as a Leading Cause of Environmental Degradation

As the world transitions from traditional agricultural economy to a more modern and
industrialized one, more and more people move from rural areas to the cities. This is
called urbanization. Today, nearly half of the world’s population reside in cities. They
are attracted by jobs on manufacturing and the professions, as well as by increased
opportunities for education and entertainment. And the number will continue to grow
as towns and villages not considered urban today will grow over time. Also, migration to
urban areas can be expected to increase as economies grow and hardship in rural areas
as experience of farmers and landless workers worsen.
But as with any statistical definition, it is always good to look under the hood. The term
“urban” is not homogenous. The conditions of urban in less developed
countries/developing economies are a far cry from the large cities/ megacities of more
developed countries.
Asking whether urbanization is good or bad, is no longer relevant. Apparently, there is
no country that achieved high income or rapid growth without substantial urbanization.
According to the World Bank Commission on Growth and Development in their 2009
Report, there is massive empirical data supporting the relationship between
urbanization and per capita income such that almost all countries. The Report states
that at almost all countries were at least 50 percent urbanized before reaching middle-
income status, and all more developed countries are 70-80 percent urbanized.

https://ourworldindata.org/urbanization

When is an area considered as Urban?

According to the Degree of Urbanization (DEGURBA) a generally accepted and applied
measurement as created by Eurostat in 2011:
 The Degree of Urbanization identifies three types of settlements:

1. Cities, which have a population of at least 50,000

inhabitants in contiguous dense grid cells (>1,500
inhabitants per km2);
2. Towns and semi-dense areas, which have a population of at
least 5,000 inhabitants in contiguous grid cells with a density
of at least 300 inhabitants per km2; and
3. Rural areas, which consist mostly of low-density grid cells
(2).

https://ourworldindata.org/urbanization
Urbanization’s contribution to growth comes from two sources:
1. The difference between rural and urban productivity levels
• Agglomeration creates economies of scale which in return offer both
efficiency and consumption advantages to urban economies.
• Recalling the Rostow Model that industries should be established as
conditions for growth, process industries ( chemicals, steel, automobiles)
operate more effectively at higher volumes; for this reason they have been
traditionally established in urban areas ( but later on moved as population
become severely dense).
• Same with some service industries such as theaters, orchestras, and sports
stadiums which require a critical mass of consumers for business to be
economically viable.
2. More rapid productivity change in cities
• Agglomeration effect in cities affect knowledge sharing. By bringing
together large numbers of people, cities facilitate the kind of interactions
needed to generate, accumulate and transfer knowledge especially among
industries that are affected by rapid technological change.

But urbanization has its dark side, especially on the environment. One effect of this
huge increase in people living in urban areas is the rise of the megacity. Megacity is a
city with at least 10 million residents. What’s the issue with megacities? People who live
in urban areas have very different consumer demands in terms of volume and pattern in
terms of food, energy, water, and land, and the urban population consumes more than
the rural population.
• In terms of food consumption, urbanites tend to consume more meat than
rural folks.
• Urbanites consume more durable goods ( appliances, furniture, cars)
• Urbanites consume more electricity (transportation, cooking,
heating/cooling)
This increased consumption is a function of urban labor markets, wages, and even
household structure and lifestyle. And so, as cities and megacities increase the pressure
on the environment to produce and absorb more becomes heavier.
Another environmental concern with urbanization is its effect on the area and its
broader regional environments. Some of urban environmental problems include
inadequate water and sanitation, lack of proper waste disposal, and industrial pollution.
But aside from these, it also causes pollution in its downwind areas. The downwind
areas from large industrial complexes experience higher temperature, air pollution, and
runoff water patterns. The health implications of these environmental problems include
respiratory infections and other infectious and parasitic diseases.
One more effect of urbanization that has an environmental impact is the urban sprawl.
Urban sprawl is when the population of a city becomes dispersed over an increasingly
large geographic area. This movement from higher density urban cores to lower density
suburbs means that as cities expand , they often begin to take up significant tracts of
land are used to be meant for agriculture.

Photo not mine. No copyright

infringement intended.
 photo by Christopher Gielen

Photos by Christopher Gielen

Consequences of urban sprawl: (Samuel Brody, Texas University)
1. Land conversion that threatens food security

Personal opinion: Prime agricultural land with efficient irrigation systems should not be converted
for residential, industrial or commercial use! Productive rain-fed agricultural land should be
provided with land-water management systems that harvest rain water into reservoirs , cisterns or
other means.

Food security can only be assured if looked through with a long-term lens, and it can be achieve if
agricultural land is not converted to any other purpose aside from agriculture. With this, it is
expected that the government, both local and national to draw a clear boundary on agricultural
land and enforce laws that prohibit land conversion.

The stand on land conversion is firm because the effects of land conversion can be irreversible.

2. Air pollution resulting from automobile dependency

3. Water pollution caused in part by impervious surfaces
4. Loss or disruption of environmentally sensitive areas (wetlands, wildlife corridors)
5. Reduction in open space
6. Increased flood risks
7. Overall reductions in quality of life (health issues and lack of social interaction)

What can be done?

Structural change is necessary for rapid growth; countries diversify into new industries,
firms learn new techniques and processes, and people move to new locations. Anything
that impedes structural change is obstructing growth. Because urbanization is one of the
most enabling process in rapid growth, making it work is imperative.

New Urbanism

Let us watch:
https://www.youtube.com/watch?v=VGJt_YXIoJI
Built to Last
"Built to Last" won first place in The Congress for the New Urbanism CNU 17
film contest. This short film explores the connection between environmental
issues and urban planning & design. Produced by First+Main Films
www.firstmainfilms.com
New Urbanism is the revival of the lost art of place-making, and is essentially a re-
ordering of the built environment in the form of complete cities, towns, villages, and
neighborhoods- the way communities have been built for centuries around the world.
(NewUrbanism.org) . With this, basically new urbanism is also the “old urbanism” , “new
city beautiful”, “old town planning”.

Principles of New Urbanism (http://www.newurbanism.org/newurbanism.html)

1. Walkability

-Most things within a 10-minute walk of home and work

-Pedestrian friendly street design (buildings close to street; porches, windows & doors; tree-lined streets;
on street parking; hidden parking lots; garages in rear lane; narrow, slow speed streets)
-Pedestrian streets free of cars in special cases

2. Connectivity

-Interconnected street grid network disperses traffic & eases walking

-A hierarchy of narrow streets, boulevards, and alleys
-High quality pedestrian network and public realm makes walking pleasurable

3. Mixed-Use & Diversity

-A mix of shops, offices, apartments, and homes on site. Mixed-use within neighborhoods, within blocks,
and within buildings
-Diversity of people - of ages, income levels, cultures, and races

4. Mixed Housing

A range of types, sizes and prices in closer proximity

5. Quality Architecture & Urban Design

Emphasis on beauty, aesthetics, human comfort, and creating a sense of place; Special placement of
civic uses and sites within community. Human scale architecture & beautiful surroundings nourish the
human spirit

6. Traditional Neighborhood Structure

-Discernable center and edge

-Public space at center
-Importance of quality public realm; public open space designed as civic art
-Contains a range of uses and densities within 10-minute walk
-Transect planning: Highest densities at town center; progressively less dense towards the edge. The
transect is an analytical system that conceptualizes mutually reinforcing elements, creating a series of
specific natural habitats and/or urban lifestyle settings. The Transect integrates environmental
methodology for habitat assessment with zoning methodology for community design. The professional
boundary between the natural and man-made disappears, enabling environmentalists to assess the
design of the human habitat and the urbanists to support the viability of nature. This urban-to-rural
transect hierarchy has appropriate building and street types for each area along the continuum.

7. Increased Density

-More buildings, residences, shops, and services closer together for ease of walking, to enable a more
efficient use of services and resources, and to create a more convenient, enjoyable place to live.
-New Urbanism design principles are applied at the full range of densities from small towns, to large cities

8. Smart Transportation

-A network of high-quality trains connecting cities, towns, and neighborhoods together

-Pedestrian-friendly design that encourages a greater use of bicycles, rollerblades, scooters, and walking
as daily transportation

9. Sustainability

-Minimal environmental impact of development and its operations

-Eco-friendly technologies, respect for ecology and value of natural systems
-Energy efficiency
-Less use of finite fuels
-More local production
-More walking, less driving

10. Quality of Life

Taken together these add up to a high quality of life well worth living, and create places that enrich, uplift,
and inspire the human spirit.
Tim Everett, Mallika Ishwaran, Gian Paolo Ansaloni and Alex Rubin
Defra Evidence and Analysis Series Paper 2 Economic Growth and the Environment
March 2010
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/69
195/pb13390-economic-growth-100305.pdf Retrieved June 15, 2020

https://ourworldindata.org/urbanization

Urbanization: AN Environmental Force to be Reckoned With

April 23, 2004
https://www.prb.org/urbanization-an-environmental-force-to-be-reckoned-
with/#:~:text=Some%20urban%20environmental%20problems%20include,rubbish%20disposal%2C%20a
nd%20industrial%20pollution.&text=Unfortunately%2C%20reducing%20the%20problems%20and,the%2
0urban%20population%20are%20expensive. Retrieved June 17, 2020

The Characteristics, Causes, and Consequences of Sprawling Development Patterns

Samuel Brody , Institute for Sustainable Coastal Communities, Texas A&M University
https://www.nature.com/scitable/knowledge/library/the-characteristics-causes-and-consequences-of-
sprawling-103014747/ Retrieved June 15, 2020

Urbanization and Growth

World Bank Commission on Growth and Development
Michael Spence editor
https://openknowledge.worldbank.org/bitstream/handle/10986/2582/470610PUB0Urba101OFFICIAL0
USE0ONLY1.pdf?sequence=1&isAllowed=y Retrieved June 15, 2020

http://www.newurbanism.org/newurbanism/principles.html

New Urbanism: Hope or Hype for American Communities?

William Fulton 1995
https://www.lincolninst.edu/sites/default/files/pubfiles/the-new-urbanism-full.pdf
Retrieved June 16, 2020
 MIDTERM EXAM
Economic Development

Name: _____________________________________ Score: ___________

Section: ___________________________________ Date: ____________

Write the letter of the correct answer before each item. STRICTLY NO ERASURES.

1. An increase in the price of a product will reduce the amount of it purchased because
A. Supply curves are up sloping.
B. The higher price means that real incomes have risen.
C. Consumers will substitute other products for the one whose price has risen.
D. Consumers substitute relatively high-priced for relatively low-priced products.
E. None of the above

2. Which of the following will not cause the demand for product K to change?
A. a change in the price of close-substitute product J
B. an increase in consumer incomes
C. a change in the price of K
D. a change in consumer tastes
E. none of the above

3. Which of the following would not shift the demand curve for beef?
A. a widely publicized study which indicates beef increases one's cholesterol
B. a reduction in the price of cattle feed
C. an effective advertising campaign by pork producers
D. a change in the incomes of beef consumers
E. none of the above

4. If the price of K declines, the demand curve for the complementary product J will:
A. Shift to the left
B. Decrease
C. Shift to the right
D. Remain unchanged
E. None of the above

5. New technology advances the rate at which furniture can be assembled. Why does this change the supply?

A. Changes in cost of production

B. Changes in producers
C. Changes in expectations
D. Changes in price
E. None of the above

For items 6 – 18: Select the the applicable graphs on the below options. WRITE ‘NE’ if NO EFFECT.

Page 1 of 5
6. The government removed the excise tax for sugars. Therefore, sugar-made foods’ supply curve will G .

7. A severe storm displaced the farmers in Benguet. Hence, supply curve for Benguet’s local produce will H .
8. A shoemaker can repair leather bags and shoes using the same resources. Suddenly, the price of shoes increases.
What will happen to its supply curve? G .

9. Rosuvastatin is a statin medication, used to prevent cardiovascular disease in those at high risk and treat abnormal
lipids. A medical mission drive was conducted in Sangandaan where most residents where diagnosed with high
cholesterol. Therefore, the medicine’s demand curve will C .

10. UE built a new campus in Laguna. Thus, the demand for school supplies in that area will C .

11. The price of laptops increases, therefore the supply curve will E .

12. Unilab boosted its advertising expenditures for its consumer products such as Biogesic, Ceelin, and Immunpro.
Therefore, the demand for these medicines will C .

13. Samsung can manufacture both tablet and phone at the same time. When the price of Samsung phones increase, the
supply of their tablet line will H .

14. It’s supply curve for the current week will H as the sellers learned the price increase of the goods next week.

15. The orphanage in Manila was relocated to Batangas. Then, the milk’s demand curve in Manila will C .

16. The price of gasoline is expected to increase next week. For this week, the demand curve for diesel will NE .

17. The price of eggs decreases, therefore its demand curve will B .

18. A factory of rubber was built. Therefore, its supply will G .

19. The Sustainable Development Goals applies to

A. All countries
B. Developed countries
C. Developing countries / LDCs

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 D. Counties with poor economic development
E. None of the above

20. How many SDGs are there?

A. 6
B. 14
C. 17
D. 23
E. None of the above

21. The three pillars of SDGs are:

A. Love, peace, joy

B. Society, the company, the environment
C. Mind, body, spirit
D. Community, Nations, the World
E. None of the above

22. What is the year set by UN for achieving the SDGs?

A. 2025
B. 2028
C. 2030
D. 2050
E. None of the above

23. Agenda (the year you have answered in question number 22) is regarded as the global treaty of the future because
the SDG goals ensure that

A. The world is becoming suitable for grandchildren

B. Modern view and less of traditional view of economic development is applied
C. Halt climate change for the environment
D. People are living in peace and no hunger
E. None of the above

For items 24 to 28, the definitions below are about the three Core Values of Development by Michael Todaro. Choose:

A. SUSTENANCE B. SELF-ESTEEM C. FREEDOM FROM SERVITUDE

24. The nature and form of this may be called in different terms. Some would call it dignity, respect, honor, or
recognition. The fundamental of which is; a person is body, soul, and spirit, not just a material object. - B

25. All people have certain basic needs without which life would simply be impossible - A

26. A basic function of all economic activity is to provide as many people as possible with the means of overcoming the
misery arising from lack of these basic needs. - A

27. The concept of _____ also include various components of political freedom including, but not limited to, personal
security, the rule of law, freedom of expression, political participation and equality of opportunity. - C

28. The basic human needs are food, clothing, and shelter. When any of these is absent or in critical short supply, a
condition of “absolute underdevelopment” exists. - A

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For items 29 to 39, classify whether it is Economic Growth or Economic Development. Select A if the definition pertains to
economic growth and B if development.

29. Rise in parameters such as GDP, GNP, FDI, etc. - A

30. Rise in life expectancy, literacy rate, mortality rate, etc - B
31. Qualitative in nature - B
32. Quantitative in nature - A
33. The ‘narrower’ concept - A
34. The ‘broader’ concept - B
35. Increase in per capita income - B
36. Increase in national income - A
37. Short-term in nature - A
38. Long-term in nature - B
39. Focuses on fair and equal wealth distribution - B

For items 40 to 48, choose:

A. GDP B. GNP C. GDP per Capita D. Nominal GDP E. Real GDP F. None of the above

40. Refers to the market value of all final goods and services produced domestically in a given period of time. - A
41. Reflects the distribution of goods, services, and income - F
42. Valued at current price of final goods and services within a country for a specific period of time. - D
43. Inflation is being accounted - E
44. Country’s economic output per person - C
45. Measures the value of goods and services produced by country’s citizens, both domestically and abroad. - B
46. Between GDP (A) and GNP (B), which is more commonly used by the global economies? - A
47. Measures the value of goods and services produced within a country's borders, including non-citizens. - A
48. Total value of goods and services produced within the country’s borders where prices are already adjusted for
inflation - E

For items 49 to 68, below is the projected REAL GDP PER CAPITA by the end of 2024 according to International Monetary Fund
(IMF). Complete the table below. – ANSWER: JUST DIVIDE GDP BY ITS POPULATION THEN RANK ACCORDINGLY

Rank (per
Rank (per Population (in GDP PPP (in USD
GDP PPP per Country GDP PPP (per Capita)
GDP PPP) Millions) Million)
capita)

1 Indonesia 279.12 4,720,636.00

2 Thailand 71.89 1,680,300.00
3 Singapore 5.68 777,802.00
4 Philippines 112.00 1,393,632.00
5 Vietnam 101.14 1,552,026.00
6 Malaysia 34.67 1,379,011.00
7 Myanmar 54.78 291,560.00
8 Cambodia 17.12 113,700.00
9 Brunei 0.45 33,880.00
10 Laos 7.69 78,932.00

For items 69 to 70, if your price index is 500, what is the real GDP if your nominal GDP is 8,250? Write the formula, derive it,
and box your final answer.

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