YouTubeExplain why development is multidimensional, use single and composite indicators such as GNI per capita, the HDI, IHDI, GII and Happy Planet Index, and evaluate how well they measure development and its link to growth.
Each is in the Economics glossary, with every other term in the subject.
The percentage of people aged 15 and over who can read and write a short, simple statement about their everyday life.
The area of biologically productive land and sea needed to produce the resources a person or population consumes and to absorb the waste it produces, measured in global hectares.
A broad improvement in people’s economic well-being and quality of life, including higher incomes, better health and education, less poverty and greater freedom of choice.
Measures of development based on energy, such as the share of the population with access to electricity or clean cooking fuels and energy consumption per person.
Measures of the environmental side of development, such as carbon dioxide emissions per person, forest area, access to clean water or the depletion of natural resources.
A composite indicator published by the UNDP that measures inequality between women and men in reproductive health, empowerment and labour market participation, from 0 (equality) to 1.
A composite indicator published by the UNDP that combines life expectancy at birth, mean and expected years of schooling, and GNI per capita at PPP into one index between 0 and 1.
Explain why economic development is multidimensional and cannot be captured by income alone.
Explain the main single indicators of development: GDP and GNI per capita at PPP, and health, education, inequality, energy and environmental indicators.
Explain how the Human Development Index (HDI) is constructed and interpret HDI data.
Explain what the Inequality-adjusted HDI (IHDI), the Gender Inequality Index (GII) and the Happy Planet Index add to the HDI.
Calculate percentage changes, ratios and losses from development data, and the HDI from its components.
Compare and contrast countries’ development using single and composite indicators.
Evaluate the strengths and limitations of different ways of measuring development.
Discuss the possible relationship between economic growth and economic development.
Measuring development means finding numbers that show how well people live: how long, how healthily, how well educated, how free and how secure. Because no single number captures all of this, economists use a set of single indicators and several composite indices, and the choice of measure changes which countries look developed.
The topic centres on the key concept of economic well-being: development is about the quality of people’s lives, not only the size of an economy. It also involves equity, since an average can hide large differences between groups, and sustainability, since well-being bought by running down resources may not last.
100 exam-style questions on this subtopic, written in the style of the IB papers. The first has its markscheme open. Counted on
Read the extract and answer the question that follows.
Text A — Hallorna's migrant-led growth
[1] Hallorna is a small, high-income economy in the Middle East. Over the past 15 years, its population has doubled as hundreds of thousands of workers have arrived from abroad to work in construction, hospitality, domestic service and healthcare. Migrant workers now make up 70 % of the labour force. Real GDP has grown by an average of 5 % a year, and the government has built new airports, hospitals and a metro system.
[2] Real GDP per capita, however, has barely changed, because population has grown almost as fast as output. Most migrant workers earn low wages, live in crowded accommodation and send a large share of their earnings home. Citizens, most of whom work in the public sector, enjoy high incomes and free healthcare and education.
[3] Rapid construction has increased traffic congestion and air pollution, and per-person water and electricity use is among the highest in the world, much of it from desalination plants powered by natural gas. The government has announced plans to diversify the economy and to invest in solar power.
Using information from the text and your knowledge of economics, discuss the consequences of Hallorna's economic growth for the living standards of people living in the country.
15 marks
Discuss requires candidates to offer a considered and balanced review that includes a range of arguments, factors or hypotheses. Opinions or conclusions should be presented clearly and supported by appropriate evidence.
Answers may include:
Terminology: economic growth, real GDP, real GDP per capita, living standards, economic well-being, factors of production, income distribution, negative externalities, sustainability, remittances.
One of 40 short multiple-choice questions on 4.8. Pick an answer to see why it's right or wrong.
What does the Inequality-adjusted HDI (IHDI) adjust the HDI for?
The official deck for this part of the syllabus.
Explain why economists use several indicators, not one number, to measure development.
State the three IB key concepts linked to measuring development, with what each means here.
With a free account, Augment remembers where you stopped and what you have practiced.
The Human Development Index adjusted for inequality in the distribution of health, education and income within a country; the gap between it and the HDI shows the loss caused by inequality.
The number of children who die before their first birthday per 1,000 live births in a year; the under-five mortality rate counts deaths before the age of five.
The average number of years a newborn baby would live if the patterns of mortality at the time of its birth stayed the same throughout its life.
The number of women who die from causes related to pregnancy or childbirth per 100,000 live births in a year.
A measure of development based on one variable, such as GNI per capita, life expectancy or the adult literacy rate, rather than a combination of several.
Education indicators used in the HDI: mean years of schooling is the average number of years of education received by adults aged 25 and over; expected years is what a child starting school can expect to receive.
Scope: At SL and HL alike, measuring development covers development as a multidimensional idea, the single indicators and the composite indicators (HDI, GII, IHDI and the Happy Planet Index), their strengths and limitations, and the possible relationship between economic growth and economic development. There is no HL extension.
Economic growth is an increase in real GDP: the economy produces more goods and services. Economic development is a wider idea. It is an improvement in people’s economic well-being and quality of life, which includes higher income but also better health, more education, less poverty, greater equality between groups and more freedom to choose how to live.
A widely used way of thinking about development comes from the economist Amartya Sen, who argued that development means expanding people’s capabilities: what they are able to do and to be, such as being healthy, being educated, taking part in the life of the community and choosing work. Income matters because it gives people the means to do these things, but it is a means to development, not development itself. A rich country where many people die young, cannot read or have no say in how they are governed is not fully developed.
Dimension of development | What it covers | Example indicators |
|---|---|---|
Material living standards | Income and consumption, access to goods and services | GNI per capita at PPP; poverty rate |
Health | Length and quality of life | Life expectancy; infant and under-five mortality; maternal mortality |
Education | Knowledge and skills | Adult literacy; mean and expected years of schooling |
Equity | How fairly income, opportunity and power are shared | Gini coefficient; income share of the top 10%; GII |
Access to basic services | Energy, water, sanitation | Access to electricity, clean cooking fuel, safe water |
Environment and sustainability | Whether well-being can be kept up | CO₂ emissions per person; forest area; ecological footprint |
Freedom and security | Political rights, safety, absence of conflict | Not part of the IB indicators; measured by other surveys |
Because development has many dimensions, a country can do well on some and badly on others. That is why economists look at several indicators together, and why indicators that combine several dimensions into one number have been developed.
A single indicator measures one aspect of development with one variable. Single indicators are easy to understand and to compare, but each captures only part of the picture.
The most common income measure of development is gross national income (GNI) per capita, adjusted for purchasing power parity (PPP). Each part of this measure solves a specific problem.
GNI rather than GDP. Gross domestic product measures the value of output produced within a country’s borders. GNI adds income that residents earn abroad and subtracts income that foreigners earn in the country. For a country where foreign firms own the oil fields or mines and send their profits home, GNI shows more accurately the income available to residents; for a country that receives large remittances from workers abroad, GNI is higher than GDP.
Per capita. Dividing by the population gives the average income per person, so that a large country with a large GDP is not mistaken for a rich one.
At PPP. Converting incomes with market exchange rates understates living standards in low-income countries, where many goods and services, especially non-traded ones such as haircuts, rent and local food, are cheap. PPP exchange rates convert incomes so that a dollar buys the same basket of goods in every country, which allows a fair comparison of real living standards.
In 2023 GNI per capita at PPP was about $15,550 in Equatorial Guinea and $14,070 in Sri Lanka, measured in current international dollars, so on this indicator the two countries had similar living standards. Their health and education indicators, however, differ sharply.
Sources: World Bank, World Development Indicators, GNI per capita, PPP (current international $) (2026).
Strengths | Limitations |
|---|---|
Data are available for almost every country, often every year, so trends and comparisons are easy. | It is an average: it says nothing about how income is distributed, so a few very rich people can raise it while most people stay poor. |
Income is a means to many other aspects of development (food, housing, health care, education). | It ignores non-market output, such as subsistence farming and unpaid care, and much of the informal economy, which are large in low-income countries. |
PPP adjustment makes comparisons of real living standards fairer than market exchange rates do. | It counts output that does not raise well-being (pollution clean-up, military spending) and ignores the depletion of natural resources. |
It is widely understood and used by the World Bank to classify countries by income. | PPP estimates rest on price surveys that are infrequent and uncertain in some countries; income says nothing about health, education or freedom directly. |
YouTubeThe video works through the same single indicators, including why PPP is used and why income averages can mislead.
Health is both a part of development and a condition for it, because healthy people can work, learn and care for others. The main health indicators measure how long people live and how many die young from causes that richer countries have largely prevented.
Life expectancy is an average over the whole population, so it is pulled down sharply when many children die young. For that reason the deaths of children are also measured separately.
Life expectancy summarises the health of a whole population. The infant mortality rate and the under-five mortality rate are especially sensitive to development, because most deaths of young children in low-income countries come from causes such as diarrhoea, pneumonia, malaria and malnutrition that clean water, vaccination and basic health care prevent. The maternal mortality ratio measures deaths of women from causes related to pregnancy and childbirth, and reflects access to trained birth attendants and emergency care.
Other health indicators measure inputs rather than outcomes: the number of doctors or hospital beds per 1,000 people, health spending per person, the share of children vaccinated, or access to clean water and sanitation. Outcome indicators such as life expectancy are usually preferred, because spending more does not always produce better health.
The scatter plot shows each country’s life expectancy against its GNI per capita, with income on a logarithmic scale, in 2023. At low incomes, small increases in income go with large gains in life expectancy, because they pay for food, clean water and basic health care; at high incomes, extra income adds little. Countries with similar incomes also differ widely. Sri Lanka and Cuba have life expectancies of about 78 years at incomes far below those of many countries with shorter lives, while Equatorial Guinea has a life expectancy of about 64 years at a similar income to Sri Lanka.
Sources: UNDP, Human Development Report 2025, composite indices time series (2025).
Education raises people’s earnings and productivity, and it widens the choices open to them. Education indicators measure either the stock of education in the adult population or the flow of education children are receiving.
The world adult literacy rate was about 88% in 2024, but it was about 36% in Niger in 2022 and about 31% in Chad in 2019, the latest years with data. Because most adults in high-income countries are literate, the literacy rate tells little about differences between them, so the HDI uses years of schooling instead.
Mean years of schooling measures the education of today’s adults, and so the past; expected years of schooling measures what today’s children are likely to receive, and so the future. Enrolment rates (the share of children of the relevant age who are in primary or secondary school) are another flow measure. All these indicators count time in school, not what is learned, so a country with large classes and few trained teachers can score well on years while children learn little.
Sources: World Bank, World Development Indicators, adult literacy rate, from UNESCO (2026).
Averages hide how income, wealth and opportunity are shared. Inequality indicators show whether development reaches most people or a minority.
The Gini coefficient summarises how unequal the distribution of income is, from 0 (everyone has the same income) to 1 (one person has all of it); the World Bank reports it as an index from 0 to 100. It was 26.5 in Norway in 2023 and 50.3 in Brazil in 2024.
Income shares, such as the share of income going to the richest 10% or the poorest 40% of households, are easier to interpret than the Gini coefficient.
The gender pay gap, female labour force participation and the share of parliamentary seats held by women measure inequality between women and men; the GII combines several of them.
The share of people in absolute poverty, below the World Bank’s international poverty line, and the Multidimensional Poverty Index measure deprivation directly.
Sources: World Bank, World Development Indicators, Gini index, from the Poverty and Inequality Platform (2026).
Modern energy is needed for almost every part of development: electric light to study at night, refrigeration for vaccines and food, power for machines and clean fuels for cooking. Energy indicators measure how far people have access to it.
Access to electricity is the most widely used. In 2024, 55% of people in sub-Saharan Africa (excluding high-income countries) had access to electricity, compared with 100% in Sri Lanka and 65% in Equatorial Guinea. Energy consumption per person is a second measure: it rises with industrialisation and income, but high consumption also means high emissions, so on its own it can reward unsustainable development.
Sources: World Bank, World Development Indicators, access to electricity (2026).
Environmental indicators measure the environmental side of development and whether present well-being can be kept up. They include carbon dioxide emissions per person, forest area, access to safe drinking water, air pollution, and the depletion of natural resources.
These indicators often move in the opposite direction to income. Qatar, one of the highest-income countries in the world, emitted about 43 tonnes of carbon dioxide per person in 2023, while Nigeria emitted about 0.6 tonnes. A country that looks highly developed on income and health may therefore be using resources at a rate that cannot be sustained, which is the idea behind indices such as the Happy Planet Index.
Sources: UNDP, Human Development Report 2025, carbon dioxide emissions per capita (production) (2025).
Single indicator | What it shows | Main limitation |
|---|---|---|
GNI per capita at PPP | Average real income per person | Hides distribution; ignores non-market output and environmental costs |
Life expectancy at birth | Overall health of the population | Says nothing about years lived in poor health |
Under-five / infant mortality | Access to clean water, vaccination, basic health care | Little variation between high-income countries |
Adult literacy rate | Basic education of the adult population | Little variation in middle- and high-income countries; self-reported in some surveys |
Years of schooling | Stock and flow of education | Measures time in school, not learning |
Gini coefficient | Inequality of income | Same value can describe different distributions; surveys may miss top incomes |
Access to electricity | Access to modern energy | Says nothing about reliability or cost of supply |
CO₂ per person | Pressure on the climate | Production-based figures ignore emissions embodied in imports |
A composite indicator combines several single indicators into one index. It captures more dimensions of development than any single indicator, while still giving one number that can be ranked and compared. The cost is that its makers must choose which indicators to include and how much weight to give each, and those choices are value judgments.
The Human Development Index (HDI), published each year by the United Nations Development Programme (UNDP) in its Human Development Report, is the best known composite indicator. It was introduced in 1990, drawing on Sen’s idea of development as expanding people’s capabilities, to move the focus of development from income to people.
The diagram shows the three dimensions and how they are combined. A long and healthy life is measured by life expectancy at birth. Knowledge is measured by mean years of schooling of adults and expected years of schooling of children. A decent standard of living is measured by GNI per capita at PPP. Each indicator is turned into an index between 0 and 1 by comparing it with a minimum and a maximum value, called goalposts.
The goalposts are 20 and 85 years for life expectancy, 0 and 15 years for mean years of schooling, 0 and 18 years for expected years of schooling, and $100 and $75,000 for GNI per capita. The education index is the average of the two schooling indices. The income index uses the natural logarithm of income, because each extra dollar adds less to well-being as income rises: going from $1,000 to $2,000 matters far more than going from $50,000 to $51,000.
The HDI is the geometric mean of the three indices: they are multiplied together and the cube root is taken. Unlike a simple average, a geometric mean penalises uneven development, so a country with a very low score in one dimension cannot make up for it fully with a high score in another. Countries are grouped by their HDI into very high (0.800 and above), high (0.700–0.799), medium (0.550–0.699) and low (below 0.550) human development.
In the 2025 Human Development Report, covering 2023, Iceland had the highest HDI (0.972), followed by Norway and Switzerland (0.970). South Sudan had the lowest (0.388), ranked 193rd, with Somalia (0.404) just above it. A useful way of reading the HDI is to compare a country’s HDI rank with its rank on GNI per capita alone. A positive difference means the country ranks higher on human development than its income would suggest; a negative difference means it turns its income into health and education less well than others.
The chart shows the gap for selected countries. Sri Lanka ranks 22 places higher on the HDI than on income, and Cuba 30 places higher, reflecting high life expectancy and schooling at moderate incomes. Guyana, whose income has risen very fast since offshore oil production began in 2019, ranks 54 places lower; Qatar ranks 39 places lower, because its expected and mean years of schooling are modest for a country with such a high income. A large negative gap is a sign that income has grown faster than human development, often because it comes from natural resources.
Over time the HDI shows how development has changed. Between 1990 and 2023 China’s HDI rose from 0.491 to 0.797 and Bangladesh’s from 0.397 to 0.685, while Nigeria’s rose more slowly, from 0.379 to 0.560. The flattening of several lines after 2019 reflects the effects of the COVID-19 pandemic on life expectancy and schooling.
Sources: UNDP, Human Development Report 2025, statistical annex and composite indices time series (2025).
Strengths | Limitations |
|---|---|
Covers three dimensions of development, not just income, so it is a better measure of well-being than GNI per capita alone. | Leaves out many dimensions: inequality, gender, poverty, freedom, security and the environment. |
Simple, transparent and published for 193 countries, so it allows comparisons and trends over time. | The choice of indicators, goalposts and equal weights is a value judgment. |
The log of income reflects diminishing returns to income; the geometric mean penalises uneven development. | It is an average: a country can have a high HDI while large groups are poor, unhealthy or uneducated. |
Comparing HDI rank with income rank shows how well countries turn income into health and education. | Years of schooling measure time in school, not learning; data for some countries are old or estimated. |
It has encouraged governments to focus on health and education. | Close to the top, differences between very high HDI countries are tiny and say little. |
YouTubeThe video revises the HDI’s components and its main criticisms, which the next indices try to address.
The HDI measures the average achievement of a country’s population. Two countries with the same HDI can be very different if in one the gains are shared and in the other they are concentrated. The Inequality-adjusted Human Development Index (IHDI) adjusts each dimension of the HDI for inequality within the population.
If everyone had the same life expectancy, schooling and income, the IHDI would equal the HDI. The more unequal the distribution, the further the IHDI falls below the HDI. The percentage difference is called the loss due to inequality.
The chart compares the HDI and IHDI of eight countries in 2023. Iceland loses only 5% of its HDI to inequality, while South Africa loses 36% and India 31%. The largest losses in 2023 were in Somalia (43%), South Sudan (42%) and Angola (42%); the smallest in Slovenia and Iceland (about 5%). The IHDI also shows which dimension drives the loss: in South Africa, inequality in income is the largest component; in Nigeria, inequality in life expectancy and education is larger than inequality in income.
The IHDI is a better guide than the HDI to the well-being of a typical person, and it shows governments which dimension of inequality matters most. Its limitations are that it needs detailed household survey data, so it is not calculated for many countries (including Equatorial Guinea, Qatar and Cuba), and that it measures inequality within a country, not inequality between particular groups such as women and men or regions.
The Gender Inequality Index (GII), also published by the UNDP, measures the loss in human development caused by inequality between women and men. Unlike the HDI, a higher GII is worse: 0 means women and men fare equally, and 1 means women fare as badly as possible in every dimension measured.
Dimension | Indicators |
|---|---|
Reproductive health | Maternal mortality ratio; adolescent birth rate (births per 1,000 women aged 15–19) |
Empowerment | Share of parliamentary seats held by women; share of women and men aged 25 and over with at least some secondary education |
Labour market | Labour force participation rate of women and of men |
In 2023 Denmark had the lowest GII of the 172 countries ranked (0.003), followed by Norway (0.004). Yemen had the highest (0.838): women held 0.3% of parliamentary seats, and about 6% of women were in the labour force, compared with about 66% of men. Nigeria (0.677) ranked 171st, mainly because of a maternal mortality ratio of over 1,000 deaths per 100,000 live births and a very low share of women in parliament.
The GII shows that development and gender equality do not always move together. Qatar, with one of the highest incomes in the world, ranked 52nd on the GII, while some lower-income countries ranked higher. The index has limitations: it leaves out unpaid care work, violence against women, pay gaps and land ownership, and in high-income countries its reproductive health indicators vary little, so differences between them are driven by parliamentary seats and labour force participation.
Sources: UNDP, Human Development Report 2025, Gender Inequality Index (2025).
The Happy Planet Index (HPI), published by the Hot or Cool Institute (originally by the New Economics Foundation), measures how efficiently countries turn natural resources into long and happy lives. It adds two things that the HDI leaves out: people’s own view of their lives, and the environmental cost of their way of life.
It combines three indicators: life expectancy at birth; experienced well-being, measured by asking people to rate their life on a scale from 0 to 10; and the ecological footprint per person, the area of productive land and sea needed to supply what a person consumes and absorb their waste. Roughly, the index multiplies well-being by life expectancy and divides by the ecological footprint, so a country scores highly if its people live long, satisfied lives while using few resources.
Country (2026 HPI) | HPI rank and score | Life expectancy (years) | Well-being (0–10) | Ecological footprint (gha per person) |
|---|---|---|---|---|
Costa Rica | 1st, 68.3 | 81.2 | 7.6 | 2.62 |
Guatemala | 2nd, 60.7 | 72.9 | 6.7 | 1.79 |
Spain | 4th, 60.6 | 84.0 | 6.6 | 3.18 |
Chad | 131st, 36.2 | 55.4 | 4.4 | 1.17 |
Mongolia | 134th (last), 34.2 | 72.2 | 6.1 | 7.53 |
The rankings differ sharply from the HDI. Costa Rica, 62nd on the HDI, is first on the HPI because its people report high well-being and live long lives with a modest footprint. Mongolia comes last despite reasonable life expectancy and well-being, because of a very large footprint per person. Many high-income countries rank far below their HDI position for the same reason.
The HPI is the only one of the four composite indicators to include sustainability directly, which makes it a measure of sustainable well-being rather than of development alone. Its critics point out that well-being scores are subjective and may reflect culture and expectations, that the footprint is estimated with large uncertainty, and that the index can rank a country with low income and poor services above one where people are healthier and better educated. For these reasons it is usually read alongside the HDI.
Sources: Hot or Cool Institute, Happy Planet Index 2026, public data set (data for 2025; accessed October 2026); UNDP, Human Development Report 2025 (2025).
Composite indicator | What it combines | What it adds | Main limitation |
|---|---|---|---|
HDI | Life expectancy, schooling, GNI per capita (PPP) | Health and education alongside income | Ignores inequality, gender and the environment |
IHDI | HDI components adjusted for inequality within the country | How evenly development is shared | Needs detailed survey data; missing for many countries |
GII | Reproductive health, empowerment, labour market by sex | Inequality between women and men | Leaves out unpaid work, violence, pay gaps |
Happy Planet Index | Life expectancy, self-reported well-being, ecological footprint | Subjective well-being and sustainability | Subjective scores; can rank low-income countries above healthier ones |
Every measure of development involves choices, and each has strengths and limitations. Several problems apply to all of them.
Data quality. In low-income countries, statistical offices often lack funding; censuses and household surveys may be years old, and many figures are modelled estimates. Conflict-affected countries may have no recent data at all.
The informal economy and non-market output. Subsistence farming, unpaid care and informal work are only partly counted in GDP and GNI, which understates income where they are large.
Averages hide distribution. National averages, including the HDI, conceal differences between rich and poor, women and men, urban and rural areas, and regions.
Value judgments. Choosing which indicators to include and how to weight them reflects views about what development means; equal weights in the HDI are a choice, not a fact.
What cannot be measured easily. Freedom, security, culture, community and the quality of institutions matter to well-being but are absent from most indicators.
Sustainability. Most measures, except the HPI, record well-being today without asking whether it can be kept up.
A balanced judgment is that no single measure is sufficient. Income per capita at PPP remains useful as a measure of the resources available, and the HDI is a clear improvement because it includes health and education. The IHDI, GII and HPI each correct a specific weakness of the HDI. A sound assessment of a country’s development uses several indicators together and asks why they differ, since the differences, such as Equatorial Guinea’s high income and low life expectancy, are often the most revealing evidence.
Growth and development are linked, but the link is neither automatic nor one-way. The relationship can run from growth to development, from development to growth, or break down in either direction.
The diagram shows the two links. Growth raises household incomes, which pay for better food, housing, school fees and health care. It also raises tax revenue, which governments can spend on schools, clinics, clean water and roads. The scatter plot of life expectancy against income shows this relationship across countries: richer countries generally have longer lives and more schooling.
The link also runs the other way. Healthier, better-educated workers are more productive, so improvements in health and education raise human capital and the economy’s productive capacity. Lower child mortality tends to reduce birth rates over time, which raises income per person; access to electricity and clean water frees time for paid work and study. South Korea’s rise from an HDI of 0.738 in 1990 to 0.937 in 2023 combined both directions: high investment in education supported rapid growth, which paid for further gains in health and education.
Growth can fail to produce development when:
its gains go to a small group, so that inequality rises and most people see little change;
it comes from natural resources owned by the state or foreign firms, and the revenue is not spent on health and education, or is lost to corruption;
it is spent on the military or on prestige projects rather than on services;
it damages the environment, so that health suffers and future output falls.
Oil- and gas-rich countries such as Equatorial Guinea and Guyana, with large negative gaps between their income rank and HDI rank, show growth that has not yet turned into equivalent human development.
Development can also advance faster than income. Sri Lanka and Cuba reached life expectancies close to those of high-income countries at much lower incomes, because their governments spent for decades on free public education and health care, and because basic measures such as vaccination, clean water and trained birth attendants are cheap relative to their effect on health.
There are limits to this path. Without growth, governments struggle to keep paying for services, and educated workers may emigrate if there are too few jobs. Development that is not supported by growth can be fragile, as Sri Lanka’s debt crisis of 2022 showed.
The evidence suggests that growth is usually necessary for sustained development, especially in low-income countries, but it is not sufficient. What turns growth into development is the way its gains are distributed and spent: on health, education and infrastructure that reach most people, through institutions that limit corruption. Development, in turn, supports future growth through human capital. The relationship is therefore strongest where growth is broad-based and governments invest its gains in people, and weakest where growth depends on a single resource controlled by a few.
Equatorial Guinea, a small country on the coast of Central Africa, and Sri Lanka, an island in South Asia, had similar average incomes in 2023 but very different levels of human development. Comparing them shows why income per capita is a poor measure of development on its own, and how growth from natural resources may not become development.
Equatorial Guinea was one of the poorest countries in the world in 1990, with real GDP per capita of about $370 (in constant 2015 US dollars). In 1995 a large offshore oil field, Zafiro, was discovered, and production began in 1996. Oil rents reached about 83% of GDP in 2000, and crude oil made up more than 90% of export earnings. Real GDP per capita rose more than 35 times, to about $13,000 in 2008. As oil output fell and the oil price dropped after 2014, it declined again, to about $4,900 in 2024.
The chart compares the two countries’ real GDP per capita since 1990. Sri Lanka grew far more steadily, from about $1,400 to about $4,200. In 2023 the two had similar GNI per capita at PPP ($15,550 and $14,070), but the development indicators differ sharply.
Indicator (2023) | Equatorial Guinea | Sri Lanka |
|---|---|---|
GNI per capita, PPP (current international $) | 15,550 | 14,070 |
HDI (rank of 193) | 0.674 (133rd) | 0.776 (89th) |
GNI per capita rank minus HDI rank | −24 | +22 |
Life expectancy at birth (years) | 63.7 | 77.5 |
Under-five mortality (per 1,000 live births) | 70.4 | 6.1 |
Maternal mortality ratio (per 100,000 live births) | 174 | 18 |
Mean years of schooling | 8.3 | 10.8 |
Access to electricity (% of population) | 66.9 | 100 |
Sources: UNDP, Human Development Report 2025 (2025); World Bank, World Development Indicators: GNI per capita PPP, under-five mortality, maternal mortality, access to electricity (2026).
The comparison shows the limits of income as a measure of development. A child born in Equatorial Guinea in 2023 was more than 11 times as likely to die before the age of five as a child in Sri Lanka, at a similar average income. The HDI captures part of the gap (Equatorial Guinea ranks 24 places lower on the HDI than on income); the single health and energy indicators show it more starkly.
Growth did not become development because of how the oil income was earned and used. Oil is produced by foreign companies with few local jobs, so growth raised GDP far more than the incomes of most households. Much of the revenue was controlled by a small political elite.
In 2017 a French court convicted Teodoro Nguema Obiang Mangue, the president’s son and the country’s vice-president, in his absence on corruption charges and ordered the seizure of his French properties, including a Paris mansion; in 2014 he had agreed to give up more than US$30 million of assets in the United States that had been bought with the proceeds of corruption. Sri Lanka, by contrast, has a long history of free public education and health care, so moderate growth was turned into high life expectancy and schooling.
The case supports the view that growth from natural resources can coexist with low development when its gains are concentrated and institutions are weak, an issue linked to the Dutch disease and to corruption as barriers to development. It also shows how a composite indicator (HDI) and single indicators (child mortality, electricity) used together expose what GNI per capita hides.
The comparison has limits. Equatorial Guinea’s data are sparse: there is no recent IHDI or GII, and several figures are UNDP or World Bank estimates. Its HDI did rise, from 0.508 in 2000 to 0.674 in 2023, so the oil boom brought some development. Sri Lanka’s record has also been tested, by civil war until 2009 and by its 2022 debt crisis. Even so, the comparison supports the view that how widely income is shared and how it is used matter as much for development as how much income a country has.
Sources: World Bank, World Development Indicators: GDP per capita (constant 2015 US$), oil rents (2026); UNDP, Human Development Report 2025 (2025); US Department of State, “Background Note: Equatorial Guinea” (2002), and _Oil & Gas Journal (1996), via Wikipedia, “Economy of Equatorial Guinea”; The Guardian and BBC News (27 October 2017) and US Department of Justice (10 October 2014), via Wikipedia, “Teodoro Nguema Obiang Mangue” (accessed 2026)._
Questions on measuring development appear mostly in Paper 2, where a table of indicators for one or more countries supports definitions, calculations and short explanations, and in Paper 1 questions on growth and development. A part (g) or a Paper 1 part (b) often asks whether a country’s growth has led to development.
Paper 2-style short questions (invented for practice):
(a) Define the term Human Development Index. [2]
(b) Using the data in Table 1, calculate the loss in human development due to inequality in Country X (HDI 0.741, IHDI 0.476). [2]
(c) Explain why GNI per capita at PPP is a better measure of living standards than GDP per capita at market exchange rates. [4]
(d) Using the data, explain two reasons why Country Y has a lower HDI rank than its GNI per capita rank. [4]
(e) Explain why the Gender Inequality Index may give a different picture of development from the HDI. [4]
Part (b) questions on development measurement usually ask for a judgment about growth and development or about a composite indicator, supported by real examples with figures.
Economic development is a multidimensional improvement in well-being: income, health, education, equity, access to services and sustainability.
Single indicators include GNI per capita at PPP, life expectancy, child and maternal mortality, literacy and years of schooling, the Gini coefficient, energy access and CO₂ emissions per person.
The HDI combines life expectancy, mean and expected years of schooling and GNI per capita at PPP into one index by a geometric mean.
The IHDI adjusts the HDI for inequality, the GII measures inequality between women and men, and the Happy Planet Index adds well-being and the ecological footprint.
Every measure has limitations: data quality, averages that hide distribution, value judgments in weighting, and dimensions left out.
Growth can pay for development and development can raise growth, but neither link is automatic; Equatorial Guinea and Sri Lanka show how similar incomes can mean very different development.
I can explain why economic development is multidimensional.
I can explain the main single indicators and why GNI per capita at PPP is used.
I can name the HDI’s three dimensions and their indicators and explain how they are combined.
I can calculate the HDI from its components and the loss due to inequality from the HDI and IHDI.
I can explain what the IHDI, GII and Happy Planet Index add to the HDI.
I can compare two countries’ development using a table of indicators.
I can evaluate the strengths and limitations of single and composite indicators.
I can discuss the relationship between economic growth and economic development with real examples.
Diagrams: PPC shifting outward as the labour force grows; AD/AS diagram showing LRAS shifting right; Lorenz curve showing unequal distribution; negative externality diagram for congestion or pollution.
Theory: growth in the quantity of factors of production (labour) shifts the PPC outward and raises total output; but living standards depend on output per person, its distribution, and non-material factors such as the environment and health.
Positive consequences:
5 % average annual growth has financed new airports, hospitals and a metro (Text A, paragraph 1), improving infrastructure and public services;
citizens enjoy high incomes and free healthcare and education (Text A, paragraph 2);
migrant workers earn more than at home and send money to their families (Text A, paragraph 2), raising their households' living standards;
investment in solar power and diversification (Text A, paragraph 3) may support future living standards.
Negative consequences:
real GDP per capita has barely changed (Text A, paragraph 2), so average material living standards have not risen with total output;
income is very unequally distributed between citizens and low-wage migrants living in crowded accommodation (Text A, paragraph 2);
remittances leave the circular flow, limiting the effect of growth on domestic spending;
congestion and air pollution (Text A, paragraph 3) reduce well-being and health;
very high water and energy use from gas-powered desalination (Text A, paragraph 3) is not sustainable and imposes costs on future generations.
Synthesis/evaluation:
the answer differs between groups (citizens, migrant workers, future generations);
GDP growth is a limited indicator of living standards (per capita figures, distribution, environment);
short-run versus long-run effects;
a reasoned judgement.
A maximum of [9] should be awarded if only positive or only negative consequences are discussed.
Examiners should be aware that candidates may take a different approach which, if appropriate, should be rewarded.
Markbands (best fit)
Level | Marks | Descriptor |
|---|---|---|
0 | 0 | The work does not reach a standard described by the descriptors below. |
1 | 1–3 | Little understanding of the demands. Theory is stated but not relevant. Terms are not relevant or are used incorrectly. No synthesis or evaluation. No use of the text/data, or it is merely copied. |
2 | 4–6 | Some understanding of the demands. Relevant theory is described. Some relevant terms are included. Synthesis or evaluation is relevant but superficial. Limited use of the text/data. |
3 | 7–9 | The demands are understood but only partially addressed. Theory is partly explained. Some terms are used appropriately. Diagram(s) are included where appropriate. Synthesis or evaluation is appropriate but lacks balance. Some relevant information from the text/data is used. |
4 | 10–12 | The demands are understood and addressed. Theory is explained. Terms are used appropriately. Diagram(s) are included and explained. Synthesis or evaluation is mostly balanced. Use of the text/data is generally appropriate, relevant and applied correctly. |
5 | 13–15 | The demands are thoroughly understood and addressed. Theory is fully explained. Terms are used appropriately throughout. Diagram(s) are fully explained. Synthesis or evaluation is effective and balanced. The text/data is appropriate, relevant and used to build a reasoned argument supported by analysis and evaluation. |
In the 21st century, economists have paid growing attention to the links between the economy, society and the natural environment.
Explain why awareness of the interdependence between the economy, society and the environment has led economists to question the use of GDP alone to measure progress.
10 marks
Using real-world examples, evaluate the strengths and limitations of composite indicators as measures of economic development.
15 marks
Read the extracts and answer the questions that follow.
Text A — Overview of Marenvia
[1] Marenvia is a lower-middle-income country in Central America with a population of 7.2 million. Agriculture provides 22 % of gross domestic product (GDP) and 41 % of employment. Its main exports are coffee, bananas and fresh vegetables.
[2] About one in six Marenvian workers lives abroad, mostly in North America. Remittances sent home by these workers rose from 11 % of GDP in 2018 to 14 % in 2024. They are spent mainly on consumer goods, housing and school fees.
[3] Coffee earns about 30 % of export revenue. World coffee prices are volatile: a fall in prices in 2019 was followed by a weakening of the varo (MVR), Marenvia's currency, which floats freely.
[4] Development indicators have improved (Table 1), but poverty remains high in rural areas, where many households live more than 10 km from a health clinic.
[5] Inflation has remained low, at around 3–4 % a year, and the central bank has kept its base interest rate stable. However, the government's tax revenue is only about 14 % of GDP, among the lowest in the region, which limits its ability to spend on infrastructure, education and health. Around 60 % of workers are employed in the informal economy.
Table 1: Development data for Marenvia
2014 | 2024 | |
|---|---|---|
GDP per capita (US$, PPP) | 7850 | 9920 |
Human Development Index (HDI) value | 0.611 | 0.648 |
Gini coefficient | 0.49 | 0.45 |
Population below the national poverty line (%) | 41 | 33 |
Text B — Fertilizer subsidies and Lake Ilona
[1] In 2016 the government began paying half of the price of nitrogen fertilizer bought by farmers, in order to raise crop yields and improve food security. Fertilizer use has risen sharply (Table 2), and maize yields have increased by 28 %.
[2] Much of the extra fertilizer is washed by rain into the rivers that flow into Lake Ilona, the country's largest lake. The nutrients cause algae to grow rapidly, reducing the oxygen in the water. Fish catches from the lake have fallen by a third, the cost of treating drinking water for the capital has risen, and tourist visits to lakeside towns have declined.
[3] The fertilizer subsidy cost MVR 830 million in 2024, more than the government spent on rural health clinics. Economists at the national university argue that the subsidy should be replaced by an indirect tax on nitrogen fertilizer, with the revenue used to pay farmers who plant grass strips along rivers to absorb run-off. Farmers' unions warn that this would reduce yields and raise food prices.
[4] Most of Marenvia's farmers are smallholders with less than two hectares of land, and many cannot afford fertilizer without the subsidy. Agronomists note that much of the subsidized fertilizer is applied at the wrong time or in excessive quantities, because farmers receive little advice on how to use it. A training programme for farmers in one district cut fertilizer use per hectare by 20 % without reducing yields.
Table 2: Nitrogen fertilizer use in Marenvia (thousand tonnes)
2015 | 2024 |
|---|---|
180 | 312 |
Text C — Health clinics for rural Marenvia
[1] In 2022 the government began building free primary health clinics in rural districts, funded partly by a loan from a multilateral development bank. Each clinic provides vaccinations, care for mothers and babies, and treatment for common illnesses.
[2] In districts with a new clinic, the share of children fully vaccinated rose from 68 % to 87 %, and the number of school days missed through illness fell. However, the clinics have struggled to recruit doctors and nurses, many of whom prefer to work in the capital or abroad.
[3] The government plans to double the number of clinics by 2028 and to offer higher salaries and housing to staff who agree to work in rural areas for at least five years. The Ministry of Finance has warned that this will be difficult to afford unless other spending is cut or taxes are raised.
Define the term remittances indicated in bold in the text (Text A, paragraph 2).
2 marks
Define the term indirect tax indicated in bold in the text (Text B, paragraph 3).
2 marks
Using information from Table 1, calculate the percentage change in GDP per capita (US$, PPP) between 2014 and 2024.
2 marks
Using information from Table 1, state whether income inequality in Marenvia increased or decreased between 2014 and 2024.
1 mark
Sketch a Lorenz curve diagram to show the change in the distribution of income in Marenvia between 2014 and 2024 (Table 1).
2 marks
Using an AD/AS diagram, explain how the rise in remittances is likely to have affected Marenvia's real GDP (Text A, paragraph 2).
4 marks
Using an exchange rate diagram, explain why a fall in world coffee prices could lead to a depreciation of the varo (Text A, paragraph 3).
4 marks
Using an externalities diagram, explain why the fertilizer subsidy has increased the welfare loss associated with fertilizer use in Marenvia (Text B, paragraphs 1 and 2).
4 marks
Using a poverty cycle diagram, explain how free rural health clinics could help households in Marenvia to break out of poverty (Text C).
4 marks
Using information from the text/data and your knowledge of economics, evaluate the government's policies to promote sustainable economic development in Marenvia.
15 marks