ECS3707 Assignment 3
(COMPLETE ANSWERS)
Semester 2 2024 (895997) - DUE
17 September 2024
CONTACT:
,ECS3707 Assignment 3 (COMPLETE ANSWERS)
Semester 2 2024 (895997) - DUE 17 September 2024
QUESTION 1 [40 MARKS] Critically assess the merits of
using economic metrics such as Gross Domestic Product
(GDP) per capita versus broader multidimensional
measures like the Human Development Index (HDI) or
Multidimensional Poverty Index (MPI) for understanding
development progress. 1.1 Compare and contrast the key
components and methodologies of GDP per capita, HDI,
and MPI. What aspects of development does each aim to
capture? (15)
Comparison of GDP per capita, HDI, and MPI
1. Gross Domestic Product (GDP) per capita
Definition: GDP per capita is the total monetary value of all goods and services produced
within a country's borders in a specific time period (usually a year), divided by the
population.
Key Components:
o Economic Output: Total value of goods and services.
o Population: Divided by the number of people living in the country to get a per-
person measure.
Methodology: Calculated by summing all national economic outputs, deducting imports,
and dividing by the population.
Aspects of Development Captured:
o Economic Growth: It reflects average income and productivity in a country.
o Material Wealth: It provides a measure of economic well-being in monetary
terms.
Limitations:
o Does not account for inequality, poverty, or social factors such as health and
education.
o Ignores environmental degradation or quality of life.
o Doesn’t reflect income distribution, hiding disparities within a country.
o Non-market activities (e.g., unpaid domestic work) are not included.
2. Human Development Index (HDI)
Definition: The HDI is a composite measure used to assess three dimensions of human
development: health, education, and standard of living.
Key Components:
, o Health: Measured by life expectancy at birth.
o Education: Measured by the mean years of schooling for adults and expected
years of schooling for children.
o Standard of Living: Measured by Gross National Income (GNI) per capita,
adjusted for purchasing power parity (PPP).
Methodology: The HDI is calculated by normalizing each dimension into an index
ranging from 0 to 1 and taking the geometric mean of the three indices.
Aspects of Development Captured:
o Holistic Development: Captures broader aspects like health and education, not
just income.
o Quality of Life: Attempts to provide a more balanced view of human well-being.
Limitations:
o Does not account for inequality within a population (addressed partially by the
Inequality-adjusted HDI).
o Doesn’t directly capture aspects like political freedom, security, or environmental
sustainability.
3. Multidimensional Poverty Index (MPI)
Definition: MPI is a multidimensional measure of poverty that assesses deprivations
across several indicators related to health, education, and living standards at the
household level.
Key Components:
o Health: Indicators include nutrition and child mortality.
o Education: Indicators include years of schooling and school attendance.
o Living Standards: Includes indicators such as access to clean water, electricity,
sanitation, and housing conditions.
Methodology: The MPI identifies poverty by examining the number of deprivations a
person faces in these areas. A person is considered multidimensionally poor if they
experience a certain number of deprivations, and the intensity of poverty is measured by
the average number of deprivations experienced by poor people.
Aspects of Development Captured:
o Poverty Beyond Income: Focuses on a wider set of deprivations, going beyond
monetary poverty.
o Detailed Insights: Highlights specific areas of deprivation, making it useful for
targeted policy interventions.
Limitations:
o Data-intensive and complex to calculate.
o Doesn't capture factors such as political freedoms or environmental quality.
Summary of Comparison
Development
Measure Key Focus Dimensions Strengths Weaknesses
Captured
GDP per Economic Economic output, Simple, widely used, Ignores social,
(COMPLETE ANSWERS)
Semester 2 2024 (895997) - DUE
17 September 2024
CONTACT:
,ECS3707 Assignment 3 (COMPLETE ANSWERS)
Semester 2 2024 (895997) - DUE 17 September 2024
QUESTION 1 [40 MARKS] Critically assess the merits of
using economic metrics such as Gross Domestic Product
(GDP) per capita versus broader multidimensional
measures like the Human Development Index (HDI) or
Multidimensional Poverty Index (MPI) for understanding
development progress. 1.1 Compare and contrast the key
components and methodologies of GDP per capita, HDI,
and MPI. What aspects of development does each aim to
capture? (15)
Comparison of GDP per capita, HDI, and MPI
1. Gross Domestic Product (GDP) per capita
Definition: GDP per capita is the total monetary value of all goods and services produced
within a country's borders in a specific time period (usually a year), divided by the
population.
Key Components:
o Economic Output: Total value of goods and services.
o Population: Divided by the number of people living in the country to get a per-
person measure.
Methodology: Calculated by summing all national economic outputs, deducting imports,
and dividing by the population.
Aspects of Development Captured:
o Economic Growth: It reflects average income and productivity in a country.
o Material Wealth: It provides a measure of economic well-being in monetary
terms.
Limitations:
o Does not account for inequality, poverty, or social factors such as health and
education.
o Ignores environmental degradation or quality of life.
o Doesn’t reflect income distribution, hiding disparities within a country.
o Non-market activities (e.g., unpaid domestic work) are not included.
2. Human Development Index (HDI)
Definition: The HDI is a composite measure used to assess three dimensions of human
development: health, education, and standard of living.
Key Components:
, o Health: Measured by life expectancy at birth.
o Education: Measured by the mean years of schooling for adults and expected
years of schooling for children.
o Standard of Living: Measured by Gross National Income (GNI) per capita,
adjusted for purchasing power parity (PPP).
Methodology: The HDI is calculated by normalizing each dimension into an index
ranging from 0 to 1 and taking the geometric mean of the three indices.
Aspects of Development Captured:
o Holistic Development: Captures broader aspects like health and education, not
just income.
o Quality of Life: Attempts to provide a more balanced view of human well-being.
Limitations:
o Does not account for inequality within a population (addressed partially by the
Inequality-adjusted HDI).
o Doesn’t directly capture aspects like political freedom, security, or environmental
sustainability.
3. Multidimensional Poverty Index (MPI)
Definition: MPI is a multidimensional measure of poverty that assesses deprivations
across several indicators related to health, education, and living standards at the
household level.
Key Components:
o Health: Indicators include nutrition and child mortality.
o Education: Indicators include years of schooling and school attendance.
o Living Standards: Includes indicators such as access to clean water, electricity,
sanitation, and housing conditions.
Methodology: The MPI identifies poverty by examining the number of deprivations a
person faces in these areas. A person is considered multidimensionally poor if they
experience a certain number of deprivations, and the intensity of poverty is measured by
the average number of deprivations experienced by poor people.
Aspects of Development Captured:
o Poverty Beyond Income: Focuses on a wider set of deprivations, going beyond
monetary poverty.
o Detailed Insights: Highlights specific areas of deprivation, making it useful for
targeted policy interventions.
Limitations:
o Data-intensive and complex to calculate.
o Doesn't capture factors such as political freedoms or environmental quality.
Summary of Comparison
Development
Measure Key Focus Dimensions Strengths Weaknesses
Captured
GDP per Economic Economic output, Simple, widely used, Ignores social,
