2.2. Economic Development
Concept
2.2.1. Introduction
The economic development is one of the oldest concept, most
exciting, and most challenging branches of the broader fields of economics and
political economy. Although one could claim that Adam Smith was the first
«development economist» and that his Wealth of Nations, published in
1776, was the first treatise on Economic Development.
2.2.2. Measures related to
Economic Development
2.2.2.1. Traditional measures of
economic development.
In strictly economic terms, development has traditionally
meant the capacity of a national economy, whose initial economic condition has
been more or less static for a long time, to generate and sustain an annual
increase in its national income at rate of 5% to 7% or more (Todaro & Smith
2006).
The World Bank use per capita income to view development of
countries (Low Income Countries are those having a per capital gross national
income in 2003 of $765 or less, Rwanda falls in this group with $300 per capita
income; Lower Middle Income countries have income between $766 and $3,035;
Upper Middle Income countries have income between $3.036 and $9,385; and High
Income Countries have a per capita income of $9,386 or more) (Todaro &
Smith 2006).
2.2.2.2. Human Development
Index
The most ambitious attempt to analyze the comparative status
of socio-economic development has been undertaken by the United Nation
Development Program (UNDP) in its annual report `Human Development
Reports' in 1990 with Human Development Index which attempts to rank all
countries in scale of 0(lowest Human Development) to
1(highest Human Development) based on three goals or ends
products of development (Todaro & Smith 2006):
o Longevity; as measured by life expectancy at birth.
o Knowledge as measured by a weighted average of adult
literacy (2/3) and mean year of schooling (1/3).
o Standard of living as measured by real per capita income.
Therefore;
HDI = 1/3(income index) +1/3(life expectancy
index) +1/3(education index)
2.2.2.3. Poverty Weighted Index
Is a welfare index in which income gains for lower income
groups are given greater weighted than gains for upper income groups (Todaro
& Smith 2006;824).
2.2.2.4. Headcount Index
This index measures the proportion of a country's population
below the poverty line.
Absolute poverty may be measured by the number or
«head-count H» of those whose incomes fall below the absolute poverty
line «Y», when the head count is taken as a fraction of the total
population «N» we define the headcount index as H/N ( Todaro &
Smith 2006;815)
2.2.2.5. Human Poverty Index
Is an index measuring deprivation in basic human development
in a country? Variables used are percentage of people expected to die before
age 40, adult literacy rate, percentage of people without access to health
services and safe water, and percentage of under weighted children 5 years of
age ( Todaro & Smith 2006).
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