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.

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)

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