The characteristics of developed,

developing and emerging economies

Developed economies are high-income

countries/high GDP per head.
• Mature markets
• High standards of living
• High level of productivity
Developing economy: an economy with a
low GDP per head. ( most asian countries )
• Poverty cycles (the links between low
income, low saving, low investment and
low productivity)
• Development traps (restrictions on the
growth of developing economies that arise
from low levels of savings and investment)
Emerging economies: economies with a
rapid growth rate and that provide good
investment opportunities.
Four largest emerging economies:
Brazil, Russia, India and China.
 GNI = (GDP + All assets, shares, profits, bonds etc owned by our citizen in foreign country )
- businesses, shares etc owned by foreigner in our country

Classification of economies
1. According to levels of income

GNI per head, 2013

Low income USD1,035
Middle income USD1,036 – USD4,085
(lower middle)
USD 4,086 – USD12,615
(upper middle)
High income USD12,616
Relatively straight forward
Can identify those economies in need of
help and assistance from aid providers.
For ex, during natural disaster. If a country happily accepts those donations, they will be considered as a
poor country in the international status

o It can be misleading as some countries’

economies may be growing while others
may be contracting.
o It does not capture all the influences on
development.
 2. According to levels of external
indebtedness
The categorization depends on:
1. the proportion of GNI that is devoted to
servicing the debt.
• It is a reflection of the extent to which
external indebtedness is an obstacle to
economic development.
2. The ratio of debt service to exports.
Huge debts can disrupt our economic growth since more money are used to repay those debts
If either the proportion of debt service
exceeds 80% of GNI or the value of debt
service to exports is 220% of exports, the
the country is considered to be severely
indebted.
If either of the two rates exceeds 60% of the
critical level, the country is said to be
moderately indebted.
The presence of debt on such a scale
diverts resources to debt repayment and
away from spending on education, health,
infrastructure, etc.
If ur economy is still dependent on the primary sector, then you cannot be recognized as a developed country.
The higher service sector tht contributes to the GDP, the better it is. Even if u r having an economic growth, but it
mostly depends on the primary sector, then it will not be good.

3. According to economic structure

• Developing economies typically have a
high dependence of the primary sector.
This will make developing economies
vulnerable to the forces of nature.
• As an economy develops, the secondary
sector becomes the major contributor and
as the economy develops further, the
tertiary sector makes the largest
contribution to output.
4. By population growth and population
structure
Developing countries tend to have high
rates of population growth because:
• The need to have children to support
This is bcs parents don’t have financial security, such as
parents in their old age pension payments etc. This is bcs they dont hv job. So
unemployment in a developing country is high.

• Lack of availability of contraceptives

• High infant mortality rates Due to lack of medical facilities
Raising a children is cheaper in

• The low cost of raising children asian countries compared to

developed countries such as US,
UK etc

• A low labour force participation

They hv a mindset that as long as 1 people is working, then the family is fine. Hence, there is a low labour
force participation. Compared to people in developed economy, each family member will try to get a job
Malthusian theory basically means that the growth of population is growing at a faster rate than food growth.

• Malthusian theory: the view that

population grows in geometric
progression whereas the quantity of a
food grows in arithmetic progression.
• The Malthusian theory has weakness: it
fails to recognise the impact of changes
in technology upon food production and
distribution.
But the disadvantage of this theory is tht it doesn’t consider the presence of technology. For ex, when a person is well
educated and are able to utilize and develop new technology, they will be able to produce more food at a faster rate than the
growth of population.
Developing economies have
• problems of famine and malnourishment
because of poor management in
agricultural sectors, vulnerability to sudden
supply shocks, etc.
• a very high dependency ratios – a
proportionally small working population
has to produce enough goods and
services to sustain also a large number of
young people who are economically
dependent upon them. Poverty trap, so dependency ratio are high
• Developed economies problem: an ageing
population because of decreasing birth
rate and death rate.
• Dependency ratios are high because of a
high proportion of old people.
• The cost of health care and pensions have
been rising.
• Thus to reduce cost of pensions,
governments increase the retirement age.
• Optimum population: the size of
population that maximises GDP per head.
• As the population grows it can make better
use of the stock of the other factor of
production. This is because increasing
returns are enjoyed as the population
grows.
• If population is below the optimum level, it
is underpopulated.
• When the population is beyond the
optimum level, and decreasing returns are
being experienced, it is overpopulated.
• The optimum population for a country is
not a fixed entity as quantity of factors
continually changes.
 5. According to income distribution

• In developing economies, income is

unevenly distributed. This is partly
because income-generating assets are
owned by the few. As a result, there are
great extremes of rich and poor.
• Ex.: Latin America, South Africa, Eastern
European countries.
 6. According to external trade
• In a number of developing economies,
primary products account for most of the
export revenue earned. This makes them
vulnerable in their trading relations
because demand and especially supply
can change significantly. The changes
means the primary products is subject to
large price fluctuation.
• Developed economies tend to export
manufactured goods and services.
• They tend to export a wide range of
products, while developing economies
rely heavily on exporting a narrow
range of products.
 7. According to urbanisation
• Developing economies tend to have a
relatively high proportion of their
populations living in rural areas but also
rapid rates of rural-urban migration.
• Most developed countries have the
majority of their populations living in the
urban areas already.
Discuss whether a larger population would
always result in food shortages.