economic development and standard of living

1. Economic development
and standard of living
By: Dr. Arifa Saeed

2. Standard of living
• A standard of living refers to the amount and quality of material goods and
services available to a given population.
• The standard of living includes basic material factors such as income, gross
domestic product (GDP), life expectancy, and economic opportunity.
• The standard of living is closely related to quality of life, which can also
include factors such as economic and political stability, political and religious
freedom, environmental quality, climate, and safety.

3. • An example of a high standard of living is a wealthy person who can buy
anything he wants.
• An example of a low standard of living is a poor person who does not
have enough food or water.

4. Indicator of standard of living
Monetary indicator Non-monetary indicator
GDP(gross domestic product) or National income HDI(human development index )
MEW(measure of economic welfare)
NEW(net economic welfare)
HPI (human poverty index), later supplanted by
MPI (multidimensional poverty index)
Kuznet curve

5. GDP (gross domestic product)
• It measures how economy is performing
• GDP is the market value of all the good and services (monetary value)
• In a specific geographical boundaries
• In specific time period
• There are two ways of viewing GDP:
• Total income of everyone in the economy
• Total expenditure of on the economy’s output of goods and services.

6. Rule of computing GDP
case of re-used item
• GDP is only measured in the currently produced goods and services
• Eg. The sale of an old care is just a transfer of an asset, not an addition to
the economy.

7. Rule of computing GDP
case of intermediate goods
• GDP only measure the value of final goods
• Eg. If woodcutter gets wood at 7$ and sell the chair in 15$. Then only 15$ is
included in GDP
• The value of intermediate good is already included as a part of market price
of final good.

8. Cont.
• Gross domestic product (GDP) is the total monetary or market value of all the
finished goods and services produced within a country's borders in a specific time
period.
• Higher GDP means;
• More goods and services produces
• More consumption in the economy
• More employment generation
• And thus more taxes are collected and increased in revenue of the govt.
• Therefore; GDP↑ SOL↑ and GDP↓ SOL↓

9. Key points for GDP. (Recap)
• GDP provides an economic snapshot of a country, used to estimate the
size of an economy and growth rate.
• GDP can be calculated in three ways, using expenditures, production, or
incomes. It can be adjusted for inflation and population to provide deeper
insights.
• Though it has limitations, GDP is a key tool to guide policymakers,
investors, and businesses in strategic decision making.

10. Types of GDP measurements
Nominal GDP
• Goods and services evaluated at
current market prices
Real GDP
• Real GDP is an inflation-adjusted
measure that reflects both the
value and the quantity of goods
and services produced by an
economy in a given year.

11. Cont.
• GDP Growth Rate: The GDP growth rate compares one quarter of a
country's GDP to the previous quarter in order to measure how fast an
economy is growing.
• GDP Per Capita: GDP per capita is a measurement of the GDP per person
in a country's population; it is a useful way to compare GDP data between
various countries.

12. GDP figures are not accurately calculated
1. Double counting problem
2. Black markets
3. False information
4. Inaccessible areas
5. Unrecorded transactions
6. Do it yourself activities
7. Domestic activities

13. GDP The real GDP posted a growth of 0.29% in FY2023. Economy faced
tremendous challenges of macroeconomic imbalances, supply shocks,
and international economic slowdown which has dampened the
economic growth
GDP by sector The growth of agriculture sector estimated at 1.55% in FY2023. This growth
is mainly driven by some main crops of wheat, sugarcane and maize and
livestock.
The industrial sector posted a negative growth of 2.94% in FY2023. Industrial
sector performance is more dependent on the Manufacturing sector which has
a share of 65.0% in the industry.
Services sector constitutes the largest share of 58% in GDP for the last several
years. The services sector witnessed meager growth of 0.86%.
Infation 29.2% during Jul-May, FY 2023 against 11.3% in the comparable period last
year.
urban food inflation during Jul-May, FY 2023, is recorded at 37.3% and non-food 20.3% as against
12.5% and 10.2% in the corresponding period last year.

15. HDI
• The Human Development Index (HDI) is a statistic composite index of life
expectancy, education (Literacy Rate, Gross Enrollment Ratio at different levels and Net Attendance
Ratio) , and per capita income indicators, which are used to rank countries into four tiers of human
development.
• LEI (life expectancy index)
• Life expectancy at birth (66.4 years)
• Infant mortality rate (61.2/1000)
• EI (Education index)
• Mean year of schooling (25 years or +)
• Expected year of schooling (5 year old )
• II (income index)

16. HDI
• HDI is the geometric mean of these indices
• HDI=3√LEI. EI . II
• HDI and SOL relationship ?
• Value range from 0 to 1
Types of countries HDI
Less developed countries 0.1-0.5
Middle income countries 0.6-0.7
Developed countries 0.8-0.99

17. HDI
• SOL↓ and HDI↓
• SOL↑ and HDI↑
• However, NI or GDP is not the reliable measure for SOL;
• Because, cannot calculated accurately
• Does not count for all the factors that determine SOL

19. Goalposts for calculating HDI
Indicator Min value Max value
Life expectancy 20 years 83.2 years
Mean year of schooling 0 13.2
Expected year of schooling 0 20.6
GNI per capita 163 US$ 108211 US$c

20. • The standard of living in Pakistan differentiates and varies between
different classes of society. Pakistan is a largely developing country and
according to the Human Development Index, is ranked 147th out of 170
countries, upper side of "low human development."

21. MEW / NEW
• It is a composite measure of living standards that adjust GDP for factors that
reduce or improve the living standards.
• Monetary value of all those factors which increase SOL will be added and those
factors which decrease SOL will be subtracted
• NEW/MEW= real GDP per capita + factors of SOL increase – factors of SOL
decrease
• Direct relationship exist between MEW and SOL
• SOL↓ and MEW↓
• SOL↑ and MEW↑

23. GENDER INEQUALITY INDEX (GII)
• GII is a composite metric of gender inequality using three dimensions:
• reproductive health,
• empowerment and
• labor market.
• A low GII value indicates low inequality between women and men, and vice-versa.
• It ranges from 0, where women and men fare equally, to 1, where one gender fares
as poorly as possible in all measured dimensions.
• GII measure suggested by Seth (2009)

25. HPI (human poverty index), later supplanted by
MPI (multidimensional poverty index)
• OPHID and UNDP, 2010
• Measure the indicators of SOL
• SOL,Education and healthcare