EDPSE-C02: §

• The World Bank’s classification of countries

These features in common are on average and with great diversity, in comparison with developed countries:

• 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

  • Religious fighting
  • Ethnic fighting
  • Resource Curse makes civil conflicts

• Larger rural population - rapid migration to cities: urbanization

• Lower levels of industrialization and manufactured exports

  • Main industry is agriculture
  • GDP is from export of raw material

• Adverse geography: weather not fit for health or agriculture

• Underdeveloped financial and other markets

• Colonial Legacies - poor institutions etc.

  • Institutional structure left by colonial masters

  • burdening people instead of helping society

  💡 Ex: French collecting tax from its colonies and poor families

Holistic Measures of Living Levels and Capabilities §

• HDI is a holistic measure of living level
  • Health
  • Life expectancy
  • Education

$$\text{HDI}=\frac{\text{income index}}{3}+\frac{\text{life expectancy index}}{3}+\frac{\text{education index}}{3}$$

2. Common characteristic of developing country §

• Lower levels of living and productivity
• Lower levels of human capital (poor human development/resources such as technical skills and expertise like scientist and technician, abundance labor)
• Higher levels of inequality and absolute poverty (poor accessibility, long working hours, low salary)
• Higher population growth rates (related to economic, social factors)
• Greater social fractionalization
  • Religious fighting (fighting over status)
  • Ethnic fighting
  • Resource Curse
• Larger rural population - rapid migration to cities (less population at rural)
• Lower levels of industrialization and manufactured exports (GDP is agricultural based, GDP based on raw material or textile export, not abundance manufactured export)
• Adverse geography (lands are not fertile, land lock countries- no access to the sea → does not have economic benefits such as port, sea route advantage)
• Underdeveloped financial and other markets (government have too much power over the markets, working under bad condition and workers arent treated properly as rule of law, monopoly)
• Colonial Legacies - installed poor/exploited institutions etc. (corrupted system, bad tax system especially in European country such as in Africa where tax is causing a burden to the people by the Germans and France)
  • Ex: even after the leave of a colonizer, the independent state would still often uses the old tax system that is corrupted.
  • Tax should be bring benefits to the country (investment in education, health care, security)
  • While Tax system inherit from previous colonizer still remain corrupted (too much power hold by 1 individual in this system)

2.2. Basic indicators of development: Real income, health, and education §

• Gross National Income (GNI): is ****a hideous oversimplification of this is that it’s ‘Gross Domestic Product + the additional income that self-employed people pay themselves +income received from abroad’.
• Gross Domestic Product (GDP): is the total economic value of goods and services (expressed in US dollars) produced within the borders of a country in the course of a year and available for consumption in the market place.
• Gross National Product (GNP) is the same but includes the value of all services produced at home and abroad. A country such as Ghana will have a relatively similar GDP to GNP because it doesn’t have many companies which produce things abroad: most production takes place within Ghana. America, on the other hand, which is where many Transnational Corporations are based, has a much higher GNP than GDP – Think about MacDonald’s for example –all of those Big Macs sold outside of the USA won’t appear in the GDP of the USA but will appear in the GNP.
• Gross National Income Per Capita (PPP): Gross National Income Per Capita – is GNI divided by the population of a country, so it’s GNI per person.

2.3. Holistic measures of living levels and capabilities §

$\text{HDI}=\frac{\text{income index}}{3}+\frac{\text{life expectancy index}}{3}+\frac{\text{education index}}{3}$

• right policy to transform your country, developing → developed
  • reformation (China → open economy → economic growth # China → regulated market (socialist market) → no growth/even face crisis

New HDI §

$NewHDI=\sqrt[3]{H}\sqrt[3]{I}\sqrt[3]{E}$

Convergence §

• Technological tranfer
  • Leapfrogging in technology
• Spillover