Economic Development: Poverty and Inequality

• Notes on economic development, poverty, inequality, population, education, and health:

Poverty and Inequality

• Inequality means individuals lack equal material wealth or living conditions.
• Income inequality exists when total income is disproportionately distributed among households.
• Personal or size distribution of income refers to income distribution by the size or class of persons.
• Personal distribution is based on household income data.
• Functional distribution deals with the distribution of economic resources, where inequality arises from unjust distribution.
• The Lorenz Curve, developed in 1905, graphically represents income/wealth inequality.
• Inequality exists in every economy and is visually graphed.
• A deeper curve indicates greater inequality.
• The Gini Coefficient is a numerical measure of income inequality, ranging from 0 to 1.
• A result of 0 indicates perfect equality, and 0.1-1 indicates more inequality.
• Anonymity means the Gini Coefficient does not identify who is rich or poor.
• Scale independence means the Gini Coefficient does not check if the country is rich or poor, nor available resources.
• The Gini Coefficient is objective and unbiased.
• Population size independence means the Gini Coefficient does not consider the country's population size.
• The transfer principle relates to how the Gini Coefficient looks at estates and their succession.
• Functional distribution of income refers to the allocation of income to production factors, regardless of ownership.
• It compares income across production factors like land, labor, capital, and entrepreneurship.

Absolute Poverty

• Absolute poverty includes:
• The Head Count Index which measures the proportion of people/households below the poverty line.
• The Total Poverty Gap considers the income gap between the rich and poor after headcount.
• The Human Poverty Index measures poverty based on income, education, and health factors.
• The Multidimensional Poverty Index measures the factors poor people lack or are deprived of.
• The poor include those:
• Living in rural areas which are places where development has not reached.
• Women due to historical inequality in rights, salaries, and facing stereotypes.
• Ethnic minorities choose culture/tradition over development.
• People in poor countries are poor.
• Policies to reduce inequality include:
• Investing in human capital via education/skills to enable economic contribution.
• Increasing school enrollment for girls/women.
• Developing rural areas to keep up with overall development.

Population and Development

• Demographic Transition describes population changes: low growth due to high birth/death rates, rapid growth with high birth and low death rates, then stability with low birth and death rates.
• Stages of Population Growth:
• High Population Growth Potential involves high birth/death rates, leading to low growth.
• Population Exploitation includes high birth rates and low death rates, leading to high growth.
• Population Stage describes low birth/death rates, leading to stabilization.
• Causes of Population Growth:
• Thomas Malthus suggested passion between sexes is a large cause.
• Population grows geometrically, while food production grows arithmetically.
• Birth rates decline as societies control birth rates.
• The Economics of Child Bearing:
• Fertility is higher when children contribute to household income.
• Fertility should be able to sustain and provide for future children.
• Reducing infant deaths lowers fertility rates.
• Institutionalized Social Security and Pensions reduce parental reliance on children, lowering fertility.
• Retirement benefits give parents less need for children.
• Fertility decreases when there are more employment opportunities for couples, especially women.
• Fertility may increase with higher income.
• Garry Becker's Theory of Household Economics:
• Couples maximize total utility from having children based on the number of children, child quality (health and education), goods/services, time, income, and cultural constraints.
• A couple may have more children if they can afford it.

Education and Development

• Planting a seed equates relates to short-term planning or quick return on investment (ROI).
• Planting a tree relates to medium-term planning that takes years to benefit.
• Teaching people indicates long-term transformative planning, benefiting individuals and society via education.
• Sowing a seed once describes short-term benefits from immediate action.
• Teaching people reaps a hundred harvests.
• It refers to the multiplier effect: educated people contribute more to society, leading to progress and prosperity.
• "Stocks" refers to the total schooling in a population.
• It is the accumulated knowledge and skills contributing to learning and careers.
• It includes educational infrastructure like buildings, learning materials, curricula, tools, and software.
• "Flows" measures include net changes in stocks due to school enrollment patterns.
• It marks the increase or decrease of stock.
• Examples are educational outputs, board passers, top performers, and failed students.
• Investments in education contribute to flows.
• Microeconomics studies the economy specifically, focusing on consumers, households, supply, and demand.
• Macroeconomics studies the economy as a whole.
• Net Enrollment Rates refer to enrollments within the relevant age group.
• It raises the questions of how many enrollees are 7 years old and how many are 18 years old.
• What are the rate of age group and how many are enrolled?
• A grade 1 student should be in the 1st grade level.
• Grade Survival Rates estimate how many children complete a grade level.
• What amount of students actually finish a grade level?
• How many of the initial 40 enrollees are left and finished the grade level at the beginning of the year?

Schooling vs. Education

• Students can sit through years of schooling and learn very little, while education measures learning outcomes.
• Schooling is a means to an end, and education is the real goal.
• Schooling is formal, structured learning in an institution, school, or university.
• Schooling includes a curriculum with objectives, grading systems, and standards.
• Education is formal or informal, referring to actual learning acquired in schooling and retention of knowledge.
• It includes learning inside and outside of school if the person actually learns.
• Education is a form of human capital, reflecting the economic value of workers (experiences, skills, intelligence, and values).
• Education is a "public good" with positive externalities and free education.
• Education is a long-term investment with substantial benefits for the student and the country.

Health and Education

• Better health is essential for human happiness and well-being.
• Health contributes significantly to economic progress through longer, more productive lives.
• Health a state of complete mental, physical, and social well-being, not just the absence of disease.
• It encompasses a holistic perspective of well-being, covering physical, mental, and social aspects.
• Mortality measures death in a population.
• It considers how many died and measures deaths within a specific period.
• Morbidity measures the rate of presence, frequency, and distribution of diseases/illnesses.
• High morbidity leads to high mortality.
• HALE (Health Adjusted Life Expectancy) reduces life expectancy based on years spent with disabilities, weighted by severity and duration.
• Life expectancy indicates the average lifespan of a person.
• HALE considers the average age people live without disabilities or illnesses.
• It represents the person's quality of life.
• It provides a comprehensive overall health picture.
• Epidemiologic Transition identifies shifts in disease patterns.
• It happens every time new outbreaks occur.
• WHO is concerned with health's impact on development and poverty reduction.
• It includes the impact of development policies on health goal achievement.
• it builds support across governments for health investment and prioritization in development plans.
• Ensures adequate aid for health priorities.
• The Preston Curve charts the relationship between income levels and life expectancy.
• As income rises, people can afford goods/services that improve health.
• The richer you are, the healthier you get.