Mar 04 2013

## Lesson Plan: Sources of Economic Growth and Development

Introduction: In order to understand the goals of economic development, it is useful to examine the characteristics of more economically developed countries and compare them to those of less economically developed countries. Before beginning the assignment below, watch the following TED Talk by Swedish Professor of world health Hans Rosling:

Resources: Use the following websites to find the required data for the assignment below.

Part 1 – Development Data:

Using the two websites above, locate the following for TWO COUNTRIES, one from the list of countries with “high human development” and one from the list of countries with “low human development”. Use the tables below to fill in the data for the two countries you have chosen.

Social Indicators (find and record figures for both the countries you chose below)

• HDI ranking and value
• Age structure
• Population growth rate
• School life expectancy
• Life expectancy at birth
• Total fertility rate
• Education expenditures

Economic Indicators:

• GDP per capita
• GDP – composition by sector
• Unemployment rate
• Public debt
• Stock of direct foreign investment – at home:
• Labor force – by occupation

Part 2 – Dependency Ratio:

A nation’s dependency ratio tells us something about the ability of members of a nation’s workforce to provide necessities to him or herself and his or her dependents. Typically, less economically developed nations will have a higher dependency ratio than more economically developed countries. The lower a nation’s dependency ratio, the greater capacity for its workers to accumulate savings, which leads to investment, accumulation of capital, greater productivity, higher incomes and more economic development.

Calculation the dependency ratio: To calculate a nation’s dependency ratio, you must find demographic information on its population. You may need to do additional research beyond the two websites above to find this data.

Calculate the dependency ratios for:

• Country with high HDI
• Country with low HDI

Part 3 – Lorenz Curve and Gini coefficient:

The Lorenz curve is a graphical representation of the income distribution of a country. It plots the percentage of a nation’s total income (GDP) against its total population. The “line of absolute equality” is the 45 degree line, indicating a nation where each quintile (20% of the population) earns exactly the same income as each other quintile. No country is absolutely equal, therefore the line of equality is only used for comparison.

The Gini coefficient is the ratio of the area below the line of equality and above a country’s Lorenz curve and the total area of the triangle below the line of equality. A country with perfect income equality would have a Gini coefficient of 0. A country in which the top 1% had controlled all of a nation’s income would have a Gini coefficient of nearly 1.
Example: Australia’s income is distributed across its population in the following way:

• 1st 20% – 5.9%
• 2nd 20% – 12%
• 3rd 20% – 17.2%
• 4th 20% – 23.6%
• 5th 20% – 41.3%
• Gini coefficient = 0.352

Illustrating your countries’ Lorenz Curves: This is another activity that may require research beyond the websites provided above. Try to find data on the share of national income earned by various levels of society. If you cannot find data for the 20% ranges, use the percentage ranges you can find. Draw a Lorenz curve for the two countries you researched.

Part 4 – Conclusions:

Evaluate your findings from the two countries you researched.

1. What conclusions can you draw about the correlation between GDP, HDI, income equality, social and economic indicators between developed and developing countries?
2. Does a high HDI correlate with relative income equality? What about low HDI?
3. Is a high GDP indicative of high levels of human development?
4. What other conclusions can you draw about economic development, national income, and equality?
5. To what extent did your country with low HD exhibit the following characteristics?
• Low standards of living?
• Low incomes?
• Inequality?
• Poor health?
• Low levels of productivity?
• High rates of population growth and dependency burdens?
• High levels of unemployment?
• Dependence on agricultural production and primary product exports?
• Imperfect markets?

About the author:  Jason Welker teaches International Baccalaureate and Advanced Placement Economics at Zurich International School in Switzerland. In addition to publishing various online resources for economics students and teachers, Jason developed the online version of the Economics course for the IB and is has authored two Economics textbooks: Pearson Baccalaureate’s Economics for the IB Diploma and REA’s AP Macroeconomics Crash Course. Jason is a native of the Pacific Northwest of the United States, and is a passionate adventurer, who considers himself a skier / mountain biker who teaches Economics in his free time. He and his wife keep a ski chalet in the mountains of Northern Idaho, which now that they live in the Swiss Alps gets far too little use. Read more posts by this author

### One Response to “Lesson Plan: Sources of Economic Growth and Development”

1. […] will create a report for the country you selected in our earlier lesson, “Sources of Economic Growth and Development”. You will have class time over the next three weeks to research and prepare your report. The report […]

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