Prepared by: Lawrence C. Robles & Krysthel Anne D.
Repisada
Economic Development Outline
Development
● The process of developing or being developed
● Defined as a process of growth, progress, positive changes, or addition
of physical, economic, environmental, social and demographic
components to an existing system or environment.
Characteristics of Emerging Economies:
What is an emerging market economy?
An emerging market economy refers to a country that is in the process
of developing its economy to become more advanced. It generates low to
middle per capita and is rapidly expanding due to high production levels and
significant industrialization. The following are it’s characteristics:
Rapid Growth
The economic growth of countries with an emerging economy typically
grows by 6% to 7% annually, whereas countries with an already well-
established economy reports of growth rates below 3%. As a result GDP
growth rates for emerging market economies outperform those of developed
countries.
High Productivity levels
Labor is characterized by low costs, which can stimulate production and
increase employment levels. Therefore, developed countries establish a
preference to build manufacturing factories and engage in outsourcing to
make use of the low-cost labor. As a result, emerging markets can increase
their international presence and improve their exports to foreign countries.
Increase in the middle class
Economic improvement in a country can lift its people out of poverty, which
shifts them into the middle class. As countries increase their productivity
levels and make use of additional streams of income, it provides individuals
with a higher standard of living, as they can get more access to educational
opportunities while enjoying better infrastructure and improved technology.
Transition from a closed economy to an open economy
Developing countries run a closed economy, as they mainly focus on the
local agricultural market. As such countries work towards economic
advancement, they will want to engage in international trade to stimulate
economic activity.
Instability and volatility
Emerging markets are vulnerable to changes, as their economies are still
developing. They are especially susceptible to financial changes in currency,
interest rates, and inflation. In particular, they are impacted by changes in
the pricing of commodities.
Attraction of foreign and local investments
Investing in businesses in emerging markets is riskier than businesses in
developed countries. However, higher risk means higher returns, which
attracts investors.
Countries with an Emerging Market Economy
1. BRICS or Brazil, Russia, India, China and South Africa – They
make up for 40% of the world’s population and contributes to more
than 25% of the world’s GDP.
2. The Next 11 or N-11 – These countries are Bangladesh, Egypt,
Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South
Korea, and Vietnam. These countries have the potential to become like
BRICS countries and with positive growth aspects.
3. MINT – Mexico, Indonesia, Nigeria, and Turkey makes up for mint and
these countries are selected due to their rapid economic growth.
Measurements of Growth and Development of an Economy
The common measurements used to determine a countries growth or
development is through their GNP or Gross National Product and GDP or
Gross Domestic Product but there are also different methods to measure
growth and development:
● Inclusive Growth – this embodies the principle that wealth creation,
economic freedom, and equal opportunity can exist. It promotes the
notion that a society can be free and equal while also pursuing further
economic growth.
● Human Development – a summary composite measure of country’s
average achievements in three basic aspects of human development;
(1) health, (2) knowledge, and (3) standard of living. It is a tool
developed by the United Nations since 1990 to measure various
countries’ level of social and economic development. It has four areas
of interest; mean years of schooling, expected years of schooling, life
expectancy at birth, and GNI or Gross National Income.
● Economic Freedom Index – The Heritage Foundation publishes
annual Index of Economic Freedom which ranks from “free” to
“repressed”. According to Heritage Foundation (2024), economic
freedom is measured through 12 quantitative and qualitative factors
grouped into four (4) different categories that are all measured from 0
to 100:
o Rule of Law (property rights, government integrity, judicial
effectiveness)
o Government Size (government spending, tax burden, fiscal
health)
o Regulatory Efficiency (business freedom, labor freedom,
monetary freedom)
o Open Markets (trade freedom, investment freedom, financial
freedom)
● Consumer Price Index – this measures pricing power and inflation,
and the monthly unemployment report, which assesses weekly non-
farm payroll.
The Key Differences of Past and Present Measurement of Economic
Growth and Development
Economic growth and development have been measured using
different indicators over time. Early methods focused on simple output
measures, while modern approaches incorporate broader aspects of well-
being, sustainability, and social progress.
Past Measurements of Economic Growth and Development
1. Gross Domestic Product (GDP)(1930s–Present)
- Measures the total value of goods and services produced within a
country.
- Used to compare economic size and growth over time.
- Limitation: It does not account for income inequality, environmental
impact, or well-being.
2. Gross National Product (GNP)
- Measures the total income earned by a country's residents,
including overseas earnings.
- More relevant in the past when economies were less globalized.
3. Industrial Output and Agricultural Production
- Early economic growth was measured by factory production,
agricultural yields, and trade volume.
- Focused on physical goods rather than services or quality of life.
4. Employment Rates and Labor Productivity
- A higher number of employed individuals and increased productivity
were seen as indicators of development.
- Did not consider working conditions, income distribution, or job
security.
5. Trade Balance and Exports
- Economic strength was often measured by export revenues and trade
surpluses.
- Countries with strong manufacturing sectors were considered more
developed.
Present Measurements of Economic Growth and Development
1. GDP per Capita
- Adjusts GDP based on population size to measure economic well-
being.
- Better indicator of living standards than total GDP.
2. Human Development Index (HDI) (Introduced in 1990)
- Combines GDP per capita, life expectancy, and education levels.
- Provides a more holistic view of development beyond economic
output.
3. Gini Coefficient (Income Inequality)
- Measures income distribution within a country.
- Helps assess whether economic growth benefits all citizens or just
the wealthy.
4. Sustainable Development Goals (SDGs) Indicators
- Includes poverty reduction, gender equality, environmental
sustainability, and healthcare access.
- Recognizes that development is more than just economic output.
5. Happiness and Well-being Index
- Measures overall life satisfaction and quality of life.
- Considers mental health, social support, and work-life balance.
6. Green GDP & Environmental Indicators
- Adjusts GDP by accounting for environmental damage and resource
depletion.
- Used to measure sustainable economic development.
7. Multidimensional Poverty Index (MPI)
- Goes beyond income levels to measure deprivations in health,
education, and living standards.
- Provides a clearer picture of poverty in developing nations.
Stages of Development According to W.W Rostow
Before Rostow, development theories had been predicated on the idea that
the Western world—then comprised of wealthier, more powerful nations—
was responsible for "modernization" as it was able to move past the early
phases of underdevelopment. Therefore, other nations ought to take
inspiration from the West and aim for a liberal democracy and a "modern"
form of capitalism. Using these ideas, Rostow proposed his classic Stages of
Economic Growth in 1960 which involves:
● Traditional Society: This stage is characterized by a subsistent,
agricultural based economy, with intensive labor and low levels of trading,
and a population that does not have a scientific perspective on the world
and technology.
● Preconditions to Take-off: Here, a society begins to develop
manufacturing, and a more national/international, as opposed to regional,
outlook.
● Take-off: Rostow describes this stage as a short period of intensive
growth, in which industrialization begins to occur, and workers and
institutions become concentrated around a new industry.
● Drive to Maturity: This stage takes place over a long period of time, as
standards of living rise, use of technology increases, and the national
economy grows and diversifies.
● Age of High Mass Consumption: At the time of writing, Rostow
believed that Western countries, most notably the United States,
occupied this last "developed" stage. Here, a country's economy
flourishes in a capitalist system, characterized by mass production and
consumerism.
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