COURSE NAME: DEVELOPMENT ECONOMICS

Code: PTKT1101 Number of Credit: 03

Instructor: Assoc. Prof. Dr NGUYEN Thanh Ha

Development Economics Dept.
 COURSE NAME: DEVELOPMENT
ECONOMICS
Code: PTKT1 Number of Credit: 03

PRE-REQUISITE:
Students have to complete MACRO- ECONOMICS 1 course.
 Development Economics is the subject in a system of
economics, which studies about the principles of economic
development in underdeveloped conditions. Development
Economics is based on developmental theories in order to find
out the principles as well as the basic trends of transition from
a low development status to a higher one. The course aims to
study the developing countries in general, however the
COURSE analysis, problem solving, specific applications are applied for
the economic development of Vietnam in particular.
DESCRIPTION
Development Economics is used generally for students in
Business and Management major (2 credits). The course’s
content includes: (i) Classification criteria of worldwide
economic system, the socio-economic characteristics of
developing countries; (ii) The nature of economic development
and sustainable development; (iii) Theoretical and
experimental models of economic growth, economic
restructuring, and social welfare economic growth, economic
restructuring, social welfare .

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 ❑General objectives:
▪ The course aims to build up the basic
principles for economic development of
developing countries. In order to achieve the
COURSE development objectives, the course also
proposes development policies in line with
OBJECTIVES the specific characteristics of each country,
particular development stages in order to find
out the optimal direction for development
process of developing countries.

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 ❑Specific objectives:
▪ Understand the classification criteria of countries in
worldwide economic system; the formation and
development process characteristics of developing
countries; methods and study objectives.
COURSE ▪ Clarify the nature, contents of economic development,
OBJECTIVES the importance of studying development issues of
developing countries in general and Vietnam in
particular.
▪ Understand the principles of developing economy
through specific studies about models of economic
growth, economic restructuring and social
development process.
▪ Apply development economic models into developing
countries like Vietnam.

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COURSE SCHEDULE and CONTENTS

In details
Total Practice,
No. Contents
hours Theory Discussion
, Exams
1 Chapter 1: Introduction 2 2 0

2 Chapter 2: Overview of economic 4 4 0

development

3 Chapter 3: Economic Growth 10 8 2

4 Chapter 4: Economic Restructuring 6 4 2

5 Chapter 5: Social advancement and 8 6 2

economic development
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Total 30 24 6
 Test, exercise, and group discussion: Students must take 01
Group assignment and 01 Mid-term test. Besides, students are
encouraged to take part in several in-class exercises and group
discussions.

ASSESSMENT Condition to take part in the final exam: Students are allowed to
take part in the final exam session after completing all lecturing
sessions, mid-term test and group assignment.
& GRADING
POLICY Method of final exam: Written examination, exam duration does
not excess 90 minutes.

Grading scheme: maximum of 10

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 ASSESSMENT &
GRADING POLICY
- Lecturing attendance and
• Assessment plan attitude 10%

- Group Assignment 20%

- Mid-term test 20%

- Final exam 50%

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CHAPTER 1: INTRODUCTION

Texts and readings for the chapter:

1. Ngô Thắng Lợi (2011), Textbook on Development Economics, National Economics

University Publishing House, Introduction chapter (pp. 8-21).

2. Todaro. MD. (1998), Economics for the 3rd World, Education Publishing House,
(Chapter 1. pp. 13 - 23), (Chapter 4. pp. 117 - 138).

3. Perkins. D.H., Radelet. S. and Lindauer. D.L. (2006), Development Economics,

Statistics Publishing House, Chapter 1 (pp. 3 - 35).

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 ❑ This chapter aims to give knowledge
about the emergence of developing
countries, criteria to classify countries
CHAPTER 1: basing on the level of development, the
INTRODUCTION distinguish differences between
developed and developing countries,
how it affects the principles and research
methods of Development economics
course; similarities and differences of
Development economics to Macro- and
Micro-Economics ( 2 hours).

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 CHAPTER 1: INTRODUCTION

The categorization of The fundamental The necessity of Objects, contents

countries on basis of characteristics of choosing the way of and research
development level developing countries development methodology
• The appearance of • The differences • Research objects
the 3rd World between • Research contents
countries developing • Research
• The classification of countries methodology
countries on basis • The common
of development characteristics of
level developing
countries

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 CHAPTER 1: I. The categorization of countries on
INTRODUCTION basis of development level
1.The appearance of the 3rd World
countries
2.The classification of countries on basis
of development level

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CHAPTER 1: INTRODUCTION

I. The categorization of countries on basis of development level

1.The appearance of the 3rd World countries
▪ The classification of nations as First World or Third World emerged during and after the
Cold War. First-World countries were known as the most highly industrialized nations
whose views aligned with the North Atlantic Treaty Organization (NATO)
and capitalism.
▪ Second-World countries supported communism and the Soviet Union. Most of these
countries were formerly controlled by the Soviet Union. Many countries of East Asia
also fit into the Second-World category.

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CHAPTER 1: INTRODUCTION

I. The categorization of countries on basis of development level

1.The appearance of the 3rd World countries
▪ Third-World countries included nations in Asia and Africa that were not aligned with
either the United States or the Soviet Union. Now, in part because the Soviet Union
no longer exists, the definition of Third World is outdated and considered offensive.
Alfred Sauvy Coined the Term
▪ Alfred Sauvy, a French demographer, anthropologist, and historian, is credited with
coining the term Third World during the Cold War. Sauvy observed a group of
countries, many former colonies, that did not share the ideological views of Western
capitalism or Soviet socialism. "Three worlds, one planet," wrote Sauvy in a 1952
article published in L'Observateur.
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CHAPTER 1: INTRODUCTION
I. The categorization of countries on basis of development level
2. The classification of countries on basis of development level

▪ Absolute poverty: A situation of being unable to meet the minimum levels of income,
food, clothing, healthcare, shelter, and other essentials.
▪ Subsistence economy: An economy in which production is mainly for personal
consumption and the standard of living yields little more than basic necessities of life—
food, shelter, and clothing.

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CHAPTER 1: INTRODUCTION
I. The categorization of countries on basis of development level
2. The classification of countries on basis of development level

▪ Developing countries: Countries of Asia, Africa, the Middle East, Latin America,
eastern Europe, and the former Soviet Union, that are presently characterized by low
levels of living and other development deficits. Used in the development literature as a
synonym for less developed countries.
▪ Development: The process of improving the quality of all human lives and capabilities
by raising people’s levels of living, self-esteem, and freedom.

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CHAPTER 1: INTRODUCTION
I. The categorization of countries on basis of development level
2. The classification of countries on basis of development level

▪ Development can be seen . . . as a process of expanding the real freedoms

that people enjoy. —Amartya Sen, Nobel laureate in economics, 1998.

Amartya Sen, (born November 3, 1933, Santiniketan, India), Indian economist who was awarded the 1998
Nobel Prize in Economic Sciences for his contributions to welfare economics and social choice theory and for
his interest in the problems of society’s poorest members. Sen was best known for his work on the causes of
famine, which led to the development of practical solutions for preventing or limiting the effects of real or
perceived shortages of food.

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CHAPTER 1: INTRODUCTION
I. The categorization of countries on basis of development level
2. The classification of countries on basis of development level

▪ In the modern-day, most countries on Earth fall into one of three general categories
that some refer to as developed, emerging, and frontier. The world segmentations
have somewhat migrated to fit within these categories overall.
▪ The developed countries are the most industrialized with the strongest economic
characteristics. The emerging countries are classified as such because they
demonstrate significant strides in various economic growth areas though their metrics
are not as stable. The frontier markets often closely mirror the old Third-World
classification and often show the lowest economical indicators.

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CHAPTER 1: INTRODUCTION
I. The categorization of countries on basis of development level
2. The classification of countries on basis of development level

Frontier Markets List

The evolutions of the worldly segmentations have become historic and obsolete. As
such, one barometer for assessing a list of developing countries is ( Morgan Stanley Capital
International) MSCI’s Frontier Markets Index. This index includes the following countries:

i. Croatia ii. Estonia iii. Lithuania iv. Kazakhstan v. Romania vi. Morocco vii. Nigeria viii.
Tunisia ix. WAEMU (Benin, Burkina Faso, Côte D'Ivoire, Guinea-Bissau, Mali, Niger, Senegal,
and Togo) x. Bahrain xi. Jordan xii. Kuwait xiii. Lebanon xiv. Oman xv. Bangladesh xvi.
Sri Lanka xvii. Vietnam xviii. Serbia xix. Slovenia xx. Kenya xxi. Mauritius

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CHAPTER 1: INTRODUCTION
I. The categorization of countries on basis of development level
2. The classification of countries on basis of development level

Other Definitions of Developing Nations

▪ The World Trade Organization (WTO), also provides another point of reference. The
WTO divides countries into two classes: developing and least developed. There are no
criteria for these classifications so countries self-nominate, though statuses can be
contested by other nations.

▪ The WTO segregation comes with certain rights for developing country status. For
example, the WTO grants developing countries longer transition periods before
implementing agreements that aim to increase trading opportunities and infrastructure
support related to WTO work.

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CHAPTER 1: INTRODUCTION
I. The categorization of countries on basis of development level
2. The classification of countries on basis of development level

Other Definitions of Developing Nations

• As an offshoot of the WTO, the Human Development Index (HDI) is another economic
status metric developed by the United Nations to assess the social and economic
development levels of countries. The HDI measures and then ranks a country based on
schooling, life expectancy, and gross national income (GNI) per capita.

• The World Health Organization and the United Nations uses Least Developed
Countries (LDC) to describe a set of 45 countries with low socioeconomic
developmental indicators. This list is reassessed every few years. These indicators are
a combination of gross national income (GNI), human assets (nutrition, life expectancy,
secondary school education, adult literacy), and economic vulnerability (population
size, remoteness, merchandise export concentration, agriculture, exports, and natural
disaster preparedness).

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CHAPTER 1: INTRODUCTION
I. The categorization of countries on basis of development level
2. The classification of countries on basis of development level

Other Definitions of Developing Nations (UNITED NATIONS CONFERENCE ON

TRADE AND DEVELOPMENT, UNCTAD, 2021)

African least developed countries and Haiti:

Angola, Benin, Burkina Faso, Burundi, Central African Republic, Chad, Democratic
Republic of the Congo, Djibouti, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau,
Haiti, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger,
Rwanda, Senegal, Sierra Leone, Somalia, South Sudan, Sudan, Togo, Uganda, United
Republic of Tanzania, Zambia.

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CHAPTER 1: INTRODUCTION
I. The categorization of countries on basis of development level
2. The classification of countries on basis of development level

Other Definitions of Developing Nations (UNITED NATIONS CONFERENCE ON

TRADE AND DEVELOPMENT, UNCTAD, 2021)

Asian least developed countries:

Afghanistan, Bangladesh, Bhutan, Cambodia, Lao People’s Democratic Republic,
Myanmar, Nepal, Yemen.

Island least developed countries:

Comoros, Kiribati, Sao Tome and Principe, Solomon Islands, Timor-Leste, Tuvalu.

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CHAPTER 1: INTRODUCTION
I. The categorization of countries on basis of development level
2. The classification of countries on basis of development level

Other Definitions of Developing Nations (UNITED NATIONS CONFERENCE ON TRADE AND

DEVELOPMENT, UNCTAD, 2021)

Developed countries:
Andorra, Australia, Austria, Belgium, Bermuda, Bulgaria, Canada, Croatia, Cyprus, Czechia,
Denmark, Estonia, Finland, France, Germany, Greece, Greenland, Hungary, Iceland, Ireland,
Israel, Italy, Japan, Latvia, Lithuania, Luxembourg, Malta, Netherlands, New Zealand, Norway,
Poland, Portugal, Romania, San Marino, Slovakia, Slovenia, Spain, Sweden, Switzerland, United
Kingdom of Great Britain and Northern Ireland, United States of America, Holy See, Faroe
Islands, Gibraltar, Saint Pierre and Miquelon.
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CHAPTER 1: INTRODUCTION
I. The categorization of countries on basis of development level
2. The classification of countries on basis of development level
Other Definitions of Developing Nations (UNITED NATIONS CONFERENCE ON TRADE AND
DEVELOPMENT, UNCTAD, 2021)
Other developing countries:
All developing countries (according to UNCTAD) that are not least developed countries:
Algeria, American Samoa, Anguilla, Antigua and Barbuda, Argentina, Aruba, Bahamas, Bahrain,
Barbados, Belize, Plurinational State of Bolivia, Bonaire, Sint Eustatius and Saba, Botswana,
Bouvet Island, Brazil, British Indian Ocean Territory, British Virgin Islands, Brunei Darussalam,
Cabo Verde, Cameroon, Cayman Islands, Chile, China, Hong Kong SAR, Macao SAR, Taiwan
Province of China, Colombia, Congo, Cook Islands, Costa Rica, Côte d'Ivoire, Cuba, Curaçao,
Dominica, Dominican Republic, Ecuador, Egypt, El Salvador, Equatorial Guinea, Eswatini,
Falkland Islands (Malvinas), Fiji, French Polynesia, French Southern Territories, Gabon, Ghana,
Grenada, Guam, Guatemala, Guyana, Honduras, India, Indonesia, Islamic Republic of Iran, Iraq,
Jamaica, Jordan, Kenya, Democratic People's Republic of Korea, Republic of Korea, (cont’d) ..
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CHAPTER 1: INTRODUCTION
I. The categorization of countries on basis of development level
2. The classification of countries on basis of development level
Other Definitions of Developing Nations (UNITED NATIONS CONFERENCE ON TRADE AND
DEVELOPMENT, UNCTAD, 2021)
Other developing countries:
All developing countries (according to UNCTAD) that are not least developed countries:
….(cont’d) Kuwait, Lebanon, Libya, Malaysia, Maldives, Marshall Islands, Mauritius, Mexico,
Federated States of Micronesia, Mongolia, Montserrat, Morocco, Namibia, Nauru, Netherlands
Antilles, New Caledonia, Nicaragua, Nigeria, Niue, Northern Mariana Islands, Oman, Pacific Islands,
Trust Territory, Pakistan, Palau, Panama, Papua New Guinea, Paraguay, Peru, Philippines, Pitcairn,
Qatar, Saint Barthélemy, Saint Helena, Saint Kitts and Nevis, Saint Lucia, Saint Martin (French part),
Saint Vincent and the Grenadines, Samoa, Saudi Arabia, Seychelles, Singapore, Sint Maarten (Dutch
part), South Africa, South Georgia and South Sandwich Islands, Sri Lanka, State of Palestine,
Suriname, Syrian Arab Republic, Thailand, Tokelau, Tonga, Trinidad and Tobago, Tunisia, Turkey,
Turks and Caicos Islands, United Arab Emirates, United States Minor Outlying Islands, Uruguay,
Bolivarian Republic of Venezuela, Viet Nam, Wallis and Futuna Islands, Western Sahara, Zimbabwe.
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 II. The fundamental
characteristics of
developing countries
1.The differences CHAPTER 1:
between developing
countries INTRODUCTION
2.The common
27
characteristics of
developing countries
 II. The fundamental
characteristics of
developing countries
1.The differences
between developing
countries: CHAPTER 1:
a. Income INTRODUCTION
b. Human assets
28 c. Economic and
Environmental
Vulnerability
CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

1.The differences between developing countries:
❑ An income criterion, based on a three-year average estimate of the gross national
income (GNI) per capita in United States dollars, using conversion factors based on the
World Bank Atlas methodology. The threshold for inclusion and graduation is based on
the thresholds of the World Bank’s low-income category. At the 2021 triennial review,
the threshold for inclusion was $1,018 or below; the threshold for graduation was
$1,222 or above.

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An income criterion
❑ Rationale
• GNI per capita provides information on the income status and the overall level of resources
available to a country
❑ Thresholds
• The inclusion threshold is set at the three-year average of the level of GNI per capita, which the
World Bank defines for identifying low-income countries. At the 2021 review it is $ 1,018.
• The graduation threshold is set at 20 per cent above the inclusion threshold. At the 2021 review it is
$ 1,222.
• The income-only graduation threshold is twice the graduation threshold. At the 2021 review it is $
2,444.
❑ Methodology
• GNI is calculated from national accounts data converted into USD using the World Bank Atlas
method (to reduce impact of short-term exchange rate fluctuations)
• GNI per capita is derived by dividing GNI in USD by the annual population of a country
❑ Data sources
• GNI per capita is calculated by the United Nations Statistics Division on the basis of its National
Accounts Main Aggregates Database
• Population data are taken from the United Nations Population Division

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CHAPTER 1: INTRODUCTION
II. The fundamental characteristics of developing countries
1.The differences between developing countries:
❑ A human assets index (HAI), consisting of two sub-indices: a health sub-index and an
education sub-index. The health sub-index has three indicators: (i) the under-five
mortality rate; (ii) the maternal mortality ratio; and (iii) the prevalence of stunting (Tình
trạng suy dinh dưỡng thấp còi). The education sub-index has three indicators: (i) the
gross secondary school enrolment ratio; (ii) the adult literacy rate; and (iii) the gender
parity index for gross secondary school enrolment. All six indicators are converted into
indices using established methodologies with an equal weight (1/6). The 2021 triennial
review set the thresholds for inclusion and graduation at 60 or below and 66 or above,
respectively.
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 A human assets index (HAI)

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A human assets index (HAI)
❑ Rationale
•The HAI is a measure of level of human capital
•Low levels of human assets indicate major structural impediments to sustainable development
•A lower HAI represents a lower development of human capital
❑ Thresholds
•Since 2015 the CDP uses absolute thresholds for the HAI to determine inclusion and graduation
eligibility
•The inclusion threshold has been set at 60
•The graduation threshold has been set at 10 per cent above the inclusion threshold at 66
❑ Composition
•The HAI is composed of six indicators grouped into a health and education subindex with each indicator
carrying an equal weight of 1/6
•Original values for each HAI indicator are converted into index numbers using a max-min procedure

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CHAPTER 1: INTRODUCTION
II. The fundamental characteristics of developing countries
1.The differences between developing countries:
❑ An economic and environmental vulnerability index, consisting of two sub-indices: an
economic vulnerability sub-index and an environmental vulnerability sub-index. The economic
vulnerability sub-index has four indicators: (i) share of agriculture, hunting, forestry and
fishing in GDP; (ii) remoteness and landlockedness; (iii) merchandise export concentration;
and (iv) instability of exports of goods and services. The environmental vulnerability sub-index
has four indicators: (i) share of population in low elevated coastal zones; (ii) share of the
population living in drylands; (iii) instability of agricultural production; and (iv) victims of
disasters. All eight indicators are converted into indices using established methodologies with
an equal weight. The 2021 triennial review set the thresholds for inclusion and graduation at
36 or above and 32 or below, respectively.

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 An economic and environmental vulnerability index

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 An economic and environmental vulnerability index
❑ Rationale
• The EVI is a measure of structural vulnerability to economic and environmental shocks
• High vulnerability indicates major structural impediments to sustainable development
• A higher EVI represents a higher economic vulnerability
❑ Thresholds
• Since 2015 the CDP uses absolute thresholds for the EVI to determine inclusion and
graduation eligibility
• The inclusion threshold has been set at 36
• The graduation threshold has been set at 10 per cent below the inclusion threshold at 32
❑ Composition
• The EVI is composed of eight indicators, grouped into an economic and environmental
subindex with each indicator carrying an equal weight of 1/8
• Original values for each EVI indicator are converted into index numbers using a max-min
procedure
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CHAPTER 1: INTRODUCTION
II. The fundamental characteristics of developing countries
2. The common characteristics of developing countries: 10 major
areas.

a. Lower Levels of Living and Productivity

b. Lower Levels of Human Capital
c. Higher Levels of Inequality and Absolute Poverty
d. Higher Population Growth Rates
e. Greater Social Fractionalization
f. Larger Rural Populations but Rapid Rural-to-Urban Migration
g. Lower Levels of Industrialization and Manufactured Exports
h. Adverse Geography
i. Underdeveloped Markets, and
j. Lingering Colonial Impacts and Unequal International Relations

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CHAPTER 1: INTRODUCTION
II. The fundamental characteristics of developing countries
2. The common characteristics of developing countries: 10 major areas.
a. Lower Levels of Living and Productivity

At very low-income levels, in fact, a vicious circle may set in, whereby low income leads
to low investment in education and health as well as plant and equipment and
infrastructure, which in turn leads to low productivity and economic stagnation. This is
known as a poverty trap or what Nobel laureate Gunnar Myrdal called “circular and
cumulative causation.” However, it is important to stress that there are ways to escape from
low income. Further, the low-income countries are themselves a very diverse group with
greatly differing development challenges.

Gunnar Myrdal, in full Karl Gunnar Myrdal, (1898-1987), Swedish economist and sociologist, awarded the
Nobel Prize for Economics in 1974 (the cowinner was Friedrich A. Hayek). He was regarded as a major
theorist of international relations and developmental economics.

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 VICIOUS CIRCLE
https://www.economicsdiscussion.net/capital-formation/the-vicious-
circle/vicious-circle-of-poverty-and-the-scarcity-of-capital-with-
diagram/11830

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CHAPTER 1: INTRODUCTION
II. The fundamental characteristics of developing countries
2. The common characteristics of developing countries: 10 major areas.
a. Lower Levels of Living and Productivity

One common misperception is that low incomes result from a country’s being too
small to be self-sufficient or too large to overcome economic inertia. However, there is
no necessary correlation between country size in population or area and economic
development (in part because each has different advantages and disadvantages that
can offset each other).

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CHAPTER 1: INTRODUCTION
II. The fundamental characteristics of developing countries
2. The common characteristics of developing countries: 10 major areas.
b. Lower Levels of Human Capital

Human capital—health, education, and skills—is vital to economic growth and human
development. Compared with developed countries, much of the developing world has
lagged in its average levels of nutrition, health (as measured, for example, by life
expectancy or undernourishment), and education (measured by literacy).

The well-performing developing countries are much closer to the developed world in
health and education standards than they are to the lowest income countries. Although
health conditions in East Asia are relatively good, sub-Saharan Africa continues to be
plagued by problems of malnourishment (suy-dinh-dưỡng), malaria (sốt-rét),
tuberculosis (lao), AIDS, and parasitic (ký sinh trùng) infections. Despite progress,
South Asia continues to have high levels of illiteracy, low schooling attainment, and
undernourishment.
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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major areas.
c. Higher Levels of Inequality and Absolute Poverty

Globally, the poorest 20% of people receive just 1.5% of world income. The lowest 20%
now roughly corresponds to the approximately 1.4 billion people living in extreme poverty
on less than $1.25 per day at purchasing power parity. Bringing the incomes of those living
on less than $1.25 per day up to this minimal poverty line would require less than 2% of the
incomes of the world’s wealthiest 10%. Thus, the scale of global inequality is
immense/huge.

Development economists use the concept of absolute poverty to represent a specific

minimum level of income needed to satisfy the basic physical needs of food, clothing, and
shelter in order to ensure continued survival. A problem, however, arises when one
recognizes that these minimum subsistence levels will vary from country to country and
region to region, reflecting different physiological as well as social and economic
requirements. Economists have therefore tended to make conservative estimates of world
poverty in order to avoid unintended exaggeration of the problem.

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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major areas.
d. Higher Population Growth Rates

Global population has skyrocketed since the beginning of the industrial era, from just
under 1 billion in 1800 to 1.65 billion in 1900 and to over 6 billion by 2000 and 7.9
billion (2021).

But population dynamics varies widely among developing countries. Populations of

some developing countries, particularly in Africa, continue to grow rapidly. From 1990
to 2008, population in the low-income countries grew at 2.2% per year, compared to
1.3% in the middle-income countries (the high-income countries grew at 0.7% per year,
reflecting both births and immigration).

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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major
areas.
d. Higher Population Growth Rates

Crude birth rate The number of children born alive each year per 1,000
population.

Dependency burden The proportion of the total population aged 0 to 15 and 65+,
which is considered economically unproductive and therefore not counted in the
labor force.

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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major areas.
e. Greater Social Fractionalization

Fractionalization Significant ethnic, linguistic, and other social divisions within a country.
Low-income countries often have ethnic, linguistic, and other forms of social divisions,
sometimes known as fractionalization. This is sometimes associated with civil strife and
even violent conflict, which can lead developing societies to divert considerable energies
to working for political accommodations if not national consolidation. It is one of a variety
of governance challenges many developing nations face. There is some evidence that
many of the factors associated with poor economic growth performance in sub-Saharan
Africa, such as low schooling, political instability, underdeveloped financial systems, and
insufficient infrastructure, can be statistically explained by high ethnic fragmentation.
The greater the ethnic, linguistic, and religious diversity of a country, the more likely it is
that there will be internal strife and political instability.
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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major areas.
f. Larger Rural Populations but Rapid Rural-to-Urban Migration

One of the hallmarks of economic development is a shift from agriculture to

manufacturing and services. In developing countries, a much higher share of the
population lives in rural areas. Although modernizing in many regions, rural areas are
poorer and tend to suffer from missing markets, limited information, and social
stratification.

A massive population shift is also under way as hundreds of millions of people are
moving from rural to urban areas, fueling rapid urbanization, with its own attendant
problems.

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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major areas.
g. Lower Levels of Industrialization and Manufactured Exports

Industrialization is associated with high productivity and incomes and has been a
hallmark of modernization and national economic power. It is no accident that most
developing-country governments have made industrialization a high national priority, with
a number of prominent success stories in Asia.

Along with lower industrialization, developing nations have tended to have a higher
dependence on primary exports. Most developing countries have diversified away from
agricultural and mineral exports to some degree. The middle-income countries are
rapidly catching up with the developed world in the share of manufactured goods in their
exports, even if these goods are typically less advanced in their skill and technology
content. However, the low-income countries, particularly those in Africa, remain highly
dependent on a relatively small number of agricultural and mineral exports. Africa will
need to continue its efforts to diversify its exports.

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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major areas.
h. Adverse Geography
Many analysts argue that geography must play some role in problems of agriculture,
public health, and comparative underdevelopment more generally. Landlocked
economies, common in Africa, often have lower incomes than coastal economies. As can
be observed on the map on the inside cover, developing countries are primarily tropical
or subtropical, and this has meant that they suffer more from tropical pests and parasites,
endemic diseases such as malaria, water resource constraints, and extremes of heat.

Clearly, geography is not destiny; high-income Singapore lies almost directly on the
equator, and parts of southern India have exhibited enormous economic dynamism in
recent years. However, the presence of common and often adverse geographic features
in comparison to temperate zone countries means it is beneficial to study tropical and
subtropical developing countries together for some purposes.

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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major areas.
i. Underdeveloped Markets

Some aspects of market underdevelopment are that they often lack (1) a legal system
that enforces contracts and validates property rights; (2) a stable and trustworthy
currency; (3) an infrastructure of roads and utilities that results in low transport and
communication costs so as to facilitate interregional trade; (4) a well-developed and
efficiently regulated system of banking and insurance, with broad access and with
formal credit markets that select projects and allocate loanable funds on the basis of
relative economic profitability and enforce rules of repayment; (5) substantial market
information for consumers and producers about prices, quantities, and qualities of
products and resources as well as the creditworthiness of potential borrowers; and (6)
social norms that facilitate successful long-term business relationships.

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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major areas.
i. Underdeveloped Markets

These six factors, along with the existence of economies of scale in major sectors of the
economy, thin markets for many products due to limited demand and few sellers,
widespread externalities (costs or benefits that accrue to companies or individuals not
doing the producing or consuming) in production and consumption, and poorly regulated
common property resources (e.g., fisheries, grazing lands, water holes) mean that
markets are often highly imperfect. Moreover, information is limited and costly to obtain,
thereby often causing goods, finances, and resources to be misallocated.

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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major areas.
j. Lingering Colonial Impacts and Unequal International Relations

Colonial Legacy Most developing countries were once colonies of Europe or otherwise
dominated by European or other foreign powers, and institutions created during the
colonial period often had pernicious effects on development that in many cases have
persisted to the present day.
Despite important variations that proved consequential, colonial era institutions often
favored extractors of wealth rather than creators of wealth, harming development then
and now. Both domestically and internationally, developing countries have more often
lacked institutions and formal organizations of the type that have benefited the developed
world: Domestically, on average, property rights have been less secure, constraints on
elites have been weak, and a smaller segment of society has been able to gain access to
and take advantage of economic opportunities. Problems with governance and public
administration, as well as poorly performing markets, often stem from poor institutions.
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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major areas.
j. Lingering Colonial Impacts and Unequal International Relations

External Dependence Relatedly, developing countries have also been less well
organized and influential in international relations, with sometimes adverse
consequences for development. For example, agreements within the World Trade
Organization (WTO) and its predecessors concerning matters such as agricultural
subsidies in rich countries that harm developing country farmers and one-sided
regulation of intellectual property rights have often been relatively unfavorable to the
developing world.
More generally, developing nations have weaker bargaining positions than developed
nations in international economic relations. Developing nations often also voice great
concern over various forms of cultural dependence, from news and entertainment to
business practices, lifestyles, and social values.

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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major areas.
j. Lingering Colonial Impacts and Unequal International Relations

Developing nations are also dependent on the developed world for environmental
preservation, on which hopes for sustainable development depend. Of greatest concern,
global warming is projected to harm developing regions more than developed ones; yet
both accumulated and current greenhouse gas emissions still originate predominantly in
the high-income countries. Thus, the developing world endures what may be called
environmental dependence, in which it must rely on the developed world to cease
aggravating the problem and to develop solutions, including mitigation at home and
assistance in developing countries.

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CHAPTER 1: INTRODUCTION

II. The fundamental characteristics of developing countries

2. The common characteristics of developing countries: 10 major areas.

DOES VIETNAM HAVE (ANY OF )THESE CHARACTERISTICS?

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CHAPTER 1: INTRODUCTION

III. The necessity of choosing the way of development

Development The process of improving the quality of all human lives and capabilities
by raising people’s levels of living, self-esteem, and freedom.

Voices of the Poor:

“When one is poor, she has no say in public, she feels inferior. She has no food, so
there is famine in her house; no clothing, and no progress in her family”.
—A poor woman from Uganda

“God did not create men standing above men. God did not create people standing
below people. It's all because of learning”.
- Fukuzawa Yukichi, Japanese Thinker

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CHAPTER 1: INTRODUCTION

III. The necessity of choosing the way of development

❑This year marks 50 years since the least developed countries (LDCs) category was
established by a United Nations General Assembly resolution, following research,
analysis and advocacy work by the United Nations Conference on Trade and
Development (UNCTAD).
❑The outlook for LDCs is grim: mired in the health, economic and social crises brought
about by the COVID-19 pandemic, in 2020 they recorded their worst growth
performance in about three decades. More broadly, these crises have reversed the
progress that had been painstakingly achieved on several dimensions of development,
notably on the fronts of poverty, hunger, education and health. Reversing these gains
will have lingering adverse consequences on the development of LDCs over the mid-
term.
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CHAPTER 1: INTRODUCTION

III. The necessity of choosing the way of development

❑ Although development progress has been made over the past 50 years, core challenges have
persisted and become more complex and urgent. However, progress on some fronts has been
disappointing, including with respect to:
(i) the slow development of productive capacities and ensuing scant progress in growth-
enhancing structural economic transformation;
(ii) the persistence of several symptoms of underdevelopment, such as low levels of labour
productivity, high poverty rates, low levels of human capital formation, and persistent under-
performance in human well-being;
(iii) a lingering vulnerability to external shocks and limited resilience due to restricted
resources and policy space, and weak institutional development;
(iv) a widening income and development gap between most LDCs and other developing
countries (ODCs); and
(v) the small number of countries to have graduated from the LDC category up to now – in
the 26 years since 1994, only six countries have graduated out of a total of 53 countries to have
ever formed part of the LDC category.

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CHAPTER 1: INTRODUCTION

III. The necessity of choosing the way of development

❑ It is therefore important to identify successful experiences, and to investigate what
policies have contributed to their achievement. It is also important to interrogate the
development policies pursued by the LDCs to discover where they have been lacking.
The objective is to glean lessons from past experience in order to formulate innovative
proposals for the future.

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 IV. Objects, contents and research
methodology
CHAPTER 1: 1.Research objects
INTRODUCTION 2.Research contents
3.Research methodology

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 IV. Objects, contents and research
methodology

CHAPTER 1: Research objects

INTRODUCTION
The field of development
economics is concerned with:
• the causes of underdevelopment and
• policies that may accelerate the rate of
growth of per capita income.

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IV. Objects, contents and research methodology

1.Research objects
❑ Development is both a physical reality and a state of mind in which society has,
through some combination of social, economic, and institutional processes, secured
the means for obtaining a better life. Whatever the specific components of this better
life, development in all societies must have at least the following three objectives:
a. To increase the availability and widen the distribution of basic life-sustaining goods such as food,
shelter, health, and protection.
b. To raise levels of living, including, in addition to higher incomes, the provision of more jobs, better
education, and greater attention to cultural and human values, all of which will serve not only to
enhance material wellbeing but also to generate greater individual and national self-esteem.
CHAPTER 1: INTRODUCTION

IV. Objects, contents and research methodology

1.Research objects
❑ Development is both a physical reality and a state of mind in which society has,
through some combination of social, economic, and institutional processes, secured
the means for obtaining a better life. Whatever the specific components of this better
life, development in all societies must have at least the following three objectives:
c. To expand the range of economic and social choices available to individuals and nations by
freeing them from servitude and dependence not only in relation to other people and nation-
states but also to the forces of ignorance and human misery.
CHAPTER 1: INTRODUCTION

IV. Objects, contents and research methodology

2. Research contents
❑ Three core values— sustenance, self-esteem, and freedom—represent common
goals sought by all individuals and societies. They relate to fundamental human needs
that find their expression in almost all societies and cultures at all times:
a. Sustenance The basic goods and services, such as food, clothing, and shelter, that
are necessary to sustain an average human being at the bare minimum level of living.
CHAPTER 1: INTRODUCTION

IV. Objects, contents and research methodology

2. Research contents
❑ Three core values— sustenance, self-esteem, and freedom—represent common
goals sought by all individuals and societies. They relate to fundamental human needs
that find their expression in almost all societies and cultures at all times:
b. Self-esteem The feeling of worthiness that a society enjoys when its social, political,
and economic systems and institutions promote human values such as respect, dignity,
integrity, and self-determination.
c. Freedom A situation in which a society has at its disposal a variety of alternatives from
which to satisfy its wants and individuals enjoy real choices according to their
preferences.
CHAPTER 1: INTRODUCTION

IV. Objects, contents and research methodology

2. Research contents

❑ Also, Development economics will try always to be mindful of the crucial roles of:
➢ Values Principles, standards, or qualities that a society or groups within it
considers worthwhile or desirable.
➢ Attitudes The states of mind or feelings of an individual, group, or society
regarding issues such as material gain, hard work, saving for the future, and
sharing wealth.
➢ Institutions Norms, rules of conduct, and generally accepted ways of doing things.
Economic institutions are humanly devised constraints that shape human interac-
tions including both informal and formal “rules of the game” of economic life in the
widely used framework of Douglass North.
CHAPTER 1: INTRODUCTION

IV. Objects, contents and research methodology

2. Research contents
❑ Douglass North:
Defining institutions as the rules of the game and means of enforcement, and then
separating the rules from the organisations that actually play the game, it became
possible to have a dynamic relationship between the interests and incentives facing the
organisations and the structure of the rules. The descriptive concept that comes out of
the dynamics is ‘adaptive efficiency’. In some societies, the interaction of institutions and
organisations produces a series of institutional changes that get incrementally better,
rather than a sequence that is sometimes good and sometimes bad for economic
performance.
CHAPTER 1: INTRODUCTION

IV. Objects, contents and research methodology

3. Research methodology
The study of economic development is one of the newest, most exciting, and most
challenging branches of the broader disciplines of economics and political economy.
Although development economics often draws on relevant principles and concepts
from other branches of economics in either a standard or modified form, for the most
part it is a field of study that is rapidly evolving its own distinctive analytical and
methodological identity.
 CHAPTER 1: INTRODUCTION

IV. Objects, contents and research methodology

3. Research methodology
Development economics, as a branch of economics that attempts to show
how the world’s poor economies can develop, had its origins in the 1940s
and 1950s. One of its earliest ideas was that the economies of the less
developed countries were mired in a cycle of poverty and needed a “big
push” to develop (Paul Rosenstein-Rodan,1943) . This push was seen as a
large boost in investment, helped by the state’s infrastructural and social
spending, as well as by private foreign capital spending and aid from the
governments of the developed nations.

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IV. Objects, contents and research methodology

3. Research methodology
Much of development economics was expressed in narrative form; it was one of
the least formal and mathematically modelled branches of economics. For this
reason (and others as well), it fell out of favor less than a generation after it began.
Mainstream economics thought of itself as a rigorous “science,” and for its
economists what wasn’t rigorously mathematical was simply not economics.
According to Krugman, development theory was, until its reformulation, no more
than an approximate literature, with “some wonderful writing, some inspiring
insights,” but which couldn’t mathematically model its basic assumptions. Because
of this, it became an “intellectual dead end.”

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IV. Objects, contents and research methodology

3. Research methodology

It was only in the 1980s, when Krugman and others managed to

integrate concepts like increasing returns or externalities (called
“non-convexities” in economics) into the neo-classical paradigm did
development theory experience a rebirth and achieve scientific
status.

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IV. Objects, contents and research methodology

3. Research methodology
Indeed, both Harvard and the LSE (London School of Economics) place heavy
emphasis on quantitative methodologies in their development economics courses.
This is in line with development economics’ turn towards empirical micro-approaches,
which has been criticized both from within and outside the field.
Moreover, the technical approach to Economics is not specific to Development
Economics, but a characteristic of the field as a whole. As the French Economist Rémy
Herrera puts it, Neoclassical Economics started absorbing Development Economics in
the 1970s and has since then become a sub-field of Neoclassical Economics. In other
words, the field development economics has narrowed substantially since the 70s.

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CHAPTER 1: INTRODUCTION

IV. Objects, contents and research methodology

3. Research methodology
Towards A More Comprehensive Approach To Development Economics

The particularities of development economies (1) are dealt with by ‘imperfections’ (as
most famously championed by Stiglitz), the global political economy (2) is dealt with
through regression analyses of trade and capital flows, and capitalism (3) is
(sometimes) acknowledged, but considered to be a stable, perfect system.
What we do need is to take a broader approach to development economics than what
is currently possible within mainstream Economics.

The future of development economics: a methodological agenda

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