Chapter 1

Introduction of
developing
countries

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Economic and Development
Studies
– Development economics just care about how to maximize profit

• Greater scope than traditional economics and

political economy.
– Why Study (p.11 – 12th edition)?

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What Do We Mean by
Development
• Traditional Economic Measures
– GNI
– income per capita
• New View of Development
• Three Core Values of Development
– sustenance, self-esteem, freedom
Sustenance: Sustenance is the ability to meet basic needs of people. All people havecertain basic needs without which life would be impossible. These basic needs include
food, shelter, health, and protection
Self-Esteem: Sense of worth and self-respect and feeling of not being marginalizedare extremely important for individual’s well being. All peoples and societies seek some
form of self-esteem (identity, dignity, respect, honor etc.)
Freedom from Servitude: Human freedom, the ability to choose, is essential for thewell being of individuals. Freedom involves an expanded range of choices for
societies:economic and political. freedom for individual and gvm

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What Do we Mean by
Development

• The Central Role of Women

– To make the biggest impact on development,
societies must empower and invest in women
• The Three Objectives of Development
– Increase availability of life sustaining goods
– Raise levels of living
– Expand range of economic and social choices
• The Sustainable Development Goals

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1.1 World income distribution

1.1.1 Living standards in developing and

developed countries

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 GDP per capita, nominal (2020): $40,284.64
England Life expectancy (2020): 81.4 years
Adult literacy (2006): 99%
Mexico

GDP per capita, nominal (2020): $8,346.7

Life expectancy (2020): 74.98 years
Adult literacy (2015): 95%
 GDP per capita, nominal (2020): $858.92
Mali, West Africa Life expectancy (2020): 59.69 years
Adult literacy (2015): 33%
1.1.2 Statistic about world income
distribution (Todaro & Smith, 2011, p.10)

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1.2 Classification of countries
1.2.1. World Bank classification (GNI/capita –
using the WB Atlas method)
– low income: ≤ $1,045;
– Middle income
• lower middle income: $1,046 - $4,095;
• upper middle income: $4,096 - $12,695;
– high income: ≥ $12,696
– High-income OECD members (extra
classification)
Source: https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-
and-lending-groups , retrieved on Oct 30, 2021
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Nations of the World, Classified by GNI Per
Capita, Atlas method (current USD)
https://data.worldbank.org/indicator/NY.GNP.PCAP.CD?view=map(2020)

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 Economic data in Selected Countries in 2020

Vietnam US Thailand
GNI per capita? 3450$ (2020) 64650
6920
2020
WB’s LMI HI UMI
classification?
Economic
2.9% (2020) -2.8%
growth rate? -6.1%

2020
Life
expectancy?201 75 (2020) 77 79

9
Literacy ?2018 97% 2020 99% 94%

How Vietnam differ from the others?

Some Basic Indicators of Development:
Income, Health & Education

GDP is the total market value of all finished goods and services
• Income produced within a country in a set time period. GNI is the total
income received by the country from its residents and businesses
regardless of whether they are located in the country or abroad
– Gross National Income (GNI)
– Gross Domestic Product (GDP)
– PPP method instead of exchange rates as conversion factors
purchasing power parity

• Health:
– Life expectancy, the rate of undernourishment, the under-5
mortality rate, the crude birth rate, etc.
• Education
– Literacy, school enrollment ratio, mean years of schooling,
expected years of schooling

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1.2.2 UNDP classification

• Human Development Index (HDI)

– It ranks countries into: low – medium – high – very high
human development
– How HDI is calcultated?
– Find the data for VN and calculate HDI of VN, US,
Thailand and compare.
(Ref: the HDR technote - http://hdr.undp.org/sites/default/files/hdr2020_technical_notes.pdf )

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HDI of Vietnam
Source: http://countryeconomy.com/hdi/vietnam, retrieved on March 01, 2015

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 Countries classification base on HDI
Source: http://countryeconomy.com/hdi/vietnam, retrieved on March 01, 2015

• Before 2010: the fixed cut-off (0.5, 0.8, 0.9)

Source: http://www.undp.org/content/undp/en/home/librarypage/hdr/human_developmentreport2011.html , retrieved on
Nov 5th , 2011

• 2010 – 2013: the quartiles cut off

• 2014 – now: the fixed cut-off (0.55, 0.7, 0.8)
Source: http://hdr.undp.org/en/content/previous-human-development-reports-countries-were-divided-quartiles-hdi-
distribution-four, retrieved on March 01, 2015

– This method is applied at least 5 years

GNI
What are the Pros & Cons of HDI of each method?
H E
Health Why does UNDP return to the old fixed cut-off?
Education
vertile cycle life
->gv needs regulation
(in developing countries)A low ranking in HDI reflects high/low HDI?
+ new policy in Japan: 40 years to be developed

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HDI of Vietnam

Source: Human Development Report 2019 from UNDP

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HDI of Vietnam

Source: Human Development Report

2019 from UNDP

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1.2.3 Other classification

• OECD (Organization for Economic

Cooperation and Development)
– LICs – Low Income Countries
– MICs – Middle Income Countries
– NICs – Newly Industrializing Countries
– OPEC

• IMF
– 1964: developed, high-income, least developed
countries
– Now: Developed; emerging and developing countries
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1.3 History of Third World
countries

• The st
1 , 2 nd and 3 rd world
• The developed & developing
countries
các nước đang phát triển hầu như đang vay mượn nước ngoài

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1.4 Characteristics of developing
countries
1.4.1 Similarities
• Lower levels of living and productivity
• Lower levels of human capital
• Higher levels of inequality and absolute poverty
• Higher population growth rates
• Larger rural population- rapid migration to cities
• Lower levels of industrialization and manufactured exports
• Adverse Geography
• Underdeveloped financial and other markets
• Colonial legacies- poor institutions etc.

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Common characteristics of
the Developing World

1. Living and
productivity
-Vicious circle
- Diminishing
marginal
productivity

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Common characteristics of
the Developing World
2. Human capital (health, education, skills)

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Common characteristics of the
Developing World
3. Levels of Inequality and Absolute Poverty

Absolute
poverty
The situation of
being unable or
only barely able
to meet the
subsistence
essentials of
food, clothing,
shelter, and basic
health care.

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 Common characteristics of the
Developing World

4. Population Growth Rates

-Crude Birth rates: # of children born alive each year per 1,000 population.
- Dependency burden
Population
Countries
Billion %
distribution of income and population is not equal
High income 1,14 16,28
Middle income (lower + upper) 5,02 72,01
Lower middle income 2,53 36,32
Low income 0,82 11,71
The world 6,97 100,00

Source: WB Development Indicators and Global Development Finance (2011)

???
Questions

• Give comments about data in the table

46% (worldbank): percentage of dependent person over independent

• What is the dependency burden? Golden k tính vào tỷ lệ thất nghiệp

population? 0.5% (nearly golden population)

• Has VN reached the golden population?

Pros & Cons of VN in this period regarding
to population? For ex: Japan
High income but high DBR as more retirement population not birth rate

DBR <<< 0.5 Birth rate 0-15

Retirement rate >65y
DBR >>> 0.5

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Common characteristics of the
Developing World

• 5. Rural Populations and Rural-to-Urban Migration

– Job creation pressure in Urban region
– Unemployment & Underemployment
• 6. Industrialization and Manufactured Exports
– Primary Product Exports
• 7. Adverse Geography
– Resource endowments (the Dutch disease)

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Common characteristics of the
Developing World

• 8. Financial and Other markets

– Imperfect markets
– Incomplete information
• 9. Colonial Legacy and external dependence
– Institutions
– Private property
– Personal taxation
– Taxes in cash rather than in kind

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1.4.2 Differences among
Developing countries
• Geographic and Demographic factors
• Resource Endowment
• Political Structure
• Historical Background
• Structure of Industry
• Ethnic and Religious Breakdown
• Per capita income levels
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1.5 Low Income Countries Today
And Developed Countries Then
• Eight differences
1. Physical and human resource endowments
2. Per capita incomes and levels of GDP
3. Climate
4. Population size, distribution, and growth
5. Historic role of international migration
6. International trade benefits
7. Scientific/technological research
8. Efficacy of domestic institutions

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