Comparative Economic Development

Question 1

What remains the most striking feature of the global economy despite substantial development progress in the developing world?

Answer 1

The extreme contrasts between nations, especially in terms of output per worker, life expectancy, and literacy rates.

Question 2

Why is the future development of developing nations a major concern for all nations?

Answer 2

Because there can no longer be two futures—one for the few rich and the other for the very many poor.

Question 3

How are developing countries commonly defined, and what classification does the World Bank use?

Answer 3

Developing countries are defined by per capita income. The World Bank classifies countries as low-income, lower-middle-income, upper-middle-income, and high-income.

Question 4

What are some regions typically included in the characterization of the developing world?

Answer 4

Sub-Saharan Africa, North Africa, the Middle East, Asia (except Japan and South Korea), Latin America, and the Caribbean.

Question 5

Which regions or countries primarily make up the developed world according to the high-income OECD classification?

Answer 5

The developed world includes countries from Western Europe, North America, Japan, Australia, and New Zealand.

Question 6

What special distinction is sometimes made among upper-middle-income or newly high-income economies?

Answer 6

Some upper-middle-income or newly high-income economies are designated as newly industrializing countries (NICs), having achieved advanced manufacturing sectors.

Question 7

How does the World Bank classify developing nations based on international indebtedness?

Answer 7

The World Bank classifies nations based on their degree of international indebtedness as severely indebted, moderately indebted, and less indebted.

Question 8

What classification does the United Nations Development Programme (UNDP) use to measure the human development level of countries?

Answer 8

The UNDP classifies countries as having low, medium, high, or very high human development.

Question 9

What are the three criteria a country must meet to be classified as a least developed country (LDC) by the United Nations?

Answer 9

A country must have low income, low human capital, and high economic vulnerability.

Question 10

What is social fractionalization, and how does it affect low-income countries?

Answer 10

Social fractionalization refers to ethnic, linguistic, and social divisions within a country, which often lead to political instability or conflict in low-income nations.

Question 11

Why do researchers use purchasing power parity (PPP) to compare GNIs and GDPs across countries?

Answer 11

PPP allows for more accurate measurement of living standards by accounting for differences in domestic prices through a “basket of goods” approach.

Question 12

According to Sen’s Capability approach, why is it necessary to evaluate health and educational attainments alongside average income?

Answer 12

It is necessary to evaluate health and educational attainments to reflect a nation’s core capabilities beyond just income.

Question 13

What are some key health indicators used to measure development?

Answer 13

Health indicators include the under-5 mortality rate, life expectancy, and the prevalence of malnutrition (% of underweight children under age 5).

Question 14

What are some key education indicators used to assess a nation’s development?

Answer 14

Education indicators include the primary completion rate (as a % of the relevant age group) and the literacy rate.

Question 15

Basic indicators of Development:

What is the most widely used holistic development measure?

Answer 15

The most widely used holistic development measure is the new Human Development Index (HDI), presented by the UNDP in the Human Development Reports.

Question 16

On what scale does the new HDI rank countries?

Answer 16

The new HDI ranks countries on a scale of 0 (lowest human development) to 1 (highest human development).

Question 17

What are the three goals of development that the new HDI is based on?

Answer 17

The three goals of development are:

• A long and healthy life, as measured by life expectancy at birth.
• Knowledge, as measured by a combination of average schooling attained by adults and expected years of schooling for school-age children.
• A decent standard of living, as measured by real per capita gross domestic product adjusted for purchasing power parity (PPP).

Question 18

List the following:

The characteristics of the developing world

Answer 18

1. Lower Levels of Living and Productivity
2. Lower Levels of Human Capital (health, education and skills)
3. Higher Levels of Inequality and Absolute Poverty
4. Higher Population Growth rates
5. Greater Social Fractionalization
6. Larger Rural Population but Rapid Rural-to-Urban Migration
7. Lower Levels of Industrialization and Manufactured Exports
8. Adverse Geography
9. Underdeveloped Markets
10. Colonial Legacy and External Dependence

Question 19

What percentage of the world’s population lives in low- and middle-income developing nations, and what share of the world’s income do they receive?

Answer 19

Five-sixths (84%) of the world’s population lives in low- and middle-income developing nations, but they receive only about 46% of the world’s income.

Question 20

Characteristics of the Developing World

What is the primary factor that explains the wide disparity in income between developing and developed countries?

Answer 20

The disparity in income is largely due to large gaps in productivity, or output per worker, between developing and developed countries.

Question 21

Characteristics of the Developing World

What is meant by lower levels of human capital in developing countries?

Answer 21

Developing countries generally lag in nutrition, health, and education compared to developed countries, though some regions like East Asia have standards closer to developed nations.

Question 22

Characteristics of the Developing World

How do well-performing developing countries, such as those in East Asia, compare to low-income countries in terms of health and education?

Answer 22

Well-performing developing countries are closer to the developed world in terms of health and education than they are to low-income countries.

Question 23

What percentage of world income do the poorest 20% of people receive globally?

Answer 23

The poorest 20% of people globally receive just 1.5% of world income.

Question 24

How much of the world’s wealth would be needed to bring the incomes of those living on less than $1.25 per day up to the minimal poverty line?

Answer 24

Less than 2% of the incomes of the world’s wealthiest 10% would be required to bring the poorest up to the minimal poverty line.

Question 25

Characteristics of the Developing World

How does inequality vary within developing countries?

Answer 25

Inequality is often very high within individual developing countries, but it varies greatly; for example, inequality is generally much lower in Asia.

Question 26

Where has most of the recent population growth been centered, and how does this compare to developed countries?

Answer 26

Most recent population growth has been centered in the developing world, while developed countries often have birth rates near or below replacement levels (zero population growth).

Question 27

Characteristics of the Developing World

What is a major implication of high birth rates in developing nations?

Answer 27

The active labor force must support more children, leading to a greater dependency burden compared to developed nations.

Question 28

Characteristics of the Developing World

What population shift is a hallmark of economic development?

Answer 28

A shift from agriculture to manufacturing and services, accompanied by rural-to-urban migration, is a hallmark of economic development.

Question 29

How does employment in agriculture differ between developing and developed countries?

Answer 29

Developing countries have a far higher share of employment in agriculture compared to developed countries, but with lower productivity.

Question 30

What type of exports are developing nations, especially low-income countries, highly dependent on?

Answer 30

Developing nations, particularly those in Africa, remain highly dependent on primary exports, especially agricultural and mineral exports.

Question 31

How are middle-income countries progressing in terms of industrialization and exports?

Answer 31

Middle-income countries are catching up with the developed world in terms of the share of manufactured goods in their exports, though these goods are often less advanced in terms of skill and technology content.

Question 32

How does being landlocked affect the economies of many developing countries, particularly in Africa?

Answer 32

Landlocked economies, common in Africa, often have lower incomes compared to coastal economies due to challenges related to geography.

Question 33

Why does the presence of natural resources not guarantee development success in some African countries?

Answer 33

The curse of natural resources suggests that even with physical resource endowment, development success is not guaranteed due to factors like poor governance and resource mismanagement.

Question 34

What are some key characteristics of underdeveloped markets in developing countries?

Answer 34

Underdeveloped markets often lack:

• A legal system that enforces contracts and validates property rights.
• A stable and trustworthy currency.
• Adequate infrastructure (roads and utilities) for low transport and communication costs.
• A well-developed and efficiently regulated financial system.
• substantial market information for consumers and producers

Question 35

How did institutions created during the colonial period affect development in many developing countries?

Answer 35

Colonial institutions often favored extractors rather than creators of wealth, leading to harmful effects on development that have persisted, such as less secure property rights and weak constraints on elites.

Question 36

What are some long-lasting impacts of colonialism on the economic opportunities available to society in many developing countries?

Answer 36

A smaller segment of society has been able to take advantage of economic opportunities, due to the institutions that prioritized extraction over wealth creation.

Question 37

How Do Low-Income Countries Today Differ from Developed Countries in Their Earlier Stages?

List the Differences

Answer 37

1. Climate Differences
2. Population Size, distribution and growth
3. The historical role of international migration
4. The growth stimulus of international trade

Question 38

How do physical and human resource endowments differ between today’s developing countries and developed countries in their early stages?

Answer 38

Today’s developing countries are less well endowed with natural resources or require heavy capital investments to exploit them, whereas developed nations were often more resource-rich in their early stages.

Question 39

How do relative levels of per capita income and GDP differ between today’s developing countries and developed countries in their early growth stages?

Answer 39

Developing countries today began their growth at the low end of the international per capita income scale, while developed nations were economically ahead of the rest of the world in their early stages, benefiting from a stronger financial position.

Question 40

What climatic differences exist between developing countries today and developed countries in their early stages?

Answer 40

Most developing countries are in tropical or subtropical zones, facing challenges like extreme heat, humidity, and poor soil quality, while developed nations are primarily in the temperate zone.

Question 41

How does population growth in developing countries today differ from that of developed countries during their early development stages?

Answer 41

Western nations experienced slow population growth during their early development, while today’s developing countries face rapid population expansion.

Question 42

What is the “brain drain” and how does it affect developing countries?

Answer 42

The brain drain refers to the emigration of highly educated and skilled professionals from developing countries to the developed world, which limits the availability of human capital in the developing nations.

Question 43

Why was international free trade considered the “engine of growth” for today’s advanced nations?

Answer 43

International free trade, through rapidly expanding export markets, was the engine of growth for advanced nations during the nineteenth and early twentieth centuries.

Question 44

How did the experience of international trade differ for many developing countries in the twentieth century?

Answer 44

Many developing countries experienced a deteriorating trade position, as their exports expanded but not as fast as those of developed nations, leading to a decline in their terms of trade.

Question 45

What are the “terms of trade,” and how did they change for many developing countries over time?

Answer 45

The terms of trade refer to the price they receive for exports relative to the price they pay for imports. For many developing countries, these terms declined over several decades.

Question 46

What are two important reasons to expect convergence in living standards between developing and developed nations?

Answer 46

The two reasons are technology transfer (advantage of backwardness) and factor accumulation.

Question 47

What does the global evidence suggest about convergence between developing and developed nations in recent decades?

Answer 47

Evidence for convergence is generally weak, with about 60% of countries growing more slowly than the United States.