St.

Anthony’s College
San Jose de Buenavista, Antique
BUSINESS EDUCATION DEPARTMENT

HANDOUTS IN AEC 204 – ECONOMIC DEVELOPMENT

Comparative Economic Development

Week 2

Learning Competencies:
Discuss the Comparative economic development and their basic indicators of
development

Comparative Economic Development

Among countries colonized by European powers during the past 500 years, those that were
relatively rich in 1500 are now relatively poor….The reversal reflects changes in the institutions
resulting from European colonialism.
—Daron Acemoglu, Simon Johnson, and James A. Robinson, 2002

Emerging powers in the developing world are already sources of innovative social and economic
policies and are major trade, investment, and increasingly development cooperation partners for
other developing countries.
—Helen Clark, Administrator, United Nations Development Programme, 2012

Comparative Economic Development

Consider 10 important features that developing countries tend to have in common, on
average, in comparison with the developed world. In each case, we also discover that behind
these averages are very substantial differences in all of these dimensions among developing
countries that are important to appreciate and take into account in development policy. These
areas are the following:

1. Lower levels of living and productivity

2. Lower levels of human capital
3. Higher levels of inequality and absolute poverty
4. Higher population growth rates
5. Greater social fractionalization
6. Larger rural populations but rapid rural-to-urban migration
7. Lower levels of industrialization
8. Adverse geography
9. Underdeveloped financial and other markets
10. Lingering colonial impacts such as poor institutions and often external dependence.

Defining the Developing World

Developing countries are, in general, countries that have not achieved a significant degree of
industrialization relative to their populations, and have, in most cases, a medium to low standard
of living. There is an association between low income and high population growth.

What is Developing Countries?

1. These are the nations that have low living standards, undeveloped industrial base, and
low Human Development Index (HDI).
2. Countries where markets haven’t reached a saturation and still lacks infrastructure
investments.
3. It is the countries which are economically and socially trying towards betterment by
economic and social maintenances and proper policy implementation.
4. Developing countries are those that have an annual per capita income (Gross National
Income [GNI]) between US$875 and US$10,725.
5. The countries that have low levels of industrialization, income per capita and standards
of living are known as Developing Countries.
6. A developing country, also called an emerging or transitional economy, is a nation with
an underdeveloped industrial base, and low Human Development Index (HDI) relative to
other countries and poor quality of governance. According to the UN,
a developing country is a country with a relatively low standard of living, undeveloped
industrial base, and moderate to low Human Development Index (HDI).
7. Developing countries show, among other things, a significantly lower per capita national
product, low labor productivity, a high illiteracy rate, and a high share of agricultural
employment compared to industrialized countries.
8. A developing country also called a less developed economy or underdeveloped country is
a nation with an underdeveloped industrial base, and a low human development index
(HDI) relative to other countries.
9. Nations with a lower standard of living, underdeveloped industrial base, and low Human
Development Index (HDI) relative to other countries.
10. Are often referred to as underdeveloped countries and they refer to countries where
there is a less developed industrial base and they have a low Human Development Index
(HDI). Developing countries differentiate from developed countries in that the people
have a lower life expectancy, lower standard of education and the people of developing
countries have a lower income and thus less money.
11. Also called a less-developed country, also known as “LDC,” is a nation with a lower
living standard, underdeveloped industrial base, and low Human Development Index
(HDI) relative to other countries. There is no universal, agreed-upon criterion for what
makes a country developing versus developed and which countries fit these two
categories, although there is general reference points such as a nation's GDP per capita
compared to other nations. Also, the general term less-developed country should not be
confused with the specific least developed country.
12. Nations with a lower standard of living, underdeveloped industrial base, and low Human
Development Index (HDI) relative to other countries.
13. Sovereign states that are not yet highly industrialized relative to the industrialized ones
and have low human development index.
14. The term used to describe countries that don´t have a strong emergent of
industrialization, infrastructure, and sophisticated technology, but are beginning to build
it.
15. A developing country is seen as a poor country that is seeking to become more advanced
economically.
16. Often referred to as underdeveloped countries and they refer to countries where there is
a less developed industrial base and they have a low Human Development Index
(HDI). Developing countries differentiate from developed countries in that the people
have a lower life expectancy, lower standard of education and the people of developing
countries have a lower income and thus less money.
17. A developing country, also called a lower developed country with middle and low
income base, is a nation with an underdeveloped industrial base, and low Human
Development Index (HDI) relative to other countries. On the other hand, since the late
1990s developing countries tended to demonstrate higher growth rates than the
developed ones. According to the UN, a developing country is a country with a relatively
low standard of living, undeveloped industrial base, and moderate to low Human
Development Index (HDI). A list of countries out of the developing club are presently
chasing the GDP of the top developed country, although are lacking in terms of other
social and political factors.
18. Countries with relatively low infrastructural and technological development.
These countries are usually found in the Global South.
19. Developing countries are those countries in which the average annual income is low,
most of the population is usually engaged in agriculture, and the majority live near the
subsistence level. In general, developing countries are not highly industrialized,
dependent on foreign capital and development aid, whose economies are mostly
dependent on agriculture and primary resources, and do not have a strong industrial base.
These countries generally have a gross national product below $1,890 per capita (as
defined by the World Bank in 1986).
20. A developing country is a country which is not industrially developed and has less
economic capacity, per capita income, and lower and inconsistent human development
index (HDI).
21. These are countries with less developed industrial base, low income levels and poor
infrastructure.
22. Countries that have not achieved a significant degree of industrialization relative to their
population; often with low to middle standard of living.
23. The nations, which have a low level of materials.
24. A developing country, also called a third world country, a less developed country or
underdeveloped country, is a nation with a less developed industrial base and a low
Human Development Index (HDI) relative to other countries. However, since the late
1990s developing countries tended to demonstrate higher growth rates than the
developed ones. There are no universally agreed-upon criteria for what makes a
country developing versus developed and which countries fit these two categories,[3]
 although there are general reference points such as a nation's GDP per capita compared to
other nations. Also, the general term less-developed country should not be confused with
the specific least developed country.
25. A broad range of countries that generally lack a high degree of industrialization,
infrastructure, and other capital investment, sophisticated technology, widespread
literacy, and advanced living standards among their populations as a whole.
26. Countries with low income per capita of population, that are trying to improve their
conditions through industrialization.
27. A group of countries, spread around the world, characterized by low level of economic
and social comparison with developed countries.
28. Either developing to become developed countries in near future, or developing
countries with rich financial resource, or developing countries with poor financial
resources.
29. A nation with a lower living standard and low Human Development Index, relative to
other countries. There is a general reference point, such as a nation's GDP per capita,
compared to other nations.
30. Developing countries are countries with low or medium human development index
(HDI), low living standards, low per capita income, widespread poverty, and have
underdeveloped industry and outdated infrastructure and are facing long periods of
recession.
31. Developing country refers a nation with a less developed industrial base and a sovereign
state with less human development indicators (HDI) than other developed countries. Per
capita income or gross domestic product (GDP) is also includes in defining
a developing country. Developing countries are those countries in which the average
annual income is low; most of the population is usually engaged in agriculture, and the
majority live near the subsistence level. In general, developing countries are not highly
industrialized, dependent on foreign capital and development aid, mostly dependent on
agriculture and primary resources, and do not have a strong industrial base.
32. It is a term that is often used to refer to most countries in Africa and Asia that are still
grappling with the challenges of modernisation. Such countries often exhibit low
standards of democratic government, civil service, industrialisation and systems of law
and order. Developing countries often score low on statistical indexes such as income
per capita, gross domestic product (GDP), life expectancy and literacy rate.
33. Those countries that are in the process of becoming industrialized but have constrained
resources with which to combat their economical problems.
34. A developing country, also called an emerging or transitional economy with middle and
low income base, is a nation with an underdeveloped industrial base, and low Human
Development Index (HDI) relative to other countries. On the other hand, since the late
1990s developing countries tended to demonstrate higher growth rates than the
developed ones along with other sectors of social developments. According to the UN,
a developing country is a country with a relatively low standard of living, undeveloped
industrial base, and moderate to low Human Development Index Employment share in
agriculture sector is very high, it could be 60 to 70 percent whereas it becomes 5 to 7
percent in developed nations.
35. Countries generally found in the southern hemisphere and characterized by low levels of
human development.
 36. Developing countries are those countries with a Gross National Income (GNI) per
capita per year of US $ 11,905 and less. Based on this criterion, the International
Statistical Institute has listed 137 countries in the developing countries chart that is
valid till 31st December 2015.
37. Nations with a lower standard of living, less developed industrialized base, and low
human development index.

https://www.igi-global.com/dictionary/cyber-capability-framework/7401

A developing country is one where most of its people live on a lot less money and with a lot
fewer public services than those in an industrialized nation. Let me give you an example for
comparison's sake. In the United States of America, a highly industrialized and developed nation,
a person earns, roughly speaking, well over $70/day. In a developing country, a person may earn
less than $2 per day (in U.S. dollars), and some earn even less than $1.25 per day. That's an
astounding difference!
A more technical definition of a developing country may be seen as a nation where the Gross
National Income (GNI) per capita per year is $11,905 or less. Again, for comparison's sake, a
country like Afghanistan, a developing nation, sits at $680/person/year, while in the U.S. the
number is $55,200/person/year.

Key Gap Indicators of Development

https://www.tutor2u.net/geography/reference/the-8-key-gap-indicators-of-development

What measures can be used to assess the development gap?

There are many different measures used to assess the development gap, each one offering an
alternate way of dividing up the world with regards to how developed it is. Here, we shall look at
some of the most common indicators of development used in geography.

Gross Domestic Product (GDP)

GDP is s how much money a country makes from its products over the course of a year, usually
converted to US Dollars:

● the sum of gross value added by all resident producers in the economy + product taxes -
any subsidies not included in the value of the products.

Gross National Product (GNP)

GNP is the GDP of a nation together with any money that has been earned by investment abroad
minus the income earned by non-nationals within the nation.
GNP per capita
GNP per capita is calculated as GNP divided by population; it is usually expressed in US
Dollars.
It's a common indicator used for measuring development, but is imperfect as the calculation
doesn’t take into account certain forms of production, such as subsistence production.
Birth and death rates
Crude Birth and Death rates (per 1000) can be used as an overall measure of the state of
healthcare and education in a country, though these numbers do not give a full picture of a
nation’s situation.
The Human Development Index (HDI)
The HDI is a composite statistic calculated from the:

● Life expectancy index

● Education index
● Mean years of schooling index
● Expected years of schooling index
● Income index

Countries are ranked based on their score and split into categories that suggest how well
developed they are.
Infant mortality rate
Infant mortality rate is the number of infants dying before reaching one year of age per 1,000 live
births in a given year.
Literacy rate
The rate, or percentage, of people who are able to read is a useful indicator of the state of
education within a country.
High female literacy rates generally correspond with an increase in the knowledge of
contraception and a falling birth rate.
Life expectancy
This simple statistic can be used as an indicator of the:

● healthcare quality in a country or province

● level of sanitation
● provision of care for the elderly

It should not, of course, be used on its own to describe these things.

World Bank An organization known as an “international financial institution” that provides
development funds to developing countries in the form of interest-bearing loans, grants, and
technical assistance.
Low-income countries (LICs) In the World Bank classification, countries with a GNI per capita
of less than $1,025 in 2011.

Middle-income countries In the World Bank classification, countries with a GNI per capita
between $1,025 and $12,475 in 2011.

Newly industrializing countries (NICs) Countries at a relatively advanced level of economic

development with a substantial and dynamic industrial sector and with close links to the
international trade, finance, and investment system.

Least developed countries A UN designation of countries with low income, low human capital,
and high economic vulnerability.

Human capital Productive investments in people, such as skills, values, and health resulting
from expenditures on education, on-the-job training programs, and medical care.

Gross national income (GNI) The total domestic and foreign output claimed by residents of a
country, consisting of gross domestic product (GDP) plus factor incomes earned by foreign
residents, minus income earned in the domestic economy by nonresidents.

Value added The portion of a product’s final value that is added at each stage of production.

Depreciation (of the capital stock) The wearing out of equipment, buildings, infrastructure, and
other forms of capital, reflected in write-offs to the value of the capital stock.

Capital stock The total amount of physical goods existing at a particular time that have been
produced for use in the production of other goods and services.

Gross domestic product (GDP) The total final output of goods and services produced by the
country’s economy within the country’s territory by residents and nonresidents, regardless of its
allocation between domestic and foreign claims.

Purchasing power parity (PPP) Calculation of GNI using a common set of international prices
for all goods and services, to provide more accurate comparisons of living standards.

Human Development Index (HDI) An index measuring national socioeconomic development,

based on combining measures of education, health, and adjusted real income per capita.

Diminishing marginal utility The concept that the subjective value of additional consumption
lessens as total consumption becomes higher.

Absolute poverty The situation of being unable or only barely able to meet the subsistence
essentials of food, clothing, shelter, and basic health care.

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.

Fractionalization Significant ethnic, linguistic, and other social divisions within a country.

Resource endowment A nation’s supply of usable factors of production, including mineral

deposits, raw materials, and labor.

Infrastructure Facilities that enable economic activity and markets, such as transportation,
communication and distribution networks, utilities, water, sewer, and energy supply systems.

Imperfect market A market in which the theoretical assumptions of perfect competition are
violated by the existence of, for example, a small number of buyers and sellers, barriers to entry,
and incomplete information.

Incomplete information The absence of information that producers and consumers need to
make efficient decisions resulting in underperforming markets.

Property rights The acknowledged right to use and benefit from a tangible (e.g., land) or
intangible (e.g.,intellectual) entity that may include owning, using, deriving income from,
selling, and disposing.

Brain drain The emigration of highly educated and skilled professionals and technicians from
the developing countries to the developed world.

Free trade Trade in which goods can be imported and exported without any barriers in the forms
of tariffs, quotas, or other restrictions.

Terms of trade The ratio of a country’s average export price to its average import price.

Research and development (R&D) Scientific investigation with a view toward improving the
existing quality of human life, products, profits, factors of production, or knowledge.

Divergence A tendency for per capita income (or output) to grow faster in higher-income
countries than in lower-income countries so that the income gap widens across countries over
time (as was seen in the two centuries after industrialization began).

Convergence The tendency for per capita income (or output) to grow faster in lower-income
countries than in higher-income countries so that lower-income countries are “catching up” over
time. When countries are hypothesized to converge not in all cases but other things being equal
(particularly savings rates, labor force growth, and production technologies), then the term
conditional convergence is used.

Economic Institutions “Humanly devised” constraints that shape interactions (or “rules of the
game”) in an economy, including formal rules embodied in constitutions, laws, contracts, and
market regulations, plus informal rules reflected in norms of behavior and conduct, values,
customs, and generally accepted ways of doing things.

References:

Todaro, Michael P, Smith, Stephen C. Economic Development, 12th Edition, Pearson Education
South Asia Pte Ltd, Singapore Pg. 280-323
https://www.igi-global.com/dictionary/cyber-capability-framework/7401

https://www.tutor2u.net/geography/reference/the-8-key-gap-indicators-of-development