Chapter 2: Comparative Economic Development
Defining the Developing World
The most common way to define the developing world is by per capita income. Several
international agencies offer classifications of countries by their economic status, but the best
system is that of the International Bank of Reconstruction and Development (IBRD), also known
– provides development funds to developing countries in the form of loans,
grants and technical assistance.
In the world bank’s classification system, 210 economies with a population of at least 30,000 are
ranked by their levels of Gross National Income (GNI) per capita. These economies are then
low income countries (LCI’s)
, Lower Middle income countries (LMC), Upper
Middle income countries (UMC) and high incomes OECD countries, and other high incomes
Low income countries are defined as having a per capital gross national income of $975 or less.
Lower middle income countries have an income between $976 and $3,855.
Upper middle income countries have between $3,856 and $11,906.
High income OECD countries have incomes over $11,907.
Note that a number of the countries group as “other high income economies” are sometimes
classified as developing countries, such as when this is the official position of their governments.
Moreover, high income countries that have one or two highly developed exports sectors but in
which significant parts of their population remain uneducated or in poor health for the countries
income level may be viewed as still developing ie Saudi Arabia. Upper income countries also
include some tourist dependant islands with development problems.
The division of the world into developed and developing countries is useful for analytical
A common Structural and Institutional Feature of Developing Countries
The coexistence of two situations or phenomena (one desirable and the other not) that
are mutually exclusive to different groups of society – for example, extreme poverty and
affluence, modern and traditional economic sectors, growth and stagnation and higher education
among a few and large scale illiteracy.
Measuring Development for Quantitative Comparison across Countries
Examine 3 basic indicators of development: Real income per capita adjusted for purchasing
power, health as measured by life expectancy, undernourishment and child mortality, and
educational attainments as measured by literacy and schooling.
Purchasing Power Parity –
According to World Bank’s income based country classification,
gross national income
(GNI) per capita, the most common measure of the overall level of
economic well-being of people in different nations. GNI is the total domestic and foreign output
claimed by residents of a country, consisting of GDP + factor incomes earned by foreign
residents – income earned in the domestic economy by nonresidents. It is calculated as the total
domestic and foreign value added claimed by a countries residents without making dedications