2. What is Economic Growth
Economic growth is the increase in market value of the goods
and services produced by an economy over time. It is
conventionally measured as the percent rate of increase in
real gross domestic product, or real GDP. Of more
importance is the growth of the ratio of GDP to population
(GDP per capita, which is also called per capita income).
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3. • Intensive growth
• Extensive growth
• In economics, "economic growth" typically refers to growth of potential
output, i.e., production at “full employment".
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4. Determinants of per capita GDP growth
Per capita output is determined by: output per unit of labor input (labor
productivity), hours worked (intensity), the percentage of the working age
population actually working (participation rate) and the proportion of the
working-age population to the total population (demography).
1. Productivity
2. Demographic changes
Demographic factors may influence growth by changing the employment to
population ratio and the labor force participation rate
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5. 3. Capital
Refers to physical capital
4. New products and services
Create demand.
5. Political institutions, property rights, and rule of law
Transition to capitalism from earlier economic systems was enabled by the
adoption of government policies.
6. Business cycle
Short-run variation in economic growth is termed the business cycle.
Economists attribute the ups and downs in the business cycle to
fluctuations in aggregate demand.
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6. Economic growth means an increase in real GDP. This increase in real GDP
means there is an increase in the value of national output / national
expenditure.
Economic growth is an important macro-economic objective because it
enables increased living standards and helps create new jobs.
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8. Benefits of economic growth
1. Increased consumption
2. Improved public services
3. Reduced unemployment and poverty
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9. Why economic growth may not bring
increased happiness
1. Diminishing returns
2. Economic growth can cause increased inequality
3. Increase in crime and social problems
4. Diseases of affluence
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10. Determinants For Economic Growth &
Happiness
Mainly there are four determinants which help to determine relationship
between happiness and economic growth in any country:
1. Human development index
2. Happiness
3. Lorenz curve & Gini coefficient
4. Income distribution among citizens
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11. Human Development Index
The HDI was created to emphasize that people and their
capabilities should be the ultimate criteria for assessing the
development of a country, not economic growth alone.
The Human Development Index (HDI) is a summary measure of
average achievement in key dimensions of human development: a
long and healthy life, being knowledgeable and have a decent
standard of living. The HDI is the geometric mean of normalized
indices for each of the three dimensions.
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12. The 2010 Human Development Report(HDI) combines three dimensions
1. A long and healthy life: Life expectancy at birth (LEI)
2. Education index: Mean years of schooling and Expected years of schooling
(EI)
3. A decent standard of living: GNI per capita (PPP US$) (II)
HDI=∛LEI.EI.II
Where,
LE: Life expectancy at birth
MYS: Mean years of schooling (Years that a person 25 years-of-age or older has spent in schools)
EYS: Expected years of schooling (Years that a 5-year-old child will spend in schools throughout
his life)
GNIpc: Gross national income at purchasing power parity per capita
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13. HDI Rankings
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Country (High Human
Development)
HDI 2013 HDI 2012
Norway .944 .943
Australia .933 .931
Switzerland .917 .916
Netherlands .915 .915
United States .914 .912
Source:http://hdr.undp.org/en/content/table-1-human-development-index-and-its-
components
14. Country (Medium Human
Development)
HDI 2013 HDI 2012
Kiribati .607 .606
Tajikistan .607 .603
India .586 .583
Bhutan .584 .580
Cambodia .584 .579
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Source:http://hdr.undp.org/en/content/table-1-human-development-index-and-its-
components
16. What is Gross National Happiness
(GNH)
GNH is a unique and a very significant approach to national and global
development, in which a country’s progress is not only dependent on the
economic development but also on the non-economical factors of well-being.
The World Happiness Report is a measure of happiness taken on the basis of six
important factors that are accountable for a country’s well-being as well as
happiness of the people. These factors are (a) GDP per capita, (b) good health
and healthy life expectancy, (c) someone in the family to count on, (d) freedom
to make choices in life, (e) freedom from corruption, and lastly (g) generosity
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17. Initially, there were four main pillars behind the concept of GNH
1. good governance of the state
2. sustainable state’s social and economic development
3. cultural preservation of the state
4. state’s environmental conservation and protection.
With time, GNH has also included other domains for a more holistic approach
such as psychological well-being, good health, proper education for all, right
use of time, community’s strength, ecological diversity and resilience, and
raising living standards
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18. Can we follow GNH policy in India?
In the name of globalization, liberalization and economic reforms, our country
has progressed and India is today one of the major G-20 economies of the
world. But at the same time, India also needs to change its policy reforms to
benefit the poorer and under-privileged sections of the country. A development
system should be framed to attack poverty in the country.
• GNH aims at improving the conditions of all people in the society, irrespective
of caste, creed, gender, religion and economic background, which in turn can
improve the entire economy.
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19. • Peace and happiness are the two essences of GNH.
• Gross Happiness measures socio-economic development by emphasising
Economic, Environmental, Physical, Mental, Workplace and Political Wellness.
• So India can adopt this policy of Gross National Happiness, which can increase
the number of people who are happy and at the same time decrease the
inadequate and poor conditions of people to make them happy.
• Combining GDP with GNH will not be a bad idea at all, after all every Indian
has a right to happiness!!!
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20. Where Does India Rank In GNH
GNH Ranking
Ranking Country On Scale Of 0-10
1 Switzerland 7.587
2 Iceland 7.561
3 Denmark 7.527
4 Norway 7.522
5 Canada 7.427
6 Finland 7.406
7 Netherlands 7.378
8 Sweden 7.364
9 New Zealand 7.286
10 Australia 7.284
117 India 4.565
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22. Income Inequality
• Income inequality refers to the extent to which income is distributed in
an uneven manner among a population.
OR
• The gap between the rich and poor.
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23. Factors Responsible For Income
Inequality
• Growth factor
• Highly unequal assets distribution
• Inadequate employment generation
• Differential regional growth
• Globalization
• Gender pay gap
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24. According to a 2011 report published by the Organisation for Economic
Cooperation and Development (OECD), income inequality has doubled in India
since the early 1990s. The richest 10 percent of Indians earn approximately 12
times as much money as the poorest 10 percent, compared to roughly six times
in 1990. India's economy is one of the fastest-growing emerging economies of
any newly industrialized nation in the world, but other countries have made
significantly more progress in addressing income inequality.
"Brazil, Indonesia and, on some indicators, Argentina have recorded significant
progress in reducing inequality over the past 20 years," according to the OECD
report. "By contrast, China, India, the Russian Federation and South Africa have
all become less equal over time."
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26. Lorenz Curve
• In economics, the Lorenz curve is a graphical representation of
the cumulative distribution function of the empirical probability
distribution of wealth or income.
• It was developed by Max O. Lorenz in 1905 for representing inequality
of the wealth distribution.
• The curve is a graph showing the proportion of overall income or
wealth assumed by the bottom x% of the people, although this is not
rigorously true for a finite population.
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27. • It is often used to represent income distribution, where it shows for the
bottom x% of households, what percentage (y%) of the total income
they have. The percentage of households is plotted on the x-axis, the
percentage of income on the y-axis. It can also be used to show
distribution of assets. In such use, many economists consider it to be a
measure of social inequality.
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28. • A perfectly equal income distribution would be one in which every person has
the same income. In this case, the bottom N% of society would always
have N% of the income. This can be depicted by the straight line y = x; called
the "line of perfect equality.“
• By contrast, a perfectly unequal distribution would be one in which one
person has all the income and everyone else has none. In that case, the curve
would be at y = 0% for all x < 100%, and y = 100% when x = 100%. This curve
is called the "line of perfect inequality."
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29. Gini Coefficient
• It is a measure of statistical dispersion intended to represent the income
distribution of a nation's residents, and is the most commonly used measure
of inequality.
• It was developed by the Italian statistician and sociologist Corrado Gini and
published in his 1912 paper "Variability and Mutability" .
• A Gini coefficient of zero expresses perfect equality, where all values are the
same (for example, where everyone has the same income).
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30. • A Gini coefficient of one (or 100%) expresses maximal inequality among
values (for example, where only one person has all the income or
consumption, and all others have none).
• a value greater than one may occur if some persons represent negative
contribution to the total (for example, having negative income or
wealth)
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31. Conclusion
• That there is no relation between economic growth and
Happiness.
• Economic growth is just a small part by this happiness cannot
be measured.
• It also has income inequality and other factors.
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