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Difference Between Economic Development and Economic Growth

In general words, economic development refers to the problems of underdeveloped countries and economic growth to those of developed countries. The raising of income levels is generally called economic growth in rich countries and in poor ones it is called economic development.

But this view does not specify the underlying forces which raise the income levels in the two types of economies. The problems of underdeveloped countries are concerned with the development of unused resources, even though their uses are well known, while those of advanced countries are related to growth, most of their resources being already known and developed to a considerable extent.

In fact, the terms "development and growth" have nothing to do with the type of economy. The distinction between the two relates to the nature and causes of change. These two terms may also be explained as the development is a discontinues and spontaneous change in the stationary state which forever alters and displaces the equilibrium state previously existing; while growth is a gradual and steady change in the long run which comes about by a gradual increase in the rate of savings and population. This view has been widely accepted and elaborated by the majority of economists.

According to another school of thought, "economic growth means more output, while economic development employs both more output and changes in the technical and institutional arrangements by which it is produced and distributed. Growth may well involve not only more output derived from greater amounts of inputs but also greater efficiency, either, and increase in output per unit of input. Development goes beyond this two employ changes in the composition of output and in the allocation of inputs by sectors". According to some classical economists the growth is an expansion of the system in one or more dimensions without a change in its structure, and development is an innovative process leading the structural transformation of social system.

Thus economic growth is related to a quantitative sustained increase in the country's per capita output or income accompanied by expansion in its labor force, consumption, capital, and volume of trade. On the other hand, economic development is a wider term. It is related to qualitative change in economic wants, goods, incentives, and institutions. It describes the underlying determinants of growth such as technological and structural change. Development embraces both growth and decline. An economy can grow but it may not develop because poverty, unemployment and inequalities may continue to persist due to the absence of technological and structural changes. But it is difficult to imagine development without economic growth in the absence of an increase in output per capita, particularly when population is growing rapidly. Despite these apparent differences, some economists use these terms as synonyms.

Article Tags: Economic Development, Economic Growth, More Output

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Arfan Ul Haq is an Asian author. He writes articles about various topics of economics and accounting such as  law of supply and online accounting courses.

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