Chapter 2

Supplement
Comparative
Economic
Development

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Suppmentary Lecture
Common Characteristics of developing
countries (based on Todaro text 10th edition)
• Lower levels of living and productivity
• Lower levels of human capital
• Higher levels of inequality and absolute poverty
• Higher population growth rates
• Greater social fractionalization
• Larger rural population- rapid migration to cities
• Lower levels of industrialization and manufactured exports
• Adverse geography
• Underdeveloped financial and other markets
• Colonial legacies- poor institutions etc.

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Defining the Developing World

• World Bank Scheme- ranks countries on

GNP/capita
– LIC, LMC, UMC, OECD (see Table 2.1 and
figure 2.1)

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Table 2.1 Classification of Economies
by Region and Income, 2007

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Table 2.1 Classification of Economies by
Region and Income, 2007 (continued)
(Latin America and the Caribbean) (Sub-Saharan Africa)

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Table 2.1 Classification of Economies by
Region and Income, 2007 (continued)

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Figure 2.1 Nations of the World,
Classified by GNI Per Capita

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Measuring Development for Quantitative
Comparison across Countries

• Gross National Income (GNI)

• Gross Domestic Product (GDP)
• PPP method instead of exchange rates as
conversion factors (see figure 2.2)

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Figure 2.2 Income Per Capita in
Selected Countries

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Table 2.2 A Comparison of Per Capita
GNI, 2005

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Some Basic Indicators of
Development

• Health
• Life Expectancy
• Education
• HDI as a holistic measure of living levels
– HDI also varies for groups within countries
– HDI also varies by region in a country
– HDI also reflects rural-urban differences

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Table 2.3 Commonality and
Diversity: Some Basic Indicators

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Figure 2.3 Human Development
Disparities within Selected Countries

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Figure 2.3 Human Development Disparities
within Selected Countries (continued)

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Table 2.4 Human Development for
23 Selected Countries (2004 Data)

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Table 2.4 Human Development for 23
Selected Countries (2004 Data)
(continued)

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Table 2.5 Human Development Index
Variations for Similar Incomes (2004 Data)

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10 Characteristics of the Developing
World: Diversity within Commonality

• 1. Lower levels of living and productivity

• 2. Lower levels of human capital (health,
education, skills)
• 3. Higher Levels of Inequality and Absolute
Poverty
– Absolute Poverty
– World Poverty
• 4. Higher Population Growth Rates
– Crude Birth rates

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Figure 2.4 Shares of Global Income,
2005

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Table 2.6 The 12 Most and Least
Populated Countries and Their Per
Capita Income, 2005

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Figure 2.5 Under-5 Mortality Rates,
1990 and 2005

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Table 2.7 Primary School Enrollment
and Pupil-Teacher Ratios

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Figure 2.6 Correlation between Under-
5 Mortality and Mother’s Education

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Figure 2.7 People Living in Poverty,
1981-2002

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Table 2.8 Crude Birth Rates Around
the World, 2005

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10 Characteristics of the Developing
World: Diversity within Commonality

• 5. Greater Social Fractionalization

• 6. larger Rural Populations but Rapid Rural-
to-Urban Migration
• 7. Lower levels of Industrialization and
Manufactured Exports
• 8. Adverse Geography
– Resource endowments

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Table 2.9 The Urban Population in
Developed Countries and Developing
Regions

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Table 2.10 Share of the Population
Employed in the Industrial Sector in Selected
Countries, 2000-2005 (%)

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10 Characteristics of the Developing
World: Diversity within Commonality

• 9. Underdeveloped Financial and Other markets

– Imperfect markets
– Incomplete information
• 10. Colonial Legacy and external dependence
– Institutions
– Private property
– Personal taxation
– Taxes in cash rather than in kind

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Low Income Countries Today And
Developed Countries Then
• Eight differences
– Physical and human resource endowments
– Per capita incomes and levels of GDP
– Climate
– Population size, distribution, and growth
– Historic role of international migration
– International trade benefits
– Scientific/technological research
– Efficacy of domestic institutions

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Convergence?

• Evidence of unconditional convergence is

hard to find
• Per capita income convergence?

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Figure 2.8 Convergence among OECD
Countries but Divergence in the World
as a Whole

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Figure 2.9 Per Capita GDP Growth in
125 Developing Countries, 1995-2005

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Figure 2.10 Growth Convergence and
Absolute Income Convergence

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Long-Run causes of Comparative
Development
• Schematic Representation
– Geography
– Institutional quality- colonial and post-colonial
– Colonial legacy- pre colonial comparative
advantage
– Evolution and timing of European development
– Inequality- human capital
– Type of colonial regime

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Figure 2.11 Schematic Representation
of Leading Theories of Comparative
Development

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Role of Institutions

• Acemoglu, Johnson, and Robinson’s

“reversal of fortune” and extractive
institutions
• Bannerjee and Iyer’s , “property rights
institutions”. Landlords versus cultivators

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Case Study: Pakistan

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Case Study: Bangladesh

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Concepts for Review

• Absolute poverty • Gross national product

• Brain drain (GNP)
• Crude birthrate • Human Development
• Convergence Index (HDI)
• Death rate • Imperfect markets
• Dependency burden
• Income gap
• Developed world
• Economic Institutions • Income inequality
• Foreign exchange • Incomplete information
• Gross domestic product
(GDP)

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Concepts for Review (cont’d)

• Infant mortality rate • Malnutrition

• International poverty • Middle-income
line countries (MICs)
• Labor productivity • Mixed economic
• Least developed systems
countries (LLDCs) • Newly industrialized
• Levels of living countries (NICs)
• Low income countries • Physical resources
(LICs)
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Concepts for Review (cont’d)

• Primary industrial • Resource endowment

sector • Secondary industrial
• Production function sector
• Purchasing power • Tertiary industrial
equivalent sector
• Purchasing power • World Bank
parity (PPP)

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