Indicators for Economic Development

Economic development refers to the process

by which a community, nation or region of the
world raises its living standards. Often, this
involves transforming the area's economy from
one based on agriculture to a modern industrial
system. Economists, demographers, sociologists
and public policy makers rely on multiple
indicators -- economic and social -- to gauge the
pace of economic development.

1. Gross Domestic Product

o You obtain per capita gross domestic product, or GDP, by dividing the total value
of goods and services produced within a country or region by its total population.
The Development Economics Web Guide observes that per capita GDP figures
often illustrate large differences between modern industrial powers and
developing nations. The website also cautions that certain issues affect the
indicator's reliability. These include issues related to measuring output in
countries where some production, such as subsistence farming, may go
unmeasured, which underestimates overall GDP. In addition, governments that
collect the data use different collection methods and may have an incentive to
overvalue national output.

2. Life Expectancy
o People residing in modern developed nations generally have longer lifespans,
measured in years, than those in poor, underdeveloped countries. As an example,
the Development Economics Web Guide contrasted life expectancies in the
United Kingdom, Ghana and Zambia. U.K. residents had a life expectancy
averaging nearly 78 years, far ahead of Ghana's 56.6 and Zambia's 41. Factors
affecting life expectancy include poverty, adequate food supplies and disease. An
increase in life expectancy points to improved social and economic conditions.

3. Agriculture

o The economies of many underdeveloped nations depend heavily on agriculture. In

contrast, developed countries have high levels of industrial employment. The
British Broadcasting Corporation reported that low levels of agricultural
employment indicate higher economic development. The BBC reported that only
2 percent of the British work force work in agriculture, while agriculture employs
72 percent of Vietnam's work force. A decline in agricultural employment over
time may indicate a region or nation undergoing a process of development.

4. Cars and Telephones

o Motor vehicles and telephones are necessary modes of transportation and
communication in developed economies. The BBC reported that the numbers of
cars and telephones per 1,000 people provide helpful indicators of a country's
level of development. An increase in the number of people who own such goods
suggests growing prosperity and a developing economy.