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Diverse Structures and Common Characteristics . Study of Developing Nations. Classification of Economies. World Bank classifies 208 economies (population=/> 30,000) based on gross national income per capita, 2000 LIC =/< $755 LMC =$756-$2995 UMC =$2996-$9265

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classification of economies
Classification of Economies
  • World Bank classifies 208 economies (population=/> 30,000) based on gross national income per capita, 2000
    • LIC =/< $755
    • LMC =$756-$2995
    • UMC =$2996-$9265
    • High- income OECD =/>$9226
    • Other high-income countries
    • Different classification of other-high income countries
classification of economies3
Classification of Economies
  • Gross National Income is the total final output of goods and services produced by the economy, plus net factor income from the rest of the world, minus sales taxes
  • Gross domestic product (GDP) + net factor payments = Gross national product (GNP)
  • GNP- sales taxes = Gross national income
structural diversity of developing economies
Structural Diversity of Developing Economies
  • Size (geographical, population) and income of the country
  • Historical and colonial background
  • Physical and HR endowments
  • Ethnic and religious composition
  • Relative importance of public and private sectors
  • Nature of its industrial structure
  • Degree of dependence on external economic and political forces
  • Distribution of power, institutional and political structures
structural diversity of developing economies important observations
Structural Diversity of Developing Economies: Important observations
  • There is no necessary relation among a country’s size, per capita income, and degree of equality/ inequality
  • Colonialism exposed African and Asian countries to new forms of potential exploitation and have resulted in different institutional and social patterns
  • Except for the Persian Gulf oil states, most developing countries have minimal endowments of raw materials and minerals
structural diversity of developing economies important observations13
Structural Diversity of Developing Economies: Important observations
  • Ethnic and religious conflicts have become frequent post cold war. Indigenous populations continue to be discriminated against in Latin American countries. Malaysia and Mauritius are exceptions
  • Most developing economies have mixed economic systems and the degree of corruption differs widely across countries
  • Majority of developing countries are agrarian and agriculture is a way of life for the people.
structural diversity of developing economies important observations14
Structural Diversity of Developing Economies: Important observations
  • The various interest and power groups among different segments of the populations in a developing country is a result of their economic, social, and political history
  • Case Study of Brazil and Costa Rica
common characteristics of developing nations
Common Characteristics of Developing Nations:
  • Low levels of living and income inequality
  • Extent of Poverty
  • Health characterized by high IMRs and malnutrition
  • Low levels of education and literacy
  • Low levels of labor productivity
  • High rates of population growth and dependency burdens
  • Substantial dependence on agricultural production and primary product exports
  • Prevalence of Imperfect markets and incomplete information
  • Dominance, dependence, and vulnerability in international relations
slide16

Income inequality: Per Capita Gross National Product in Selected Countries, 1997 (in U.S. dollars at official exchange rates)

poverty share of population living on 1 day
Poverty: Share of population living on < $1/ day

* Increase in absolute number of people

slide27

Composition of World Exports (percentages of primary and manufactured products)

Markets are imperfect in developing countries due to:

  • Economies of scale
  • Thin markets for many products due to limited

demand

  • Widespread externalities (good and bad)
  • Prevalence of common property resources
  • Incomplete information
  • Information is costly to obtain
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