Development Economics: Differences between Economic Growth and Economic Development

This article discusses the concept of economic development and its differences with that of economic growth, addressing the various opinions and debates existing in these aspects. The article also tries to analyse the implications of the differences between these two terms on the measurement of poverty in a generalised framework. It further explores and discusses the development trends of Pakistan and Bangladesh, highlighting the differences in their development paths.

Running head: DEVELOPMENT ECONOMICS
Development Economics
Name of the Student
Name of the University
Author Note

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Table of Contents
Part A.........................................................................................................................................2
Introduction............................................................................................................................2
Economic Development.........................................................................................................2
Difference between Economic Development and Economic Growth...................................3
Differences in measurement of Poverty.................................................................................7
Economic Growth and Poverty..........................................................................................7
Economic Development and Poverty.................................................................................7
Conclusion..............................................................................................................................8
Part B..........................................................................................................................................8
Differences in Paths of Development....................................................................................9
Reasons behind these differences.........................................................................................10
Theoretical Linkages............................................................................................................11
References................................................................................................................................13

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Part A
Introduction
Over the years, the global economic scenario has developed immensely and has
experienced immense dynamics in due course of time. This in turn has contributed in
expanding the theoretical and conceptual framework of economics as a discipline and newer
theories have emerged over the years, much of which can be attributed to the modifications
and changes which have occurred in the global economic scenario, with time (Ray 1998).
Two such aspects of immense importance of the theoretical framework of economics
are that of economic growth and economic development. In the initial periods, although both
were used to refer to similar notions of economic progress of regions, however, with time,
there arose differences in the meaning of the two economic concepts (Pearce and Warford
1993).
Keeping this into consideration, the concerned assignment tries to discuss the concept
of economic development and its differences with that of economic growth, addressing the
various opinions and debates existing in these aspects. The assignment also tries to analyse
the implications of the differences between these two terms on the measurement of poverty in
a generalised framework.
Economic Development
As discussed in the above section, the term economic development has existed in the
conceptual framework of economics over the years. However, its meanings and implications
have been differently interpreted by different schools of thoughts at different points of time.
The Classical school of thought, founded under Adam Smith, in general used both the terms
interchangeably, to denote more or less the same phenomenon of economic progress of a
country with time. The same trend also remained in the Neo-Classical school of thought.

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Some economists tried to interpret this phenomenon with the help of comparative-static
analysis while some others asserted that economic development is a dynamic process
(Brinkman 1995).
However, with time and especially after the Second World War, the notion of
economic development changed with the conditions faced by major sections of the global
population. The conditions not only showed acute economic scarcity but also the presence of
evils like lack of food, presence of high disease burdens, acute poverty, stagnancy of life and
destruction of economic activities (Seers 1969). This, to some extent, gave rise to the need for
a wholesome improvement in the human life, which is not just comprised of economic
progress, but also improvements in the social, political and other aspects of human lives.
From this need, originated the concept of economic development, as it can be seen to be in
the contemporary period (Gillis et al. 1992).
One of the most comprehensive definitions of the concept of economic development,
in the recent periods, is that of a wholesome and all-inclusive process of improvement of the
economic, structural, political as well as social aspects of a country, thereby affecting the
lives of the population of the country positively, from all aspects of well-being (Meier 1994).
Thus, the concept of economic development can be found to be a much broader concept than
only the progress of industries, commerce and economic aspects of a country and involves
the general welfare of the population of the same.
Difference between Economic Development and Economic Growth
The term “Economic Growth”, in general, refers to the increase in the money value of
goods and services which are produced by the different sectors of the economies within a
particular period of time. In the contemporary period, many economists also view economic
growth as the increase in capital formation and industrial growth of the countries with time.

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Overall, this concept is a quantitative measure which shows the increase in the commercial
transaction and economic abundance, per head of the population of the country (Seers 1969).
The concept of economic growth thus differs from that of the notion of economic
development in the following ways:
 Economic growth refers to the positive changes in the real output production in a
country within a particular point of time whereas the term, economic development,
not only involves the increase in the production of the country but also factors like the
technological advancements as well as increase in the overall living standards of the
population of the country, which includes economic, social, cultural and political
aspects too (Ranis, Stewart and Ramirez 2000).
 Some economists like Amartya Sen denotes economic growth to be one of the
comprising features of economic development, while economists like Kuznets and
Rostow defines economic development to be an independent variable, whose
dynamics influence economic growth of a country (Kuznets 2016).
 The economic growth of a country is an automatic phenomenon which occurs with
industrial and commercial advancements of the country. On the other hand, economic
development, generally occurs in a country, as a result of planned and targeted
activities of the government of the same.
 The economic growth of a country, in general, leads to positive dynamics in the
indicators of monetary well-being like that of the Gross Domestic Product, per-capita
income of a country and others (Schumpeter 2017). However, economic development
indicates towards the improvement of other welfare aspects like the life expectancy,
infant mortality, poverty and literacy in a country.

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 The two concepts also differ in terms of duration. While economic growth is a short-
term phenomenon, measured in terms of yearly changes in the income of the
economy, economic development is a much long-term process.
 Economic growth can only measure the monetary and cardinal progress of the
population of a country while the overall quality of life is measured by the economic
development of the country.
 Economic growth, thus, results in only quantitative changes while the implications of
economic development are both quantitative as well as qualitative (Leigh and Blakely
2016).
 The process of economic growth can be discretely measured in a particular period but
the phenomenon of economic development is a continuous one which cannot be
measured effectively for a discrete time period.
Thus, from the above discussion, it can be asserted that although in many instances
the terms economic growth and economic development are used interchangeably to refer to
the progress of a nation, the concepts are however, considerably different. Economic
development is a much broader concept than that of economic growth (Lewis 2013). When
there is positive economic growth in a country, it does not necessarily mean that there is also
existence of economic development in the country. This can be explained with the help of the
following example:
Example:
The difference between economic growth and economic development can be
highlighted by discussion the theory of Trickle Down, in the conceptual framework of
economics. According to this theory, existing in the earlier years, the fruits of economic
growth of a nation are first accrued to the wealthier classes and then trickle down to other

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sections of the country, thereby increasing the overall welfare of the population of the
countries, which in turn led to the notion of interchangeability of the terms economic growth
and economic development. However, this theory did not seem to work, which can be seen to
be especially in the cases of developing countries (Bertrand and Morse 2016). With the
increase in the economic growth of the countries (most of whose growth rates are highly
impressive), the inequality in distribution of the fruits of growth has also increased, with the
rich becoming richer and the poor becoming poorer. This can be seen from the following
figure:
Figure 1: Gini Coefficients for the developing regions over the decades
(Source: Triplecrisis.com 2018)
As is evident from the above figure, the Gini Coefficient values have been
considerably high for the developing countries (in spite of their high economic growth) and
the same can also be seen to be increasing with time for some of them, which in turn
indicates towards higher presence of inequality (Persky, Felzenshṭain and Carlson 2004).
Thus, from the above discussion, it is evident that economic growth of a country does
not necessarily leads to the overall economic development of the same and the latter is a
much broader concept than that of the former in the conceptual framework of economics.

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Differences in measurement of Poverty
The differences between the economic growth and economic development concepts,
can be seen to have implications on different aspects of human life and their measurements,
which primarily include that of the aspect of poverty. In general, the term “Poverty”, refers to
an inferior condition of living of people in which the basic needs of the people cannot be
fulfilled by them due to lack of resources and amenities present with them (Sen 2006).
However, the poverty in a country, can be seen to be measured differently and from
different perspectives, under the domain of economic growth theory and economic
development theory, which can be seen as follows:
Economic Growth and Poverty
Under the domain of economic growth, poverty is measured in terms of lack of
monetary abundance present with a section of population in the country. There are different
measures of poverty, which are frequently used in this aspect:
Poverty Line- This refers to a monetary threshold which shows the amount of money
required by an adult of a country, to sustain and get the basic needs fulfilled. The section of
the population of the country, under that line is considered to be poor. This also shows the
absolute poverty in a country (Chen and Ravallion 2007).
Relative Poverty- This measures the share of population in a country receiving income at a
certain level below the median income level of the general population of the country.
Economic Development and Poverty
Under the domain of economic development, the measurement of poverty is much
more widespread than that of only economic deprivation and factors like health, employment,
education and overall standard of living are also considered. One such example of
measurement is as follows:

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Multi-Dimensional Poverty Index (MPI)
In this method, there are three dimensions of deprivation and each of them has
indicators for measuring the extent of deprivation which are as follows:
a. Health- The indicators being nutrition and mortality of children
b. Education- The indicators being years of schooling and children enrolment
c. Standard of Living- The indicators being lack of access to electricity, sanitation,
cooking fuel, safe drinking water, flooring and assets (Alkire, Conconi and Seth 2014)
Conclusion
The above discussion asserts that there lie significant differences between the
concepts of economic growth and economic development in the contemporary global
economic scenario. Thus, the measurement of poverty also, is a much more inclusive and
multi-dimensional under the economic development framework than that of the same under
the economic growth model as in the former apart from economic, other factors of
deprivation, which leads to poverty, are also considered unlike that in the former.
Part B
The economic development, being a multi-dimensional notion, can be seen to be
taking place in different countries across the globe at different periods of time. The trends
shown by the economic development frameworks of different countries can also be seen to be
hugely differing from one another, attributed to the inherent differences in the countries, their
governing bodies as well as exogenous factors affecting the economies of the countries,
which in turn can also be seen to be bringing different outcomes for the countries and their
population (Baulch and Hoddinott 2000).

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Keeping this into consideration, this section of the assignment tries to explore and
discuss the development trends of Pakistan and Bangladesh, two of the developing economies
in the contemporary period, thereby highlighting the differences in their development trends
and linking the same with the existing development theories in the conceptual framework of
economics.
Differences in Paths of Development
Before independence, in 1971, Bangladesh used to be a part of Pakistan (known as
East Pakistan) and the economic and political power of the entire consolidation were
concentrated in the West Pakistan. Despite of being under same governing and policy
frameworks, Bangladesh, lagged hugely behind Pakistan and much of its sufferings can be
attributed to the phenomena like Bengal famine, war of independence and others.
However, post-independence, the country can be seen to show distinct developing
traits, which are highly different from that of Pakistan. Although both the countries started
with almost similar economic, political, social and demographic characteristics and although
Pakistan had an upper hand over that of Bangladesh, it can be seen that in the recent period,
the latter has been showing much more positive trends in terms of overall economic
development than the former (Todaro and Smith 2012).
Pakistan has over the years developed the monetary aspects of the economy, with
44% higher income that of Bangladesh. But the trends of Pakistan resemble more of “Growth
without development” as it lags dangerously behind in terms of the different other social
indicators of well-being (Deaton 2003). On the other hand, Bangladesh, in spite of lagging
Pakistan, in the aspects of income growth and monetary abundance, can be seen to be
performing better in the overall social indicators, which in turn indicates towards the fact that
while Pakistan has overtly emphasized on economic progress, Bangladesh has resorted to an

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overall development of its society and population, which can be seen from the following
differences:
Income- Pakistan have 44% higher income than Bangladesh.
Human Development Index- Bangladesh has caught up with Pakistan with nine places
higher than expected in NHDI, while Pakistan lags nine places behind as expected in the
same indicator.
Literacy- More parity in male and female literacy levels in Bangladesh than that in Pakistan.
Health- The average life expectancy of Bangladesh in much higher (69 years) than that of
Pakistan (65 years) in 2012, while the trends were inverse in 1970s. The child malnutrition
rates of Bangladesh have also fallen significantly from 1971, although the fall in the same in
case of Pakistan is much less significant. The mortality rate (under 5) for Bangladesh is 46
per 1000 while for Pakistan it is 72 per 1000 (as per 2013 statistics) (Deaton 2003).
Population Growth- Although in 1971, the fertility rates were extremely high for both
Pakistan and Bangladesh (with 6 births per woman), by 2011, the same decreased to 2.2 for
Bangladesh while for Pakistan it is as high as 3.3.
Gender Equity- The ranking of Pakistan in gender equity index (2013) is 0.29 while that for
the Bangladesh can be seen to be much higher (0.55) (Todaro and Smith 2012).
Reasons behind these differences
There are various reasons behind the different development dynamics of Pakistan and
Bangladesh, the primary ones being as follows:
Priorities of the government- While Pakistan’s policy frameworks have been always pro-
military, with wars agitation, political instabilities always remaining highly existent in the

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country, the government of Bangladesh, in spite of the sufferings and shortcomings,
emphasized in slow but steady improvement of the overall life quality in the country.
Equity- The increasing equity between male and female population of Bangladesh helped
considerably in developing the way it has. On one hand, with increased educational
opportunities, the female population has been increasing engaging in production activities,
thereby increasing economic growth as well as individual development and on the other hand,
this has also led to fall in fertility and decrease in dependence level, which cannot be seen in
the case of Pakistan (Boserup, Tan and Toulmin 2013).
NGO sectors- Bangladesh has one of the most develop0ed non-profit NGO sectors across the
globe, which works for various social development like poverty eradication, increase in
educational and employment opportunities and health care, which also contributes to its
wholesome slow but steady progress (Rahman 2006).
Civil Inequality- The level of inequality in Bangladesh is also comparatively low which
explains its similar HDI rank with that of Pakistan, in spite of lesser income than the same.
The income growth of Pakistan does not percolate to all the sections of the society due to
presence of higher inequality and corruption in the country.
Theoretical Linkages
The economic development traits of Bangladesh can be explained considerably by the
Linear Stages of Growth Theory of Rostow. As per the theoretical framework, Bangladesh,
currently can be considered to be in the late transitional phase with investment increasing,
fertility decreasing, equity and freedom increasing and the overall mindset changing, thereby
getting ready for the take-off stage, which can lead the country to a sustained path of
development in the coming years (Rostow 2000). The economy of Bangladesh also
developed over the years, from agriculture based one to an industrial one, with different

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service sectors also slowly coming into existence, which indicates the structural changes as
can be founded in the Structural Theory of Development.
On the other hand, the development of Pakistan, can be attributed considerably to the
high levels of aids and monetary as well as non-monetary assistance of the developed
countries and international organizations, thereby making the development traits of the
country considerably dependent on the exogenous factors, which in turn draws the linkage of
the Dependency Theory of Development with the traits of Pakistan (Pieterse 2010). There
also remains lack of government intervention in developing the economy of the country by
appropriately regulating the markets, which can be seen to the form of development
advocated by the Neo-Classical theories of economic development.

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