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Differences between Developing and Developed Countries

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Last Update on October 1, 2024
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There is a big difference between Developed Countries and Developing Countries as the developed countries are self-contained flourished while the developing countries are emerging as a developed country. Developing Countries are the one which experience the phase of development for.....
Differences between Developing and Developed Countries
Differences Between Developing And Developed Countries
Developed Countries Developing countries
GDP Per Capita
  • Income from production of high value goods + services
  • Highly skilled labour force
  • Capital intensive production methods
  • Income predominantly from agricultural goods
  • Prices of agricultural goods tend to be low so generates low income Oil v Wheat?
  • Protection policies such as tariffs imposed on agricultural goods by some countries
  • This reduces export revenue for developing countries
GDP Per Capita Impact on Economic Performance
  • Good level of income allows for development in services and infrastructure and in improving education and productivity
  • Poorer countries struggle to earn income they need to improve economic development
  • They may be forced to borrow money from abroad to invest in their economies resulting in increased foreign debt (interest payments)
Distribution of Income and Wealth
  • Efficient progressive tax systems in place
  • Provide welfare benefits to the poor
  • Have larger informal (Black Market) economies, making tax collection difficult
  • Therefore have less revenue to spend on welfare and public services like education, healthcare so the cycle continues
  • More likely to suffer from corruption
Distribution of Income and Wealth Impact on economic Performance
  • Absolute poverty largely eradicated from developed countries (but relative poverty still a concern)
  • More people living in absolute poverty
Productivity
  • Higher productivity level due to a skilled labour force and investment in modern technology
  • More unskilled labour due to poor education system and limited training opportunities
  • Do not have the money to invest in capital equipment and machinery will lead to lower productivity
Productivity Impact on economic Performance
  • Economic growth more likely as productivity and output should improve year on year so revenue should improve too
  • Relatively unskilled leads to fewer products and services produced and lower income as a result
  • Less revenue available to invest in improving their economies
Population growth
  • Slow population growth rates due to women choosing careers, marrying later, having fewer children
  • High cost of raising children another factor for lower birth rates
  • Rapidly growing population due to high birth rates (poorest regions in Africa have 2.7% rith rate compared to 0.4% in EU)
Population growth
Impact on Economic Performance
  • May need to plan for a ageing population e.g. Japan, china
  • Rapid birth rates put strain on resources
  • Absolute poverty may rise as population grows
  • Tend to have larger dependent populations putting on pressure on the working population e.g. 51% of Niger’s population aged under 14
Size of Primary, secondary, tertiary Sector
  • Mainly have jobs in the tertiary sector which requires a higher level of education and skill
  • High proportion of workers in primary sector
Size of Primary, secondary, tertiary Sector – Impact on Economic development
  • Farming tends to be capital intensive cheaper to produce and output more productive
  • Farming tends to be labour intensive so workers more unskilled so receive low wages and risk of drought and crop failure
Saving and Investment
  • Higher income enable them to save and invest more in capital equipment and development of new technology to increase productivity and expand output
  • Lower revenues results in less opportunity to save and invest so productivity unlikely to improve
Saving and Investment
Impact on economic Development
  • Money makes money
  • Trapped in poverty cycle
  • Have to borrow to invest leads to high levels of debt
  • Interest rates tend to be high
Education
  • High quality school education accessible for all, many go on to university results in ever improving skilled workforce
  • Lack income to invest in education as a result skills level and productivity of the labour force likely to be low
  • Poor education makes it difficult to raise themselves out of poverty
Education
Impact on economic Development
  • Higher economic growth and improving productivity
  • Without education many trapped in inter generational poverty (People born into poverty likely to be trapped in poverty due to low education)
  • Results in low economic growth and productivity
Healthcare
  • Higher standard of medical care accessible to all
  • Better access to healthier foods, clean water
  • May lack access to basic medical care such as vaccinations to prevent disease
  • Safe water and sanitation may not be accessible increase spread of life threatening disease
Healthcare Impact on Economic development
  • Life expectancy higher many of which have an ageing population, as a result higher taxes may be in place to fund pensions and health services
  • Number of elderly people living in relative poverty may rise
  • Life expectancy lower and poor health will reduce productive capacity. Swaziland 49 Japan 84
Infrastructure
  • More money to invest in roads, communications, housing, transport links
  • Lack funds to invest in infrastructure which results in poor roads and unreliable power supply
Infrastructure
Impact on economic development
  • Attracts investment from Private business and FDI (Foreign Direct Investment)
  • Poor infrastructure reduces productive capacity and discourages investment

 

Understanding the distinctions between developing and developed countries is crucial for policymakers, investors, and anyone interested in global economics. These differences span various aspects, including GDP per capita, income distribution, productivity, population growth, sector sizes, saving and investment, education, healthcare, and infrastructure. In this blog, we’ll delve into each of these areas to provide a clear comparison between developing and developed nations.

Table of Contents

  1. GDP Per Capita
  2. Income Distribution and Wealth
  3. Productivity
  4. Population Growth
  5. Size of Primary, Secondary, Tertiary Sectors
  6. Saving and Investment
  7. Education
  8. Healthcare
  9. Infrastructure
  10. Conclusion

GDP Per Capita

Developed Countries

  • High GDP Per Capita: Developed nations boast a high GDP per capita, primarily generated from the income of high-value goods and services.
  • Economic Impact: A robust income level facilitates advancements in services, infrastructure, education, and overall productivity, driving sustained economic growth.

Developing Countries

  • Low GDP Per Capita: Income in developing countries is predominantly from agricultural goods, which often have low market prices, resulting in minimal income.
  • Economic Impact: Limited income restricts economic development, forcing these nations to borrow from abroad, which increases foreign debt and hampers growth.

Income Distribution and Wealth

Developed Countries

  • Efficient Tax Systems: Implement progressive tax systems that effectively redistribute wealth.
  • Welfare Benefits: Comprehensive welfare programs support the poor, reducing absolute poverty.

Developing Countries

  • Large Informal Economies: A significant black market presence makes tax collection challenging, limiting government revenue for public services.
  • Corruption Issues: Higher corruption rates impede equitable wealth distribution and access to essential services like education and healthcare.

Economic Impact

  • Developed Countries: Reduced poverty levels and efficient wealth distribution enhance economic stability and growth.
  • Developing Countries: Persistent poverty and income inequality hinder economic progress and maintain the cycle of poverty.

Productivity

Developed Countries

  • High Productivity: Driven by a skilled labor force and advanced technology, leading to increased output and economic efficiency.

Developing Countries

  • Low Productivity: Limited access to education and training results in a predominantly unskilled workforce, reducing overall productivity.

Economic Impact

  • Developed Countries: Continuous economic growth fueled by rising productivity and innovation.
  • Developing Countries: Lower productivity stifles economic expansion and limits income growth.

Population Growth

Developed Countries

  • Slow Growth Rates: Factors such as women pursuing careers, delayed marriages, and high child-rearing costs contribute to lower birth rates.

Developing Countries

  • Rapid Growth Rates: High birth rates, especially in regions like Africa, lead to a rapidly increasing population.

Economic Impact

  • Developed Countries: Aging populations may require adjustments in social services and pensions.
  • Developing Countries: Rapid population growth strains resources, increases absolute poverty, and places pressure on the working-age population.

Size of Primary, Secondary, Tertiary Sectors

Developed Countries

  • Dominance of Tertiary Sector: Employment is mainly in services, which require higher education and skills.

Developing Countries

  • Prevalence of Primary Sector: A large portion of the workforce is engaged in agriculture and other primary industries.

Economic Impact

  • Developed Countries: Capital-intensive farming and advanced services boost productivity and income.
  • Developing Countries: Labor-intensive agriculture leads to lower wages and vulnerability to environmental factors.

Saving and Investment

Developed Countries

  • Higher Savings Rates: Greater income levels enable significant savings and investments in capital equipment and technology.

Developing Countries

  • Lower Savings Rates: Limited revenue restricts opportunities to save and invest, perpetuating low productivity levels.

Economic Impact

  • Developed Countries: Continuous investment fosters economic growth and technological advancements.
  • Developing Countries: High debt levels and low investment impede economic development and perpetuate poverty cycles.

Education

Developed Countries

  • Accessible Quality Education: Universal access to high-quality education leads to a skilled and productive workforce.

Developing Countries

  • Limited Educational Investment: Insufficient funding results in low education levels and limited training opportunities.

Economic Impact

  • Developed Countries: Enhanced education drives economic growth and innovation.
  • Developing Countries: Poor education systems trap populations in intergenerational poverty, limiting economic progress.

Healthcare

Developed Countries

  • Comprehensive Healthcare Systems: Accessible medical care, clean water, and healthy food contribute to high life expectancy.

Developing Countries

  • Basic Healthcare Challenges: Limited access to essential medical services increases disease prevalence and lowers life expectancy.

Economic Impact

  • Developed Countries: Higher life expectancy supports an aging population but requires substantial funding for pensions and health services.
  • Developing Countries: Poor health reduces workforce productivity and increases mortality rates, hindering economic development.

Infrastructure

Developed Countries

  • Advanced Infrastructure: Investments in roads, communication, housing, and transportation enhance economic efficiency and attract investment.

Developing Countries

  • Underdeveloped Infrastructure: Poor roads, unreliable power supply, and inadequate transport links discourage investment and limit productive capacity.

Economic Impact

  • Developed Countries: Superior infrastructure attracts foreign direct investment (FDI) and supports robust economic activity.
  • Developing Countries: Inadequate infrastructure hampers economic growth and deters both domestic and foreign investment.

Conclusion

The disparities between developing and developed countries are multifaceted, encompassing economic, social, and infrastructural dimensions. Developed nations benefit from high GDP per capita, efficient income distribution, skilled labor forces, advanced technology, and robust infrastructure, all of which drive sustained economic growth and high living standards. In contrast, developing countries face challenges such as low income levels, income inequality, limited educational and healthcare resources, and inadequate infrastructure, which hinder their economic development and perpetuate cycles of poverty.

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