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 = $ Less developed countries More developed countries

Characteristics of developing countries Watch you tube video TJHjD4&list=PL5E59472ABA76E134 TJHjD4&list=PL5E59472ABA76E134

Characteristics of developing countries 1. Low levels of GDP per capita 2. High levels of poverty (< $1 per day) 3. Large agricultural sector 4. Large urban informal market (illegal market) 5. High birth rates and population growth 6. Low levels of health and education 7. Low levels of productivity 8. 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 areas 4. Population growth 5. Less job opportunities in the formal sector in the city areas 6. Sector attracts migrants, uneducated, and low skills workers

Problems with informal market Limited worker protection Vulnerable to exploitation Environmental dangers Health hazards in slums with no basic services No access to credit for workers Limited 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 education  Provide 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 environment Improve health +education + infrastructure Improve 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 birth Environmental degradation – affect the poor

Impacts of Dual Economy Dual Economy Wealthy/ highly educated peoplepoor illiterate people Formalinformal urban sector High productivity industrial sectorlow 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.