CHARACTERISTICS OF DEVELOPED AND DEVELOPING COUNTRIES

CHARACTERISTICS OF DEVELOPED AND UNDER DEVELOPED COUNTRIESTRANSITION FROM GROWTH TO DEVELOPMENT

Definition of Economic Development: 1950s

In economic terms, development is the capacity of a nation to generate and sustain an annual increase in its GNP of 5% or more. Traditional economic measures: GDP: is the market value of all final goods and services produced within a country in a given period of timeY=C+I+G+NXGNP: is the market value of all final goods and services produced by permanent residents of a country in a given period of timeGNP= GDP+ net factor income from abroad

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Definition of Economic Development(contd)Common alternative index is the rate of growth of income per capita or per capita GNP Per capita GNP: is the per-head value of final goods and services produced by permanent residents of a country in a given period of time. It is converted to USD using the current exchange rate.PPP Measure: the number of units of a countrys currency required to purchase the same of basket of goods and services in the local market that a US $1 would buy in the USA. Under PPP, exchange rates should adjust to equalize the price of a common basket of goods and services across countries. Penn World Tables rank countries using the PPP method.

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Comparison of GNP GNP Per Capita (US $)CountryExchange ratePPPUK24,50023,550USA34,26034,260Zimbabwe4802,590Bangladesh3801,650China8403,940India4602,390Sri Lanka8703,470

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CLASSIFICATION CRITERIAEconomic factorsCapitalLaborNatural resourcestechnologyestablished markets (labour, financial, goods)Non-economic factors (institutional, social, values)attitudes toward life and work public and private structurescultural traditionssystems of land tenure, property rightsintegrity of government agencies

CHARACTERISTICS OF DEVELOPED COUNTRIESHigh per capita incomePredominance of Non-Agricultural sectorAbundance of Capital and TechnologyLow level of unemploymentBetter quality of life

CHARACTERISTICS OF UNDER DEVELOPED COUNTRIESLow per- capita incomeMass povertyUnemploymentPredominance of agricultureHeavy population pressureCapital deficiencyPoor quality of lifeUnder utilization of natural resourcesPoor economic organizationDual economyForeign tradeCorruption

DEVELOPED AND DEVELOPING COUNTRIESCHARACTERISTIC FEATURES OF THE THIRD WORLD COUNTRIES

Developed CountryAlso calledIndustrialized countriesMore economically developed countries

Reasons for DevelopmentForm of government (democracy)Free market economyLack of corruptionMore dependent on manufacturing than agriculturePrevalent technology

ExamplesUnited StatesJapanGermanyFranceAustraliaCanadaNetherlandsEngland

Features of Developing CountryCountry with low standard of livingAlso Called Third World CountriesUndeveloped industryLack of modern technologyLow levelsEducationHealthcareLife expectancy

ExamplesMexicoBrazilSouth AfricaThailandIndiaSri LankaEgypt