Unit I –DEVELOPMENT CONCEPTS AND PRINCIPLES

MODULE 2 – COMPARATIVE ECONOMIC DEVELOPMENT

Objectives:

1. Identify economic indicators

2. Classify countries
3. Differentiate factors affecting development of countries

Discussion / Lecture

Within a rising economy, economic development is described as the reduction

and elimination of poverty, inequality, and unemployment. A developed country (or
industrialized country, high-income country, or more economically developed country
(MEDC)) is a sovereign state with a high quality of life, developed economy, and
advanced technological infrastructure, in comparison to other less industrialized
countries (Wikipedia).

Gross domestic product (GDP), gross national product (GNP), per capita income,
extent of industrialization, amount of widespread infrastructure, and general standard of
living are the most common criteria used to determine economic development
(Investopedia).

Economic considerations have continued to dominate debates. One such

criterion is per capita income; countries with high GDP per capita are thus classified as
developed. Another economic criteria is industrialization; industrialized countries are
those in which the tertiary and quaternary sectors of industry prevail (Wikipedia).

A new metric, the Human Development Index (HDI), has recently surfaced,
combining an economic indicator, national income, with other indicators, such as life
expectancy and education. Developed countries will be described by this criterion as
having a very high (HDI) ranking. The index, on the other hand, ignores a number of
variables, such as a country's net income per capita or the relative quality of its products
(Economics Help).
FACTORS AFFECTING ECONOMIC DEVELOPMENT

Economic development and growth are affected by four factors, according to

economists: human resources, physical capital, natural resources, and
technology. Less-developed countries, including those with abundant natural
resources, would fall behind if they do not encourage technological research and
enhance their workers' skills and education. Governments in highly developed countries
place a strong emphasis on these issues.

● Human Resource

The labor force's skills, education, and training have a direct impact on an
economy's development. A professional, well-trained workforce is more efficient
and produces high-quality production, which increases an economy's
productivity. A lack of skilled labor can stifle economic growth. A workforce that is
underutilized, illiterate, and unskilled would be a drain on the economy and will
result in higher unemployment.

● Investment in Physical Capital

Improvements and increased investment in physical infrastructure, such

as roads, equipment, and factories, would lower the cost of economic production
and increase its productivity. Physical labor is less economical than modern,
well-maintained factories and machinery. Increased production is the result of
increased efficiency.

If the ratio of capital expenses per worker rises, labor becomes more
efficient. An rise in labor productivity boosts the economy's growth rate.

● Quantity and Availability of Natural Resources

The discovery of additional natural resources, such as oil or mineral

reserves, would improve a country's economy by growing its production potential.
The efficiency in which a county uses and exploits its natural resources is
determined by the labor force's abilities, the technology used, and the capital
 available. These natural resources can be used by skilled and trained workers to
help the economy develop.

● Improvements in Technology

Managers find ways to incorporate scientific findings as more advanced

manufacturing methods as the scientific community makes more discoveries.
Better technology ensures that the same amount of labor will be more efficient,
and economic development will be more cost-effective.

Countries that understand the importance of the four factors that influence
economic growth will experience faster growth and higher living standards for their
citizens. Economic productivity would rise as a result of technological progress and
increased worker education, resulting in a better living environment for everyone.
Increases in labor efficiency are much easier to achieve when better equipment is
purchased that requires the labor force to do less physical work.

COUNTRIES’ ECONOMIC DEVELOPMENT

The gross domestic product (GDP) per capita, which measures all of a country's
goods and services generated in a year, is a useful metric for classifying countries as
developed or developing. Countries with developed economies, on average, have GDP
per capita of at least $12,000 (USD), though some economists suggest $25,000 (USD)
is a more practical calculation criterion.
Another tool is the United Nations' human development index (HDI), which was created
as a measure for assessing countries' levels of social and economic development. It
converts life expectancy, educational attainment, and income into a standardized
number between 0 and 1; the closer the nation gets to 1, the more developed it is.
Although there is no minimum criterion for being classified as developed, most
developed countries have HDIs of 0.8 or higher.
DEVELOPED vs. DEVELOPING COUNTRIES

Developed and developing countries https://youtu.be/val9YCQHX3A

Common characteristics of developing nations https://youtu.be/zXVBoRaZDFo

Argentina (Developing Country)

It is one of the strongest in South or Central America. Argentina's GDP per capita, at
$12,494, is higher than the $12,000 threshold that most economists consider to be the
minimum for a country to be considered established.

The child mortality rate in the country is 10.4 per 1,000 infants, almost double the rate in
other developed countries. Argentine families have more children than families in other
developing countries to compensate for the high number of infant deaths, as shown by
the country's high birth rate of 17 per 1,000 residents.

Qatar (Developing Country)

Qatar stands out as the nation with the highest GDP per capita ($143,788), proving that
it is an exception to the rule on what counts as developing. Many people have access to
developed-world luxuries such as technology, recreational sports, fast food, and
expendable income.

Although some people have extreme wealth and access, many others live in extreme
poverty and struggle, which is similar to the situation in many other developing countries
in and around the Arabian Peninsula. Perhaps this is why Qatar's HDI is 0.85, which is
above the minimum for a developing country but low given the country's high GDP.

Australia (one of the most Developed country)

As of 2016, the country's per capita GDP was $49,144, far above any acceptable
threshold for developing country status. The child mortality rate in the country is three
per 1,000 live births, which is among the lowest in the world.

Australia's HDI was 0.93 in 2016, making it one of the best in the world (second only to
Norway). The majority of Australians benefit from widespread industrialization, high
literacy rates, and high-quality health care.

Canada (Developed Country)

Canada has a diverse economic base as the world's 11th largest economy. Oil, gas,
and coal are among the abundant natural resources. As a result, the nation will meet its
own energy requirements while still exporting natural resources to other countries.
Canadians have universal health care coverage, with all residents benefiting from a
government-funded program that provides free medical care. Canada has the
characteristics of a developed country, such as a strong economy, well-regarded
educational institutions, and a high standard of living for its people.

France (Developed Country)

France has one of the largest economies. France has the world's sixth-largest economy
in terms of nominal gross domestic product (GDP) and fourth-largest economy in terms
of aggregate household income as of 2016. Though its GDP per capita is slightly lower
than that of other European countries such as Germany and Switzerland ($39,678), its
HDI is a strong 0.89.

France has a diverse economy, with technology, transportation, and agriculture all
contributing to its success. France is known for its culture, which includes some of the
world's most popular art museums and the best cuisine. It is the world's most popular
tourist destination, with 84 million visitors per year. The tourism industry accounts for
7% of the country's gross domestic product.

Germany (Developed Country)

The GDP per capita in the country is $47,268. People of Germany have access to
universal health care. Every German is required to be a member of a non-profit
sickness fund that covers the majority of medical procedures and medications.
Germany provides public education to all of its citizens in addition to adequate health
care services. If students do not wish to attend university, the German education system
offers a dual vocational and academic track that prepares them to join the industry
quickly.

Greece (Developed Country)

Greece's per capita GDP was $26,680 in 2016. Most economists consider this to be
sufficient to classify the country as developed. It has a relatively low child mortality rate
of four per 1,000 as of 2015. Greeks, on the other hand, have a remarkable life
expectancy of 81 years as of 2013. Greece's HDI is 0.87, putting it above the most
popular developed-country threshold.

Italy (Developed Nation)

With a well-developed infrastructure, a long cultural history, and influence over a

number of exports Italy has the world's eighth-highest nominal gross domestic
product (GDP) of $1.16 trillion, with a per capita GDP of $35,896.

Italy, which is ranked fifth in the world in terms of total income, accounts for 4.92
percent of global wealth. The country's Human Development Index (HDI) is 0.87,
making it the world's 27th best.

The Netherlands (Developed Country)

The Netherlands has the 17th highest GDP in the world, which is remarkable given its
population of nearly 17 million people, which ranks 65th. When it comes to per capita
GDP, the Netherlands' economy shows its true strength, with a figure of $48,458 putting
it in 11th position.

In contrast to the global average of 13%, the Netherlands ranks very highly in terms of
work/life balance, with less than 0.5 percent of residents saying that they work long
hours. It has an HDI of 0.92, which is the fifth highest in the world.

Norway (Highly Developed Country)

Norway's per capita GDP is $61,471, which places it ninth in the world. Norway's
economy was ranked 27th most open in the world by The Heritage Foundation in 2015.
The fact that the vast majority of employees (77.6%) are working in the services sector
rather than agriculture or manufacturing is one of the characteristics that distinguishes
Norway as a developed country.

Norway has the highest HDI score of 0.94 in the world.

South Korea (Developed Country)

The nation has a high GDP per capita, a low child mortality rate, and a long life
expectancy, and it provides its people with widespread access to high-quality health
care and higher education. By any fair criterion, South Korea's per capita GDP, at
$34,549 in 2016, meets developed-country requirements. The average life expectancy
is 81 years, and the infant mortality rate is three per 1,000 live births. South Korea's HDI
is 0.89 as of 2016.

Spain (Developed Country)

Spain is unquestionably a developing country as of 2016, with a diverse economy,

widespread access to high-quality health care and higher education, and strong
economic and quality-of-life indicators.

As of 2016, Spain's per capita GDP was $34,526. It has excellent child mortality and life
expectancy rates; less than four children per 1,000 live births die, and the average
Spaniard lives to be 82 years old. Spain's HDI score in 2013 was 0.87, which is far
above the widely agreed benchmark for developing country status.

Even if a country's GDP exceeds $12,000, it does not automatically qualify it as

developed. Developed countries have a number of other characteristics in common:

● They have a high level of industrialization.

● Their birth and death rates have remained constant. They may not have overly
high birth rates because child mortality rates are low due to high living standards
and quality medical care. Families do not feel compelled to have a large number
of children because they know some would suffer. Infant mortality is lower than
10 per 1,000 live births in no developing world. Every developed country has a
life expectancy of more than 70 years, with many averaging 80.
● Women are employed in greater numbers, especially in high-ranking executive
positions. These career-driven women often opt for smaller families or don't have
children at all.
● They consume an immense amount of global resources, such as oil. More
people in developed countries drive vehicles, ride on aircraft, and use electricity
 and gas to fuel their homes. Developing-country residents often lack access to
technology that necessitate the use of these services.
● They have a higher overall debt. Developing countries do not have access to the
seemingly limitless funding that more developed countries do.

Activity

A. True or False.

___________ 1.) Economic development is the promotion and inclusion of poverty,

inequality and unemployment.

___________ 2.) A developing country is a sovereign state with a high quality of life,
developed economy, and advanced technological infrastructures.

____________ 3.) Human Development Index (HDI) base on a country's net income per
capita or the relative quality of its products.

____________ 4.) Gross National Product is used to determine economic development.

____________ 5.) Industrialized countries are those in which the tertiary and quaternary
sectors of industry do not prevail.

B. Enumerate the four (4) factors affecting economic development.

6.) _____________________________

7.) _____________________________

8.) _____________________________

9.) _____________________________

10.) ___________________________
 C. Write 3 common characteristics of developed countries.
1.) ___________________________________
2.) ___________________________________
3.) ___________________________________
D. Write 3 common characteristics of developing countries.
1.) ___________________________________
2.) ___________________________________
3.) ___________________________________

References:

https://en.wikipedia.org/wiki/Developed_country

Majaski, Christina. (2020, November 21). “Developed Economy”. Investopedia.

Retrived from https://www.investopedia.com/terms/d/developed-
economy.asp#axzz1legO8olO

Investopedia. (2021, April 25). Top 25 Developed and Developing Countries. Retrieved
from https://www.investopedia.com/updates/top-developing-countries/

"Human development index". Economics Help. Retrieved from

https://www.economicshelp.org/blog/glossary/human-development-index/

International Monetary Fund. "World Economic Outlook Database." Retrieved from

https://www.imf.org/external/pubs/ft/weo/2017/02/weodata/index.aspx

UNICEF. "Argentina: Key Demographic Indicators." Retrieved from

https://data.unicef.org/country/arg/#

The World Bank. "Mortality rate, infant (per 1,000 live births)." Retrieved from
https://data.worldbank.org/indicator/SP.DYN.IMRT.IN
International Monetary Fund. "IMF DataMapper: GDP Per Capita, Current Prices."
Retrieved from
https://www.imf.org/external/datamapper/NGDPDPC@WEO/OEMDC/ADVEC/WEOWO
RLD

Organization for Economic Cooperation and Development. "Better Life Index: Work-Life
Balance." Retrieved from http://www.oecdbetterlifeindex.org/topics/work-life-balance/

The Heritage Foundation. "2019 Index of Economic Freedom." Retrieved from

https://www.heritage.org/index/ranking

Woodruff, Jim. (2019, February 12). “Factors Affecting Economic Development and
Growth”. Chron. Retrieved from https://smallbusiness.chron.com/factors-affecting-
economic-development-growth-1517.html

Answers

a. True or False
1. False
2. False
3. False
4. True
5. False

b. 4 factors affecting economic development

6. Human resources
7. Physical capital
8. Natural Resources
9. Technology

c. Developed Countries Common Characteristics

 high level of industrialization
 birth and death rates remained constant
 Consumes immense amount of global resources
 have higher overall debt

d. Developing Countries Common Characteristics

 Do not have access to the seemingly limitless funding than more developed
countries do.
 Residents often lack access to technology.