Development Economics

Semester: Fall 2019

Course Supervisor: Hira Mehwish

Lecturer - KASBIT
 GROWTH
• Growth in a human being means the increase
in weight and height of the individual. These
are purely physical in nature like increases in
weight from 5 kilos to 50 kilos or increases in
height from 91 centimeters to 191
centimeters.

• In similar fashion, growth in a country’s

economy means increases in physical output
or production.
DEVELOPMENT
 Development in human means not only physical growth but also the
necessary changes that he has to undergo to develop into a matured
individual. This means that the individual’s attitudes, habits, emotions,
feelings and intelligence must have undergone changes to fit into the
concept of matured individual.
 In similar fashion, development in a country’s economy means both
increases in output or production and changes in the technical and
institutional arrangements by which the factors of production are
produced and distributed.
 Economic Development
• Economic development of any nation can be
characterized by the following:
1. Increases in output or production has to be sustained
over a long period of time.
2. Changes in economic structure would spread out in the
entire economy.
3. Growth has to be accompanied by an increase in
efficiency
Economic Development

Economic development is shaped not only by

economic factors but also by non-economic
factors like environmental, social, and
cultural conditions of the economy.

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Class Activity:

How important is economic growth to Economic

Development?
 As economic growth we consider the increase in real output (real GDP) over
time caused by additional resources (production inputs) and higher
productivity of these inputs (more efficient production methods). As economic
development we consider not only the increase in output but also the structural,
technological and institutional changes in production and distribution of
product. The latter term is more general.

 The main difference is that development includes a number of structural

changes (social, institutional, economic and cultural). This is why we may say
that less developed economies (relatively low GDP or GNP per capita)
“develop” while the developed (or “mature”) economies (relatively high GDP
or GNP per capita) that present no significant structural changes “grow”.

 Another way of looking at the problem is by saying that development is related

to the increase of output while growth does not necessarily mean development.
As an example the increase in oil production may lead to the increase of the
economy’s product without implying that this growth will lead to the
restructuring of the production, of the technology or the distribution of the
final product.
FIGURE : The Circular Flow of Payments
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