Distinguish between 'economic development' and 'economic growth'. What are the factors which determine economic development?
Differences between Economic Growth and Economic Development
- Economic growth is a narrow concept (It studies only increase in real per capita income) while economic development is a broad concept (it studies increase in real per capita income as well as economic welfare).
- Economic growth is only a quantitative concept whereas economic development is both a quantitative as well as a qualitative concept.
- Economic growth ignores distribution of income. Economic development studies distribution of income.
- Economic growth is the essential element of progress of developed countries. Economic development is the essential element of the progress of under developed countries.
- Economic development accounts for structural, institutional and technical change in the economy while economic growth does not.
Factors responsible for economic development:
Capital Formation: higher saving for higher capital formation
Structural, Institutional and Technical Changes
Increase in Real per Capita Income
Marketable Surplus of Agriculture: rise in productivity to transform from substantial to commercial agriculture.
Conditions in Foreign Trade: in a country has proved to be beneficial for earning forex and decreasing current account deficit
Economic System: enhanced economic planning and capitalistic approach can be beneficial
Other factors includes: Desire to Develop; Less or no corruption; Social Organization; Human Resources and Increase in level of technical knowledge.