Key Indicators of Economic Development in a Country

There are many different situations where you need an indicator of how well a country is doing economically. For example, maybe you’re planning to expand your business into a new area, and you need to understand the local purchasing power. 

To do this kind of analysis, you’ll need to look at the different indicators of economic development. There are a lot of methods available to you, and it might be hard to settle on one technique. This article lists some of the most popular indicators of economic development for your consideration.

GNP Index

The gross national product or GNP index looks at the output of a countries residents regardless of where the actual economic activity is taking place. This makes it one of the great economic indicators of development for looking at how foreign investments benefit a country. 

In a global economy, states need to invest in foreign markets if they want to grow. GNP is a great measure of this. 

GNP should not be confused with GDP, which is a different kind of economic indicator. 

Per Capita Income Index

Per capita income is concerned with how much money is earned per person within a specific geographic region. Since people need money to live good lives, per capita income measures are an excellent way to see how well a country is doing. 

With that said, this method does have some limits compared to other indicators of economic growth. For example, it can’t account for inflation or income disparity. 

Quality of Life Index

Many economists have noted that the basic indicators of economic development only account for income and not other important factors. In some countries, the economy improves, but the lives of everyday people do now. 

The quality of life index tries to address this issue by looking at factors such as infant mortality, life expectancy, and literacy. Economists such as James Robinson have gone even deeper into looking at non-financial factors. James Robinson argues that inclusive institutions may also have a positive impact on economic development. 

Human Development Index

The Human Development Index combines economic and non-economic factors to create a powerful indicator for gauging development. This index looks at educational attainment, life expectancy, and per capita income. 

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Basic Needs Approach

The basic needs approach is concerned with the basic necessities that humans require for survival. For example, it looks at access to water, food, and sanitation. 

Again this is a helpful tool for gauging if financial improvements in a country actually translate to improving living conditions for the ordinary people who live there. 

Now You Know Some Basic Indicators of Economic Development

As you can see, there are many different ways to assess how a country is doing economically. No one measure gives guaranteed indicators of economic development because economists tend not to even agree on what economic development is. 

If you want to learn more about other money-related topics, check out the rest of our blog posts.