AQA Specification focus:
‘The difference between growth and development.’
Economic growth and economic development are often linked, but they refer to distinct processes. Understanding their differences is central to AQA A-Level Economics study.
Economic Growth
Economic growth refers to an increase in a country’s output of goods and services, usually measured by Gross Domestic Product (GDP) over time.
Economic Growth: An increase in the real output of goods and services produced in an economy over time, typically measured by real GDP.
Growth can be expressed in two forms:
Nominal growth: Growth in GDP measured at current prices, not accounting for inflation.
Real growth: Growth in GDP adjusted for inflation, giving a more accurate measure of increased output.
Causes of Economic Growth
Growth is typically driven by increases in aggregate demand (AD) and/or aggregate supply (AS).
Key factors include:
Investment in capital, technology, and infrastructure.
Human capital improvements such as education and training.
Natural resource exploitation.
Innovation and productivity growth.
Government policies encouraging enterprise and trade.
Measurement of Growth
The most widely used measure is the annual percentage change in real GDP. This provides a snapshot of whether the economy is expanding or contracting.
Economic Growth Rate (%) = (Real GDP in current year – Real GDP in previous year) ÷ Real GDP in previous year × 100
Real GDP = GDP adjusted for inflation
While growth is essential for raising living standards, it does not always reflect wider improvements in welfare.
Economic Development
Economic development is a broader concept than growth, incorporating not just higher output but also improvements in quality of life, living standards, and economic opportunities.
Economic Development: A process by which a nation improves the economic, social, and political well-being of its people.
Development includes:
Health improvements (life expectancy, nutrition).
Education access and literacy rates.
Income distribution and reduction in inequality.
Employment opportunities and job security.
Environmental sustainability.
Freedom, rights, and political stability.
This diagram illustrates the components of the Human Development Index, which includes life expectancy at birth, mean years of schooling, expected years of schooling, and GNI per capita. These indicators collectively assess a country's development by considering health, education, and income, offering a more comprehensive measure than GDP alone. Source
Indicators of Development
Unlike growth, development cannot be captured by GDP alone. Economists use both quantitative and qualitative indicators.
This graph from Our World in Data compares GDP per capita with the Human Development Index across various countries. It demonstrates that nations with similar GDP levels can have significantly different HDI scores, emphasizing that economic growth alone does not guarantee improved human development outcomes. Source
Important measures include:
Human Development Index (HDI): Composite index combining life expectancy, education, and GNI per capita.
Gini coefficient: Measures income inequality.
Access to healthcare and education.
Quality of infrastructure.
Environmental measures such as CO₂ emissions.
Key Differences Between Growth and Development
Focus
Growth: Narrow focus on the increase in output and income levels.
Development: Broader focus on improving living standards, opportunities, and well-being.
Measurement
Growth: Real GDP and GDP per capita are the main measures.
Development: HDI, Gini coefficient, literacy, life expectancy, and other social indicators.
Inclusiveness
Growth: Benefits may not be evenly distributed. Some groups may gain more than others.
Development: Concerned with equity, poverty reduction, and long-term sustainability.
Time Horizon
Growth: Short-term increases in production and consumption.
Development: Long-term structural improvements in society and the economy.
Interrelationship Between Growth and Development
While distinct, growth and development are interlinked.
Growth without development: An economy may experience rising GDP, but if inequality increases, education is limited, or healthcare is poor, then people’s lives may not improve significantly.
Development requiring growth: Sustained development usually requires resources generated through economic growth. Without higher incomes and government revenues, improvements in education, health, and infrastructure are hard to fund.
Examples and Application
Rapid growth in some developing economies has lifted millions out of poverty but also created problems of pollution, congestion, and inequality.
Developed economies may focus more on development goals, such as improving environmental sustainability and reducing inequality, rather than rapid GDP growth.
Importance for Policy Makers
Policy makers must balance growth objectives with development goals. For instance:
Fiscal policy can be used to fund education, healthcare, and infrastructure.
Redistributive measures such as progressive taxation can link growth to equity.
Sustainability policies ensure that growth today does not harm future generations.
Summary of Key Points for Study
Growth = Increase in real GDP (quantitative).
Development = Improvement in living standards and well-being (qualitative).
Growth can support development, but development requires more than growth.
Indicators differ: GDP for growth, HDI and broader social indicators for development.
AQA focus: Understand the difference between growth and development clearly.
FAQ
Income distribution highlights whether the benefits of growth are shared widely. Growth may raise total GDP, but if income inequality increases, many people see little improvement in living standards.
Development requires more equitable distribution, ensuring that improvements in health, education, and opportunities reach the majority, not just a small elite.
GDP per capita is an average and does not reveal inequality. A high GDP per capita can mask large disparities between rich and poor households.
It also ignores non-monetary aspects of well-being such as education, healthcare, political freedoms, and environmental quality, all of which are central to development.
The HDI captures broader aspects of welfare by combining:
Health (life expectancy at birth)
Education (mean and expected years of schooling)
Income (GNI per capita, adjusted for purchasing power)
This composite measure better reflects improvements in living standards and opportunities compared to GDP alone.
Yes, especially if resources are redistributed effectively. For instance, strong healthcare and education systems can raise life expectancy and literacy even when GDP grows slowly.
Policies that focus on reducing inequality, improving governance, and protecting the environment may enhance development independently of rapid output growth.
Environmental degradation from unsustainable production
Rising inequality if gains are concentrated among the wealthy
Weak social outcomes if education and health investment are neglected
Political instability when populations feel excluded from growth benefits
These risks can undermine future growth and prevent genuine development from taking place.
Practice Questions
Define economic development and explain how it differs from economic growth. (2 marks)
1 mark for a correct definition of economic development (e.g., improvement in living standards, well-being, or economic opportunities beyond just output).
1 mark for identifying the difference from economic growth (e.g., growth is quantitative, measured by real GDP; development is qualitative, measured by indicators like HDI).
Using examples, explain why a country might experience economic growth without achieving significant economic development. (6 marks)
Up to 2 marks for identifying the concept of growth without development (e.g., rising GDP without improvements in equality, education, health).
Up to 2 marks for appropriate examples (e.g., developing countries experiencing rapid industrialisation leading to GDP growth but high inequality, pollution, or poor living standards).
Up to 2 marks for analysis/explanation of why development may lag behind (e.g., benefits of growth concentrated among elites, inadequate redistribution, weak institutions, or lack of social investment).
Maximum 6 marks: Responses must demonstrate both knowledge (definitions/examples) and analysis (linking growth to lack of wider development).
