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Study notes

Developing Countries – Similarities and Differences

  • Levels: AS, A Level
  • Exam boards: AQA, Edexcel, OCR, IB

There are many indicators that can be used to compare and contrast developing countries

World Bank Income Classification (2013)

As of July 2013, the World Bank income classifications by GNI per capita are as follows:

  • Low income: $1,025 or less
  • Lower middle income: $1,026 to $4,035
  • Upper middle income: $4,036 to $12,475
  • High income: $12,476 or more

Low- and middle-income economies are sometimes referred to as developing economies. Please remember that this term is used for convenience.

Fall in Extreme Poverty

The number of people living on less than US$1.25 a day is projected to be 883 million in 2015, compared with 1.4 billion in 2005 and 1.8 billion in 1990. However, much of this progress reflects rapid growth in China and India, while many African countries lag behind

Diversity between developing countries

  • No two developing countries are the same! There is a huge diversity between them
  • There are many key structural economic differences between nations – for example:
  • 1.The size of an economy (i.e. population size, basic geography, annual level of national income)
  • 2.Historical background including years since independence from colonial rule
  • 3.Natural resource endowment such as access to mineral deposits and a favourable climate
  • 4.The age structure of the population, natural rates of population growth
  • 5.Ethnic and religious composition
  • 6.Relative size / importance of public and private sectors of the economy
  • 7.Structure of national output (e.g. primary, secondary, tertiary and quaternary sectors)
  • 8.Structure of international trade (both geographical and the commodity pattern of trade)
  • 9.Political stability, strength of democratic institutions, transparency of government, level of corruption and ease of doing business
  • 10.Ethnic and gender equality, opportunity and tolerance
  • 11.The ease with which new businesses can be created and sustained
  • 12.Other competitiveness indicators (see the chapter on competitiveness, trade and growth)
The proportion of people living in poverty having 1.25 U.S. dollars (PPP) or less per day

What are some of the Common Characteristics of Developing Countries?

These characteristics might include:

  • Relatively low incomes per capita and a low level of absolute savings
  • Lower absolute levels of productivity (labour and capital)
  • Often endowed with rich natural resources
  • A higher dependency on export incomes from primary commodities / low export diversification
  • They have a large share of the population living in rural areas and employed in agriculture
  • Limited scope and support provided by a welfare system
  • A higher informal sector for example in partial subsistence farming
  • Many industries in low-income countries tend to be some distance from technological frontiers
  • Relatively fast growth of population and a younger average age
  • Rapid urbanisation and large-scale rural-urban migration
  • Weaknesses in infrastructure such as telecommunications, transport, ports, water and sanitation
  • Weaknesses in institutions such as stable government, civil service money and capital markets
  • Relatively higher tariffs and other import controls
  • Tendency to have capital controls / relatively closed capital markets
  • Lower access to advanced country markets

Exam Technique Revision Video: Economic Growth in Developing Countries

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