Measures of economic development

There are a number of different ways economic development can be measured. One of the most common is gross national income data or GNP. However, this data can be very misleading in establishing the level of economic development of a country, particularly if it is an LIC. Using the mathematical mean is a crude way of establishing a typical figure. If there is a significant divide between the earnings of rich and poor people the income of the more wealthy will skew the GNP. The value of how hard people work, as is common in LICs and NEEs as many people work in subsistence farming or in the informal sector, is not included in the data. Other shortcomings in this data is that is may not be accurate and people may not tell the truth about their earnings, conflict or natural disaster can make it very difficult to collect data. Also, large-scale migration makes it difficult to accurately record population and earnings in any one place.

Also, GNI data is expressed in US dollars, the value of which changes on a daily basis. Finally, some countries have underestimated their GNI because they did not include earnings from certain sectors. For example, Nigeria did not include revenue from the internet or from entertainment in their calculations until recently leading to the value of its economy being under-estimated.

Given the World Bank’s categorisation of LICs, it is possible that some LICs might really be NEEs, or vice versa.