1. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. Chapter 2 Comparative Economic Development

2. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-2 Country Classifications World Bank ranks countries on GNI per capita Low Income Countries (LIC) Low Middle Income Countries (LMC) Upper Middle Income Countries (UMC) High Income Countries (HIC) Organization for Economic Cooperation and Development (OECD)

3. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-3 Classification of Economies by Region and Income in 2007

4. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-4 Classification of Economies by Region and Income, 2007 (Latin America and the Caribbean) (Sub-Saharan Africa)

5. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-5 Classification of Economies by Region and Income, 2007

6. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-6 Nations of the World, Classified by GNI Per Capita

7. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-7 Measuring Development Gross National Income (GNI) Gross Domestic Product (GDP) Purchasing Power Parity (PPI): method instead of exchange rates as conversion factors

8. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-8 Income Per Capita in Selected Countries

9. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-9 Comparison of Per Capita GNI, 2005

10. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-10 Basic Indicators of Development Health Conditions Life Expectancy Education Achievements Human Development Index (HDI): a composite measure of living standards

11. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-11 Commonality and Diversity: Some Basic Indicators

12. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-12 Human Development Disparities

13. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-13 Human Development Disparities

14. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-14 Human Development Index: 23 Countries, 2004

15. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-15 Human Development Index: 23 Countries, 2004

16. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-16 Human Development Index Variations: Similar Incomes, 2004

17. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-17 Common Characteristics of LDCs: 1. Lower levels of living and productivity 2. Lower levels of human capital investment (health-care, education, skills) 3. Higher levels of income inequality and poverty 4. Higher population growth rates

18. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-18 Shares of Global Income, 2005

19. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-19 Most and Least Populated Countries and Their Per Capita Income, 2005

20. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-20 Child Mortality Rates, 1990 and 2005

21. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-21 Primary School Enrollment and Pupil-Teacher Ratio

22. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-22 Correlation between Child Mortality and Mother’s Education

23. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-23 People Living in Poverty, 1981-2002

24. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-24 Common Characteristics of LDCs: 5. Greater social fractionalization 6. Larger rural population, but rapid rural-urban migration 7. Lower levels of industrialization and manufactured exports 8. Adverse geography and resource endowment

25. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-25 Urban Population in LDCs

26. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-26 Share of Population Employed in Industry 2000-2005 (%)

27. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-27 Common Characteristics of LDCs: 9. Underdeveloped financial and other markets – Imperfect markets – Incomplete information 10. Colonial legacy and external dependence – Institutions – Private property – Personal taxation – Taxes in cash rather than in kind

28. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-28 LDCs Today vs. MDCs Then 1. Physical and human resource endowments 2. Per capita incomes and levels of GDP 3. Climate 4. Population size, distribution, and growth

29. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-29 LDCs Today vs. MDCs Then 5. Historic role of international migration 6. International trade benefits 7. Scientific innovation & technological advancement 8. Effectiveness of domestic institutions

30. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-30 Convergence? The closing economic and technological gaps between LDCs and MDCs? Evidence of unconditional convergence is hard to find Per capita income convergence?

31. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-31 Convergence in OECD Divergence in the World

32. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-32 Per Capita GDP Growth in LDCs, 1995-2005

33. Copyright © 2009 Pearson Addison-Wesley. All rights reserved. 2-33 Growth Convergence and Income Convergence