DEVELOPED VS DEVELOPING COUNTRIES

Syllabus Outcomes:

•Distinguish between developed, developing, less developed countries•Explain using examples that economically less developed countries share certain characteristics including: low levels of GDP per capita, high levels of poverty, large agricultural sector, large urban informal sectors and high birth rates.

Developed vs developing countries

World bank divided countries into 4 groups based on GNI (GDP) per capita

Types of Countries

Low income countries GNI = <

$975

Lower middle

income GNI = $976 to

$ 3855

Upper middle income GNI =

$3856 to $11905

More developed countries = $ 11906

Less developed countries More developed countries

Characteristics of developing countries

Watch you tube video http://www.youtube.com/watch?v=p4FERTJHjD4&list=PL5E59472ABA76E134

Characteristics of developing countries

1. Low levels of GDP per capita 2. High levels of poverty (< $1 per day)3. Large agricultural sector4. Large urban informal market (illegal market)5. High birth rates and population growth6. Low levels of health and education7. Low levels of productivity8. Dual economies

Formal Vs Informal Markets

Formal markets – part of the economy that is registered and legal.

Informal market – part of the economy that is unregistered, illegal and unregulated.includes jobs such as: barbers, drivers, carpenters, drycleaners, hotel workers, street sellers.

Informal markets and developing countries

Informal market is more common in less developed countries is not due to tax evasion or illegal activities instead its due to:

Urbanisation Increased population Recession

Reasons for growth of informal markets

1. Government policy failure ( 50’s/60’s)focusing on manufacturing and neglected agriculture

2. Less job opportunity and incomes in rural areas.

3. Migration from rural to urban areas4. Population growth5. Less job opportunities in the formal sector in

the city areas6. Sector attracts migrants, uneducated, and

low skills workers

Problems with informal market

Limited worker protectionVulnerable to exploitationEnvironmental dangersHealth hazards in slums with no basic

servicesNo access to credit for workersLimited opportunities for education and

training

Possible benefits of informal markets

Opportunities for employment in countries that cannot create formal employment

Government can take advantage of this opportunities and assist this sector to become formal by:

give access to credit – so businesses can expand and grow

provide training and educationProvide needed infrastructure and services

Problems of high birth rates

High birth rates high population growth

85% of world population live in developing countries

birth rates falling everywhere but rising in LDC.

Dependency ratio very high – % of economically dependent people (children & elderly) those who cannot work. ( in LDC = 85% vs MDC = 49%)

High dependency ratio income must be stretched to support more members in the family. Big problem if income very low.

Implications of high birth rates

1. Huge burden on LDC to absorb growing no people to :

Create Employment Avoid pressure on environmentImprove health +education +

infrastructureImprove SOL for poor

Implications of high birth rates

2. Slow down in economic growth & devp because:

Rapid population growth require an even more rapid output and income growth in order for per capita income and output to increase

high dependency rate – less income per person – push into poverty

Poor health of mothers due to frequent birthEnvironmental degradation – affect the poor

Impacts of Dual Economy

Dual EconomyWealthy/ highly educated people poor illiterate people

Formal informal urban sector

High productivity industrial sector low productivity traditional sector

low productivity agricultural rural sector

high productivity industrial urban sector

A modern commercial agricultural sector

traditional subsistence agricultural sector

A dual economy arise when there are 2 sets of circumstances that exist simultaneously .