4.2: Measuring development



  1. Relative poverty is a comparative level of poverty. A person is said to be in relative poverty if they don’t reach a specified level of income.
  2. Absolute poverty is measured in terms of the basic necessities of survival., i.e. the level of income that is sufficient to buy basic clothing, food and shelter. It is calculating using PPP exchange rates, enabling us to make comparisons with different countries worldwide.
  3. Human development index is a composite index that brings together three variables, namely the measurements of health, education and living standards in order to attempt to measure relative development. Elements of the HDI are life expectancy at birth, adult literacy rate, school enrollment rate and GDP per capita. The indicators are combined to give an index value between 0 and 1.
  4. GDP per capita is the total money value of all goods and services produced in a country in one year, regardless of who owns the productive assets, divided by the size of the population.
  5. GNI per capita is the total income earned by the country’s factors of production, regardless of where the assets are located, divided by the size of the population.


Poverty cycle/trap

Linked to a combination of barriers to growth and development that is cyclical, thus self perpetuating until a cycle is broken.

Single indicators

1. Financial measures

  • GDP per capita vs. GNI per capita.
  • When comparing the same products in different countries, the value tends to be different.
  • GNI figures are used to compare developing countries as high levels of FDI leads to high GDP levels.
  • To avoid the problem of different values, economists called the purchasing power parity (PPP) exchange rate is used to equate the purchasing power of currencies in different countries and calculated by comparing prices for identical products, such as Big Mac.


2. Health measures

  • Life expectancy at birth determines the well-being of the society.
  • Good levels of health care and services + Provision of clean water supplies + Adequate sanitation + Provision of education + Reasonable supplies of food + Healthy lifestyle + Low levels of poverty + Lack of conflict → High life expectancy at birth.
  • Infant mortality rate measures no. of deaths of babies before they turn a year old.
  • Greatly affected by level of health care and services, availability of clean water, sanitation and food and level of poverty.


3. Education measures

  • Adult literacy rate is measure of people above 15 years of age who are literate.
  • Person who is literate can write and read a short statement relating to their everyday life.
  • Affected by level of educational opportunities → Affect the wealth of the country, income distribution and poverty levels.
  • Net enrolment rate in primary education is the measure of no. of children enrolled in primary school.
  • Affects the relative wealth of the country, income distribution and poverty levels.


Composite indicators

1. Human development index (HDI)

  • GDP per capita can be used to measure growth and development.
  • However, GDP per capita cannot influence the living standards of the country, making other factors important to HDI as well.
  • More info about HDI in section 2.1.

2. Gender-related development index (GDI)

  • Have the same indicators as HDI, but also includes the inequality of genders.
  • GDI = HDI adjusted for inequality for men and women.
  • Developing countries tend to have large differences between HDI and GDI, but it isn’t always true as developed countries such as Saudi Arabia has large difference between the two indicators as well.


3. Gender empowerment measure (GEM)

  • Measures the extent to which women can participate in economic and political life.
  • Looks at participation of women in leadership, managerial, parliamentary positions and in technical and professional jobs.
  • High value = High level of employment for women.
  • Low value of GEM and HDI → Implies basic needs, education and health aren’t provided for greater opportunities and participation for women.


4. Human poverty index (HPI)

  • Measure of deprivation and poverty experienced by the country.
  • High HPI → High levels of deprivation and poverty.
  • Two countries can have similar HDI values, but different HPI values, such as Bangladesh and Kenya.