Chapter 1

Introduction of
developing
countries
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Economic and Development
Studies
– Development economics
• Greater scope than traditional economics and
political economy.
– Why Study (p.11 – 12th edition)?

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What Do We Mean by
Development
• Traditional Economic Measures
– GNI
– income per capita
• New View of Development
• Three Core Values of Development
– sustenance, self-esteem, freedom

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What Do we Mean by
Development
• The Central Role of Women
– To make the biggest impact on development,
societies must empower and invest in women
• The Three Objectives of Development
– Increase availability of life sustaining goods
– Raise levels of living
– Expand range of economic and social choices
• The Sustainable Development Goals

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1.1 World income distribution

1.1.1 Living standards in developing and

developed countries

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 GDP per capita, nominal (2020):
England $40,284.64
Life expectancy (2020): 81.4 years
Adult literacy (2006): 99%
Mexico

GDP
GDP per
per capita,
capita, nominal
nominal (2020):
(2020): $8,346.7
Life
Life expectancy
expectancy (2020):
(2020): 74.98 years
Adult
Adult literacy
literacy (2015):
(2015): 95%
 GDP per capita, nominal (2020): $858.92
Mali, West Africa Life expectancy (2020): 59.69
years
Adult literacy (2015): 33%
1.1.2 Statistic about world income
distribution (Todaro & Smith, 2011, p.10)

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1.2 Classification of countries
1.2.1. World Bank classification (GNI/capita –
using the WB Atlas method)
– low income: ≤ $1,045;
– Middle income
• lower middle income: $1,046 - $4,095;
• upper middle income: $4,096 - $12,695;
– high income: ≥ $12,696
– High-income OECD members (extra
classification)
Source:
https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-len
ding-groups
2-10
, retrieved on Oct 30, 2021
Nations of the World, Classified by GNI Per
Capita, Atlas method (current USD)
https://data.worldbank.org/indicator/NY.GNP.PCAP.CD?view=map(2020)

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 Eco growth rate still positive because at the first period of covid, while many
countries
severely but Vietnam cant control it so maintain positive sign

Literacy rate is high 1/ the government of people so they care about the people
welfare, provides opportunity to get access to education.

Vietnam US Thailand
GNI per capita? 2,660 64,530 7,050
WB’s Lower middle High Income Upper Middle
classification? income country Income
Economic growth 2.9 -3.5 -6.1
rate? (GDP growth)

Life expectancy? 75 79 77
(2019)

Literacy ? (2019) 96 79 94

How Vietnam differ from the others?

Some Basic Indicators of Development:
Income, Health & Education

• Income
– Gross National Income (GNI)
– Gross Domestic Product (GDP)
– PPP method instead of exchange rates as conversion factors
• Health:
– Life expectancy, the rate of undernourishment, the under-5
mortality rate, the crude birth rate, etc.
• Education
– Literacy, school enrollment ratio, mean years of schooling,
expected years of schooling

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1.2.2 UNDP classification

• Human Development Index (HDI)

– It ranks countries into: low – medium – high – very high
human development
– How HDI is calcultated?
– Find the data for VN and calculate HDI of VN, US,
Thailand and compare.
(Ref: the HDR technote - http://hdr.undp.org/sites/default/files/hdr2020_technical_notes.pdf )

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HDI of Vietnam
Source: http://countryeconomy.com/hdi/vietnam, retrieved on March 01, 2015

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Countries classification base on HDI
Source: http://countryeconomy.com/hdi/vietnam, retrieved on March 01, 2015

• Before 2010: the fixed cut-off (0.5, 0.8, 0.9)

Source: http://www.undp.org/content/undp/en/home/librarypage/hdr/human_developmentreport2011.html , retrieved
on Nov 5th , 2011

• 2010 – 2013: the quartiles cut off

• 2014 – now: the fixed cut-off (0.55, 0.7, 0.8)
Source:
http://hdr.undp.org/en/content/previous-human-development-reports-countries-were-divided-quartiles-hdi-distribution-f
our
, retrieved on March 01, 2015

– This method is applied at least 5 years

What are the Pros & Cons of HDI of each method?
Why does UNDP return to the old fixed cut-off?

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HDI of Vietnam

Source: Human Development Report 2019 from UNDP

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HDI of Vietnam

Source: Human Development Report

2019 from UNDP

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1.2.3 Other classification

• OECD (Organization for Economic

Cooperation and Development)
– LICs – Low Income Countries
– MICs – Middle Income Countries
– NICs – Newly Industrializing Countries
– OPEC
• IMF
– 1964: developed, high-income, least developed
countries
– Now: Developed; emerging and developing countries
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1.3 History of Third World
countries

• The 1st, 2nd and 3rd world

• The developed & developing
countries

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1.4 Characteristics of developing
countries
1.4.1 Similarities
• Lower levels of living and productivity
• Lower levels of human capital
• Higher levels of inequality and absolute poverty
• Higher population growth rates
• 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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Common characteristics of
the Developing World

1. Living and
productivity
- Vicious circle
- Diminishing
marginal
productivity

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Common characteristics of
the Developing World
2. Human capital (health, education, skills)

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Common characteristics of the
Developing World
3. Levels of Inequality and Absolute Poverty

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

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 Common characteristics of the
Developing World

4. Population Growth Rates

- Crude Birth rates: # of children born alive each year per 1,000 population.
- Dependency burden

Population
Countries
Billion %
High income 1,14 16,28
Middle income (lower + upper) 5,02 72,01
Lower middle income 2,53 36,32
Low income 0,82 11,71
The world 6,97 100,00

Source: WB Development Indicators and Global Development Finance (2011)

Common characteristics of the
Developing World

• 5. Rural Populations and Rural-to-Urban Migration

– Job creation pressure in Urban region
– Unemployment & Underemployment
• 6. Industrialization and Manufactured Exports
– Primary Product Exports
• 7. Adverse Geography
– Resource endowments (the Dutch disease)

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Common characteristics of the
Developing World

• 8. Financial and Other markets

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

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1.4.2 Differences among
Developing countries
• Geographic and Demographic factors
• Resource Endowment
• Political Structure
• Historical Background
• Structure of Industry
• Ethnic and Religious Breakdown
• Per capita income levels

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1.5 Low Income Countries Today
And Developed Countries Then
• Eight differences
1. Physical and human resource endowments
2. Per capita incomes and levels of GDP
3. Climate
4. Population size, distribution, and growth
5. Historic role of international migration
6. International trade benefits
7. Scientific/technological research
8. Efficacy of domestic institutions

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