We will start by defining Economic growth and development. Having economic growth without economic development is possible.
Economic growth in an economy is demonstrated by an outward shift in its Production Possibility Curve (PPC). Another way to define growth is the increase in a country’s total output or Gross Domestic Product (GDP). It is the increase in a country’s production.
A country’s economic development is usually indicated by an increase in citizens’ quality of life. ‘Quality of life’ is often measured using the Human Development Index, which is an economic model that considers intrinsic personal factors not considered in economic growth, such as literacy rates, life expectancy and poverty rates.
Growth Occurs When
- There is a discovery of new mineral/metal deposits.
- There is an increase in the number of people in the workforce or the quality of the workforce improves. Example: training and education.
- There is an increase in capital and machinery.
- There is an improvement in technology.
Development Occurs When
Measures of economic development will look at:
- An increase in real income per head – GDP per capita.
- The increase in levels of literacy and education standards.
- Improvement in the quality and availability of housing.
- Improvement in levels of environmental standards.
- Increased life expectancy.
Difference between Economic Growth and Economic Development
We can also have a situation where there is growth and development, i.e. increase in luxury goods and education.
Development alleviates people from low standards of living into proper employment with suitable shelter. Economic Growth does not take into account the depletion of natural resources which might lead to pollution, congestion & disease. Development, however, is concerned with sustainability which means meeting the needs of the present without compromising future needs.
A. Economic Growth
Growth is an increase in the country’s output.
B. Development
Development is an improvement in factors such as health, education, literacy rates and a decline in poverty levels.
The Relationship between Inequality and Economic Growth
Poverty has come down most when inequality has fallen, and there is high economic growth. Initial low levels of inequality are associated with more negative elasticities of poverty reduction concerning growth. Higher initial inequality results in less effect on poverty with an increase in economic growth.
1. Savings rate
The marginal savings rate changes with decreasing or increasing income. The marginal savings rate is the fractional decrease in saving that results from a decrease in income.
2. Credit market constraints
The poor can’t get loans.
3. Political economy
Governments pursue poor policies (redistribution policies) trying to reduce inequality which results in high inflation, high deficit, and lower growth. However, there doesn’t seem to any relationship between inequality and economic growth empirically. But, higher economic growth leads to lower levels of poverty (not the same as inequality)
Growth Effect
The positive growth of people’s income and no change in income leads to a decrease in the poverty level.
Redistribution Effect
If there is a rise in inequality and mean income remains constant, then poverty will rise.
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Main Difference – Growth vs Development
Although many people assume growth and development to be the same, there is a significant difference between growth and development. However, growth is often a part of development. Growth refers to the increase in size and number whereas development refers to an improvement of circumstances. This is the main difference between growth and development.
This article will explore,
1. What Does Growth Mean
– Definition, Meaning, Features, Examples
– Definition, Meaning, Features, Examples
2. What Does Development Mean
– Definition, Meaning, Features, Examples
– Definition, Meaning, Features, Examples
3. What is the difference between Growth and Development?
What Does Growth Mean
Growth typically refers to an increase in size or number. This increase is often measurable. For example, a tree can grow. Its growth can be measured from its height. Similarly, an organization can also grow by adding more staff or other organizations to it. Profit of a company can also grow. For more examples, look at the following sentences.
Everyone was amazed at the growth of the company.
Jake had a growth spurt when he was 15 years old – he grew taller than all his older brothers.
The growth of the plants and trees are affected by the weather.
There is a 16% growth in this year’s profits.
He looked like a ruffian, with several day’s growth of beard.
The fertility of the land and rainfall affect the growth of the crops.
The finance minister refused to comment on the economic growth of the country.
What Does Development Mean
Development mainly refers to progress and improvement. It often encompasses a growth as well as an improvement of circumstances. Development is a qualitative measure. Thus, when something develops, the quality of that thing also improves. If a tree develops, its changes will not only be the size – it will stay healthy, bear fruits and continue growing. The same applies to a child or a company. Thus, development refers to the overall changes and the progressive changes of a thing.
The following examples will help you to understand the meaning of this noun more clearly.
A balanced diet and exercise are imperative for the development of muscles.
The president was very interested in the economic development of the country.
The illustrations in the book show the development of a baby inside a mother’s womb.
Personal development is the primary aim of education, not wealth or status.
Brain drain is the greatest obstacle to the development of the country.
The economic development of this company astonished many financial analysts.
The development of a child’s mind is fascinating to observe.
Difference Between Growth and Development
Meaning
Growth: Growth refers to the increase in size and number.
Development: Development refers to an improvement in circumstances.
Measure
Growth: Growth has a quantitative measure.
Development: Development has a qualitative measure.
Interrelation
Growth: Growth basically refers to the increase in size and number.
Development: Development encompasses overall changes including growth and other progressive changes.
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