Development and well-being indicators

Explain the difference between economic growth and development. Can a country's GDP grow without improving the lives of the majority? Give a reasoned example.

Explain in your own words what a country's development is and what dimensions it includes besides income (health, education, freedoms, the environment). Why is development said to be "multidimensional"?

Development approaches talk about expanding people's "capabilities" and real freedoms: being able to read, living healthily, participating, choosing your own life project. Explain with an example why a person with income but without freedom or without health is not truly "developed".

The fictional country "Austral" managed to quadruple its GDP per capita in two decades by attracting foreign textile assembly factories and maintaining very low wages. However, over the last ten years its wages have grown compared to poorer neighboring countries, multinationals are starting to offshore, and growth has stagnated at 0.8 % per year, failing to converge with high-income countries.

1. a) Diagnose why the competitive advantages that allowed Austral to escape extreme poverty are no longer effective for sustained growth (the "middle-income trap").
2. b) Design two structural policies to overcome this stagnation and justify why these reforms entail greater technical difficulties and higher short-term political costs than the initial measures of opening up to maquiladoras.

What does the Human Development Index (HDI) measure and which three dimensions does it combine? Explain why it is considered a more comprehensive measure than GDP per capita.

Two imaginary countries: Kolia has an income per capita of $\$40,000$ and a medium HDI; Osia has $\$28,000$ and a very high HDI.

1. a) How is this combination possible? Explain what Osia must be doing right.
2. b) Which country would you choose to live in and what criterion do you use to decide?

Three fictitious countries: Alia has income per capita of $\$30,000$, life expectancy of $80$ years and $12$ average years of schooling; Bora has $\$24,000$, $82$ years and $14$ years of schooling; Cira has $\$34,000$, $76$ years and $10$ years of schooling.

1. a) Build a reasoned development ranking and explain how you weighted income, health, and education.
2. b) What value judgment did you make when weighting? Compare your ranking with one based only on income and comment on the differences.

Give three reasons why GDP does not accurately measure well-being, focusing on unpaid work, the shadow economy and environmental damage. For each one, explain with an example how it distorts the measure.

An earthquake destroys part of a city. The following year, the region's GDP rises strongly thanks to reconstruction.

1. a) Explain why GDP grows even though residents are worse off than before the earthquake: what does GDP count and what does it not count?
2. b) What complementary indicator would better reflect the situation (wealth or assets destroyed, perceived well-being)? Explain your answer.

The president of a country declares in the budget debate: "Our absolute economic priority must be for GDP to grow above 3 %, because when GDP increases, the social well-being and sustainability of a country are automatically guaranteed."

1. a) Refute the president's claim by providing two concrete examples where an increase in GDP causes or conceals an actual deterioration in citizens' quality of life.
2. b) If GDP has such well-known limitations for measuring well-being, why do the Treasury Department, the Bureau of Economic Analysis, and international organizations continue to use it as the core macroeconomic indicator? Justify at least two operational advantages of GDP compared to composite quality-of-life indices.
3. c) Design an alternative dashboard with three key non-monetary indicators and explain what practical measurement or periodicity difficulties the federal government would face when trying to govern based on them.

What does life expectancy at birth measure and what does it tell us about a country? Two countries with the same income per capita have life expectancies of $74$ and $83$ years: what hypotheses would you make about their health care systems, their diets or their inequality?

What do the literacy rate and the average years of schooling measure? Explain why education is both a sign of development and one of its causes: what chain connects it to future income?

What does the per capita carbon footprint measure? Explain why environmental indicators are part of future well-being even though they do not measure today's quality of life: what is the relationship between current emissions and the development of the next generations?

Name three quality-of-life indicators other than GDP (related, for example, to health, education, the environment or leisure time) and explain what each one captures that GDP does not.

The figure compares three imaginary countries using two indicators: income per capita in thousands of dollars (bars) and the score on a quality-of-life index from $0$ to $100$ (dots).

1. a) Which country has the best combination of income and quality of life? Justify your answer using the graph.
2. b) Which country seems to "buy" little quality of life with its income? What might be going wrong there?

If two neighbors each look after their own children, GDP records nothing; if they decide to pay each other to look after the other's children, GDP rises, even though the work done is the same.

1. a) Explain the paradox and what it says about what GDP measures (market transactions).
2. b) Reason how this affects GDP comparisons between countries or between periods with different levels of women's participation in paid work.

Two countries: one has high income, very polluted air and extremely long working hours; the other has average income, clean air and more free time.

1. a) What indicators would you ask for, besides income, to decide where to live? Justify each one.
2. b) Explain why that decision mixes data and personal judgments, and what that says about "best country to live in" rankings.

You are asked to assess whether your city "is developed" beyond its income.

1. a) Propose four objective pieces of data you would collect (health, education, the environment, safety, or cohesion) and explain what each one contributes.
2. b) Add a survey of residents: what two questions would you ask about their lives, and why do subjective data count too?

A region depends on a highly polluting mine: local GDP is high, but air quality is poor, life expectancy is low and young people are leaving.

1. a) Assess the region's "well-being" using several indicators, not just economic ones.
2. b) Propose two measures to improve its development without shutting down activity all at once.

Design a quality-of-life index for your city.

1. a) Choose five variables (with their unit of measurement) and explain why each one deserves to be in the index.
2. b) How would you weight them? Justify your decision and mention a practical difficulty in collecting the data.