Unit 4 Macro: Developing Countries - Similarities and Differences

Of the 192 member states of the United Nations, only 52 are currently classified as high-income countries. In other words, 140 countries (73 per cent) are still considered developing economies.

As of 1 July 2012, the World Bank income classifications by GNI per capita are as follows:

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

Diversity between developing countries

· No two less economically developed countries are the same!

· There is a huge amount of diversity between them

· Think about some of the 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
4. The age structure of the population
5. Ethnic and religious composition
6. Relative size / importance of public and private sectors of the economy
7. Structural of national output (e.g. primary, secondary, tertiary and quarternary sectors)
8. Structure of international trade (both geographical and the commodity pattern of trade)
9. Political stability, strength of democratic institutions, transparency of government
10. Ethnic and gender equality and tolerance
11. The ease with which new businesses can be created and sustained
12. Other competitiveness indicators including the relative size and strength of high-knowledge / high-technology industries

There are also some common characteristics of developing countries – the list below is not meant to be an exhaustive one, but here these characteristics might include:

1. Relatively low incomes per capita compared to richer advanced nations
2. Lower absolute levels of productivity (labour and capital)
3. A higher dependency on export incomes from primary commodities / low rates of export diversification
4. They have a large share of the population living in rural areas and employed in agriculture
5. A higher than normal “informal” sector of the economy for example in partial subsistence farming
6. Many industries in low-income developing countries tend to be some distance from the technological frontiers reached in rich advanced nations.
7. Relatively fast growth of population and a younger average age – giving a different shape to the population pyramid
8. Weaknesses in critical infrastructure such as telecommunications, transport, ports, water and sanitation and institutions such as stable government, a well functioning civil service and money and capital markets

% of Value Added (GDP) from Agriculture

Shares of GDP by value added for a selection of countries / groupings