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Economic Development Among Member States in the European Union

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Economic Development Among Member States in the European Union

Reinalyn E. Andaluz

Ma. Nina Angela S. Gomez


This study investigates some indicators of economic development among European Union member states. Further, the study utilized data mining or exploratory data analysis in determining the varying quantifiable indicators that could affect economic development. To be more specific and accurate, the data of the indicators is obtained in the year 2016. This will provide an overview of how these following indicators affect economic development in the European Union. The study found out that economic indicators does not only affect economic growth but it also could affect the totality of the whole society. Most especially, the quality of life of the people. Moreover, where there is economic growth, economic development takes place.

Keywords: Economic development, European Union member states

  1. Introduction

Economic development is briefly defined as the improvement of each country in terms of economic wealth. One common mistake in determining the economic development of a country is by solely looking at the country’s GDP –the sum of gross value added by all residents in the economy plus any product taxes and minus any subsidizes not included in the value of the products –but in reality, there are many characteristics involved to figure out what makes the country economically developed. It is typically associated with a variety of indicators such as the total country’s GDP per capita, human development index, corruption perception index, urbanization, rate of unemployment, and total amount of external debt. But these would not necessarily be adequate enough to determine the economic status of a country. Nonetheless, these would identify which indicators could affect the economic development of a country.

It is not that easy to attain economic development. Developed countries have undergone series of difficulties before they were able to achieve the title. Naturally, developing countries have tried to emulate strategies and/or techniques inspired by developed countries for the reason that they too would like to become one of them. In addition, developed countries still has to maintain stability in order to provide the demands of its people. For example, according to Balcerowicz (2012) Sweden used to be one of Europe’s worst-managed economies but now it is one of the best. It is also stated that Greece and Spain demonstrate ambiguous performance –doing well in some years and catastrophically badly in others.

Japan, which is considered to be one of the largest economies in the world today, is said to have also experienced downfall after the world war 2. However, it was able to recover its economy enabling free trade and investments (Kimura, 2009). With the help of industrialization and westernization, Japan transformed into an economic superpower state (Ohno, 2006). Moreover, Japan is best at creating firm and strong products which they exported to other countries. Technological improvements in Japan contributed greatly to its economic growth, because improvements of technologies in one industry influenced the growth of many other industries. For example, Japan’s steel industry successfully improved the quality of the special steel used in automobiles and as a result of technological progress in the casing of parts, the automobile industry, too, grew into an industry to be able to compete in international markets for the first time (Takada, 1999). Further, since Japan do not have much population, GDP per capita in Japan is high. Human Development Index (HDI) also greatly contributes to Japan’s economic development since Japanese value education and people have experience great quality of life with high income level. However, they do have problems with their decreasing population since most citizens are old-aged but it did not hinder Japan’s development but they consider this as a problem and challenge as well.  

There are many reasons that hinder the progress of a country. It could either be due to internal or external factors. According to Pritchett, Woolcock, and Andrews (2013), most times the economic development goals of specific countries cannot be reached because they lack the State’s capabilities to do so. For example, if a nation has little capacity to carry out basic functions like security or service delivery it is unlikely that a program that wants to foster a free-trade zone. This has been something overlooked by multiple international organizations, aid programs and even participating governments who attempt to carry out ‘best practices’ from other places in a carbon-copy manner with little success. This isomorphic mimicry –adopting organizational forms that have been successful elsewhere but that only hide institutional dysfunction without solving it on the home country –can contribute to getting countries stuck in ‘capability traps’ where the country does not advance in its development goals.

Furthermore, since the beginning of the public debt crisis in 2009, opposite economic situations have emerged between Southern Europe on one hand, and Central and Northern Europe on the other hand: a higher unemployment rate and public debt in the Mediterranean countries, and a lower unemployment rate with higher GDP growth rate in the Eastern and in Northern member countries. In 2015, public debt in the European Union was 85% of GDP, with disparities between the lowest rate, Estonia with 9.7%, and the highest, Greece with 176%. (Eurostat, 2016).

In addition, the economic success of a country is achieved through small activities that are often overlooked by some. The small things would lead from one thing to another which would then result to a much bigger problem. Some researchers, including Helpman and Krugman (1985), Bhagwati (1988), Grossman and Helpman (1991), have argued that the expansion of international trade resulting from the productivity gains and economies of scale will lead to a reduction of production costs and consequently result in a substantial improvement in productivity. This improvement in productivity will in turn leads to an increase in international trade and so on. Thus, the expansion of trade leads to economic growth, and economic growth leads to an expansion of trade.

        Historically, nothing has worked better than economic growth in enabling societies to improve the life chances of their members, including those at the very bottom (Rodrik, 2007). Before economic development, there should be an economic growth. There must be a manifestation of economic growth that must be felt by the people. One denies his country as economically developed if he doesn’t feel any changes in his quality of life. Economic development then, involves economic growth with positive social change. Poverty may be very difficult to be eliminated but economic development would pave the way to easing poverty. It is perceived that countries with higher growth rates tend to have lower poverty rate. A study for example in China, it lifted over 450 million people out of poverty since 1979. Evidence shows that economic growth in China have decreased poverty rate in the country (Lin, 2003 as cited in DFID 2017). This rapid economic development of China is basically due to the country’s great reliance on its exports. Although China before adheres to a communist economic system, Deng Xiao Peng initiated some economic reforms for opening the country for trade towards other countries (Zhuo & Kotz, 2010).



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