Characteristics of Countries at Different Levels of Development (Syllabus 11.4)
Hello future economists! Welcome to one of the most important sections in the A-Level curriculum: understanding development. This topic moves beyond simply comparing Gross Domestic Product (GDP) and asks: What does a developing country actually look like?
By studying the characteristics of economies at different stages of development, you gain the analytical tools needed to understand *why* certain policies work in some countries but fail in others. Don't worry if some of the statistics seem overwhelming—we will break down these key structural differences into clear, manageable concepts.
1. Population Growth and Structure (11.4.1)
The structure and growth rate of a population are crucial indicators of a country's development level.
A. Measurement and Causes of Population Changes
We look at four main factors that determine how a population changes:
Key Population Indicators and Development Levels
- Birth Rate (BR): The number of live births per thousand people per year.
- Death Rate (DR): The number of deaths per thousand people per year.
- Infant Mortality Rate (IMR): The number of deaths of children under one year of age per 1,000 live births.
- Net Migration: The difference between immigration (people moving in) and emigration (people moving out).
Developed Countries (DCs) usually exhibit low BR, low DR, and very low IMR, leading to slow or zero population growth and an aging population structure.
Developing Countries (LDCs) often have high BR (due to lack of family planning, need for agricultural labour, and cultural norms) and historically high but falling DR and IMR (due to improvements in basic health care). This leads to rapid population growth and a youthful population structure.
Did you know? A high IMR in LDCs often encourages families to have more children to ensure that some survive to support the parents in old age, perpetuating the high birth rate.
B. Optimum Population
This is a classic concept you must define precisely:
The Optimum Population is the size of the population which, when combined with the existing amount of resources and level of technology, yields the highest real GDP per capita for the country.
- If a country has a population below the optimum level, it is underpopulated (not enough labour to exploit resources fully).
- If a country has a population above the optimum level, it is overpopulated (resources are strained, and real GDP per capita falls).
Remember: Optimum population is not about the largest total population, but the population that maximises individual wealth (per capita income).
C. Level of Urbanisation
Urbanisation is the increase in the proportion of the population living in urban areas (cities and towns).
- In LDCs, urbanisation is rapid, often driven by rural populations moving to cities seeking better employment (rural-urban migration). This frequently leads to overcrowded cities, informal settlements (slums), and strain on public services (e.g., transport, sanitation).
- In DCs, urbanisation is already high and relatively stable. The movement may be slightly outwards from city centres (suburbanisation).
Key Takeaway for Population: Developing nations face rapid population growth and high rates of urban migration, straining resources and infrastructure, whereas developed nations struggle with aging populations and stable growth.
2. Income Distribution (11.4.2)
Economic development is not just about the size of the national income (GDP); it’s about how that income is shared. Development economists stress that inequality (a characteristic often seen in LDCs) can hold back progress.
A. The Lorenz Curve Analysis
The Lorenz Curve is a graphical way to show how unequally income (or wealth) is distributed in a country.
- The graph plots the cumulative percentage of the population (on the X-axis) against the cumulative percentage of total income they receive (on the Y-axis).
- The Line of Absolute Equality (45-degree line) shows a hypothetical situation where every percentage of the population receives that same percentage of income (e.g., 20% of the population gets 20% of the income).
- The Lorenz Curve always bows below the line of equality. The further the curve bows away from the line of equality, the greater the income inequality.
Analogy: Imagine a birthday cake. If the Lorenz Curve is far from the 45-degree line, it means 80% of the guests only get 10% of the cake, while the remaining 20% get 90%. That’s high inequality!
B. The Gini Coefficient
The Gini Coefficient is a single numerical value that summarises the degree of income inequality shown by the Lorenz curve. You must understand its interpretation and concept of calculation.
The Gini coefficient is calculated as the ratio of the area between the Line of Absolute Equality and the Lorenz Curve (let's call this Area A) to the total area under the Line of Absolute Equality (let's call this Area A + Area B).
\[ \text{Gini Coefficient} = \frac{\text{Area A}}{\text{Area A} + \text{Area B}} \]
Interpreting the Gini Coefficient:
- A value of 0 (or 0%) represents Perfect Equality (Area A is zero).
- A value of 1 (or 100%) represents Perfect Inequality (Area B is zero, meaning one person has all the income).
Developing Countries often have higher Gini coefficients (meaning greater inequality) than developed countries, although this is a general trend and exceptions exist.
Key Takeaway for Income Distribution: LDCs often struggle with high income inequality, which is measured and visualised using the Gini Coefficient and the Lorenz Curve. High inequality can hinder development even if average income is growing.
3. Economic Structure (11.4.3)
The way an economy earns its living (its structure) changes dramatically as it develops. This involves looking at which sectors employ the population and what products the country trades internationally.
A. Employment Composition (The Sectoral Shift)
Economies are typically divided into three sectors. As a country develops, its employment shifts from Primary to Tertiary.
The Three Economic Sectors (PST Trick)
- Primary Sector: Extraction of raw materials (e.g., agriculture, fishing, mining, forestry).
- Secondary Sector: Manufacturing and processing raw materials into finished goods (e.g., car production, textile factories, construction).
- Tertiary Sector (Services): Providing services (e.g., banking, education, healthcare, tourism, retail).
In Developing Countries (LDCs):
- A very large percentage of the workforce is employed in the Primary Sector (often 50% or more). Productivity in this sector is typically low.
- The Secondary Sector (manufacturing) is often small or emerging.
In Developed Countries (DCs):
- The vast majority of the workforce (often 70%+) is employed in the Tertiary Sector (services).
- The Primary Sector employs a tiny fraction of the population (often less than 5%), but uses highly advanced technology.
B. Pattern of Trade at Different Levels of Development
The goods a country exports reflect its economic structure:
Trade Patterns Contrast
- LDC Trade Pattern: Exports are dominated by Primary Commodities (e.g., cocoa, crude oil, copper, cotton). Imports consist largely of manufactured goods and high-tech equipment.
- DC Trade Pattern: Exports are dominated by Manufactured Goods and High-Value Services (e.g., consulting, financial services, software, specialised machinery).
This difference is critical because primary commodity prices tend to be volatile and generally fall relative to manufactured goods prices in the long run (a concept related to the Terms of Trade, which often disadvantages LDCs).
Common Mistake to Avoid: Don't confuse "primary sector" dominance in LDCs with "good economic performance." High reliance on primary output means the economy is vulnerable to climate changes and global commodity price swings.
Key Takeaway for Economic Structure: Development is marked by a structural transformation, shifting employment away from subsistence farming (Primary) towards factories (Secondary) and eventually to services and knowledge-based industries (Tertiary). This shift directly affects the country's pattern of international trade.