2.

Contents

2.1 Defining the Developing World

Ch.2 2.2 Basic Indicators of Development: Real Income, Health, and Education

Comparative 2.3 Holistic (‫)كلي‬Measures of Living Levels and Capabilities

Economic 2.4 Characteristics of the Developing World: Diversity within Commonality

Development
2.5 Are Living Standards of Developing and Developed Nations Converging?

1
 Introduction
Most striking feature of the global economy

Example 1 : Output Per Worker in US(2007)

About 10 times higher than India More than 50 times higher than in Congo.

Example 2 : Real income per capita(2008)

‫متوسط دخل الفرد بالسنة‬

US $48,430 ($4,000 per month= 2,840 JD)

India $2,930 ($244 per month=173.3 JD)
Congo $280 ($23.4 per month= 16.7 JD)

Also other example are in welfare measures

2
 Cont.’d…….. Introduction
Enormous ‫ شاسع‬gaps in measures of welfare (2008/2009)
US India Congo
Life expectancy 78 65 46
‫متوسط توقع الحياه‬/ ‫معدل‬

Undernourishment less than 2.5% 22% 75%

‫سوء التغذية‬

Women Literacy Almost all women are literate 51% 56%

‫معرفة القراءة والكتابة‬

Such disparities exists in a wide scale between developing and developed ..That is why World Bank started classifying
countries according to their level of income

3
 World Bank Scheme- ranks countries on GNI/capita
Classification Definition
World Bank An organization known as The International Bank for Reconstruction and
Development (IBRD) that provides development funds to developing countries in the
form of interest-bearing loans, grants, and technical assistance.
The world’s largest development bank, IBRD provides financial products and policy
advice to help countries reduce poverty and extend the benefits of sustainable
growth to all of their people.
Low-Income Countries Countries with a gross national income per capita (GNI/Capita)of less than $976 in
(LICs) 2008.

Middle-Income In World Bank classification, countries with a GNI per capita between $976 and
Countries(MICs) $11,906 in 2008.

Least Developed Countries A United Nations designation of countries with low income, low human capital, and
(LDCs) high economic vulnerability.

What other classifications

4
 Cont.’d …….. World Bank Scheme- ranks countries on GNI/capita

Classification Definition
OECD The Organization for Economic Co-operation and Development is an
intergovernmental economic organization with 35 member countries*
founded in 1961 to stimulate economic progress and world trade.

Other High-Income Rest of economics not mentioned in the previous classifications.

Economies

*UK, USA, Germany, Sweden, Switzerland, Norway, New Zealand, Netherlands, Poland ,Portugal, Turkey, Netherlands, Slovenia, Slovak
Republic, Spain, Mexico, Australia, Austria, Belgium, Canada, Chile, Czech Republic, Denmark, Estonia, Finland, France, Greece, Hungary
Iceland ,Ireland, Israel, Italy, Japan ,Korea, Latvia, Luxemburg.

So lets remember what is GNI and then GDP ..

5
 2.2 Basic Indicators of Development: Real Income, Health, and Education

Indicator Definition
Gross National The total domestic and foreign output claimed by residents of a country,
Income consisting of gross domestic product (GDP) plus(+) factor incomes earned
(GNI) by foreign residents, minus income earned in the domestic economy by
non-residents.

GNI= GDP + Factor incomes earned by foreign residents - income earned

in the domestic economy by non-residents.

GNI Per Most common measure of the overall level of economic activity, is often
capita used as a summary index of the relative economic well-being of people
in different nations.

So GNI is calcautaed by …
6
 Cont. Basic Indicators of Development: Real Income, Health, and Education
Just for remember what these terminologies mean…‫لإلطالع‬

It is calculated as : total domestic and foreign value added claimed by a country’s

GNI per Capita residents without making deductions for depreciation (or wearing out) of domestic
capital stock.

Value added The portion of a product’s final value that is added at each stage of production.
‫القيمة المضافة‬

Depreciation Wearing out of equipment, buildings, infrastructure, and other forms of capital,
(of capital stock) reflected in write-offs ‫ خفض القيمة‬to the value of the capital stock.
‫اهتالك رأس المال‬

Capital stock The total amount of physical goods existing at a particular time that have been
‫رأس المال‬ produced for use in the production of other goods and services.

And what is the GDP

7
 Basic Indicators of Development

Indicators Definition
Gross Domestic Product The total final output of goods and services produced by the country’s
(GDP) economy within the country’s territory by residents and non-residents,
regardless of its allocation between domestic and foreign claims.

Purchasing Power Parity Calculation of GNI using a common set of international prices for all goods
(PPP) and services, to provide more accurate comparisons of living standards.

PPP method instead of exchange rates as conversion factors.

Jordan 2005 PPP conversion factor, GDP (Local Currency Unit (LCU) per international $) For example : JD 5 JD = US$ 7 as
exchange rate, but using PPP conversion factor means the number of units of a country's currency required to buy the same
amounts of goods and services in the domestic market as U.S. dollar would buy in the United States.

Lets see GNI Per capital in some countries

8
 Figure 2.2
GNI Per
Capita
in
Selected
Countries,
2011

Lets see list of continue classifications

9
 Table 2.1
Classification
of
Economies
by
Region
and Income,
2013

Continuing with the table 10

 Table 2.1
Classification
of Economies
by Region and
Income, 2013
(cont.’d)

11
Continue with the table
 MENA countries
GCC countries
Bahrain, Kuwait, Oman, Qatar, Saudi
Arabia,
United Arab Emirates.

Non GCC countries

Algeria, Djibouti, Egypt, Egypt, Iran, Iraq,
Jordan, Lebanon, Libya, Morocco, Syria,
Tunisia.

Source :
World Bank Group (2020): Trading together: Reviving Middle East
and North Africa Regional Integration in the Post-Covid Era ..
WORLD BANK MIDDLE EAST AND NORTH AFRICA REGION
https://www.worldbank.org/en/region/mena/publication/mena-
economic-update-trading-together-reviving-middle-east-and-north-
africa-regional-integration-in-the-post-covid-era

12
Source: https://www.sketchbubble.com/en/presentation-mena-map.html
 Table 2.1
Classification of
Economies by
Region and Income,
2013 (cont.’d)

13
Recently other classification have appeared , depending on fragile situation
 Other classifications
• The list of fragile and conflict-affected situations (FCS) is released annually by the World Bank
Group (WBG).
• Given the complexity of fragility and conflict, the list is not meant to be comprehensive— it does
not include all countries affected, nor is it a ranking of countries.
• The list is based on publicly available global indicators and is updated every year to reflect changes
in country situations.
• The list distinguishes between countries based on the nature and severity of issues they face. The
classification uses the following categories:
Countries with high levels of institutional and social fragility, identified based on publicly available
indicators that measure the quality of policy and institutions and manifestations ‫ ظهور‬of fragility.
Countries affected by violent conflict, identified based on a threshold number ‫ رقم أولى‬of conflict-
related deaths relative to the population. This category includes two sub-categories based on the
intensity of violence: countries in high-intensity conflict and countries in medium-intensity conflict.

Source: The World Bank Group. URL : https://www.worldbank.org/en/topic/fragilityconflictviolence/brief/harmonized-list-

of-fragile-situations Accessed 13.03.2020
What are these fragile list of countries
14
 FY20 List of Fragile and Conflict-affected Situations
HIGH-INTENSITY CONFLICT MEDIUM-INTENSITY CONFLICT HIGH INSTITUTIONAL AND SOCIAL FRAGILITY
( 7 countries) (9 countries)
Afghanistan Burkina Faso NON-SMALL STATES (14 states) SMALL STATES (7 states)
Central African Republic Burundi Cameroon Chad Comoros
Libya Congo, Dem. Rep. Congo, Rep. Kiribati
Somalia Iraq Eritrea Marshall Islands
South Sudan Mali Gambia, The Micronesia, Fed. Sts.
Syrian Niger Guinea-Bissau Solomon Islands
Arab Rep. Nigeria Haiti Timor-Leste
Yemen, Rep Sudan Kosovo Tuvalu
Lebanon
Liberia
Myanmar
Papua New Guinea
Venezuela, RB
Zimbabwe
West Bank and Gaza (territory)
Source: The World Bank Group (2020): BRIEF Classification of Fragile and Conflict-Affected Situations.
http://pubdocs.worldbank.org/en/179011582771134576/FCS-FY20.pdf Accessed on 13.03.2020

Lets come now to other measure of development 15

 2.3 Holistic (Comprehensive) Measures of Living Levels and Capabilities

A holistic ‫ شامل‬measure of living levels: Health, Life Expectancy, Education

Human
Development An index measuring national socioeconomic development, based on combining
Index measures of education, health, and adjusted real income per capita.
(HDI)

Is presented by the United Nations Development Program (UNDP) in its annual

series of Human Development Reports

How this HDI is calculated

16
 HDI Calculation: Income Index

Index Country: Bangladesh

Income Index = [log (1,241) - log (100)] = 0.420

[log (40,000) - log (100)]

GDP Per Capita $1,241 (UNDP estimates)

PPP(2007)
Assumption Real per capita income can not possibly be less than $100 PPP.

Maximum $40,000: the maximum a developing country might reasonably aspire

goalpost ‫ تطمح‬to over the coming generation. The UNDP takes this at $40,000 PPP.
‫الهدف المرجو‬

What about other measure for health?

17
 Life expectancy* index(Health Proxy)
Indicator Country: Bangladesh
Life Expectancy Index 65.7 – 25 = 0.678
85-25
Population Life Expectancy(2007) 65.7 years

Lower Goalpost (25) the lowest that life expectancy could have been in any country
over the previous generation
Anticipated ‫ متوقع‬Life Expectancy that 85 years is a maximum reasonable life expectancy for a
country try to achieve over the coming generation.

*Life expectancy at birth : the number of years a newborn infant would live if prevailing patterns of mortality at the time
of its birth were to stay the same throughout its life.

Now we will talk about literacy

18
 Adult literacy index
Indicator Country: Bangladesh
Adult Literacy Index 53.5 – 0 = 0.535
100) Gross School Enrollments ( – 0

Gross School Enrollments can exceed 100% (because of older students going back to
school), this index is also capped ‫ وصل ل‬at 100%.

Zero No one can read and write

Adult Literacy* 53.5%(Estimated)

* Number of literates population aged 15 years and over who can both read and write with understanding a short simple
statement on his/her everyday life.

Other indicators about schooling …

19
 Gross Enrollment Index
Indicator Country: Bangladesh

Gross Enrollment Index 52.1 – 0 = .521

100 - 0

52.1 Actual number of population who are enrolled in primary,

secondary, and tertiary school
Upper goalpost 100 : all population are enrolled

Lower goalpost 0: No one goes to school

That means Bangladesh 52.1% of its primary, secondary, and tertiary age population are enrolled in school.

How to calculate the overall Index

20
 Cont.’d ….Education index

• To get the overall Education index:

• Adult Literacy Index * (2/3) and

• Gross Enrollment Index *(1/3)

• This choice reflects the view that literacy is the fundamental

characteristic of an educated person.

• Education index=
2/3(Adult literacy index)+1/3 (Gross enrollment index)

21
How HDI is calculated in the end
 HDI in the end
HDI =1/3(Income Index) +
1/3(Life Expectancy Index )+
1/3(Education Index)

HDI =1/3(0.420)+ 1/3(0.678)+1/3(0.530)=

HDI = 0.543…………. for Bangladesh in(2007)
HDI from .1 To .999
For Jordan: ranked 86 and HDI=.741 in (2015)*
For Jordan: ranked 86 and HDI=.72 in (2020) * *

Source:

*United Nations Development Programme (UNDP):Human Development Reports http://hdr.undp.org/en/composite/HDI

**https://knoema.com/atlas/Jordan/topics/World-Rankings/World-Rankings/Human-development-index

22
 Cont.’d …HDI Implications
• HDI reminds us that by development we clearly mean: broad human development, not
just higher income.

• Many countries, such as some higher-income oil producers, have been said to have
experienced “growth without development.”

• Health and education are inputs into the national production function in their role as
components of human capital…..

What is Human capital?

23
 Cont.’d …HDI ….Human capital

Human capital: Productive investments in people, such as skills, values,

and health resulting from expenditures on education, on-the-job training
programs, and medical care.

Lets see HDI around the world 24

25
 Comments on Table 2.4
• Costa Rica has a higher HDI than Saudi Arabia, despite the fact that Saudi
Arabia has more than double the real per capita income of Costa Rica.

• Many countries have an HDI significantly different from that predicted by

their income. South Africa has an HDI of 0.683, but it ranks just 129th , 51
places lower than to be expected from its middle-income ranking.

• GNI per capita rank minus HDI rank: Difference in ranking by GNI per capita
and by HDI value. A negative value means that the country is better ranked
by GNI than by HDI value.

26
27
Rather there are problems with HDI 28
 Criticisms and drawbacks of HDI
• Gross enrollment: in many cases overstates(too much) the amount of schooling, because in
many countries a student who begins primary school is counted as enrolled without
considering whether the student drops out at some stage.
• Equal weight(1/3): is given to each of the three components, which clearly has some value
judgment behind it, but it is difficult to determine what this is.
• Variables: are measured in very different types of units, it is difficult even to say precisely
what equal weights mean.
• Role of quality. Not mentioned. There is a big difference between an extra year of life as a
healthy, well-functioning individual and an extra year with a sharply limited range of
capabilities (as being confined (restricted/limited).
• Quality of schooling counts: not just the number of years of enrollment, but quality that
counts.
• Proxies for health and education: measures for these variables were chosen partly on the
criterion that sufficient data must be available to include as many countries as possible.

So a NHDI is replaced 29
 The New Human Development Index (NHDI)

• In 11.2010 UNDP(United Nations Development Programme) introduced

its New Human Development Index (NHDI) to address some of criticisms
of HDI.

• The NHDI is still based on standard of living, education, and health. But it
has (8) notable changes, each with strengths, but also a few potential
drawbacks(problems).

30
 What Is New in NHDI?
1.Gross National Income (GNI) per capita: replaces (GDP) per capita.

• GNI = GDP + Net Property Income from Abroad (NPIA); interest, profits and dividends.

• GDP: concerned only with incomes generated within geographical boundaries

of country.

• The value of output produced by McDonald’s in Jordan counts towards Jordan GDP but some of the profits
made by overseas restaurants here in Jordan are sent back to their country of origin – adding to their GNP,
remittances, Investments.

What are other new things in NHDI 31

 Cont’d: …What Is New in NHDI

Income Earned by: GDP GNI GNP

Gross Domestic Product Gross National Income Gross National Product

Residents in Country C+I+G+X C+I+G+X C+I+G+X

Foreigners in Country Includes Includes If Spent in Country Excludes All

Residents Out of Country Excludes Includes If Remitted Back Includes All

Foreigners Out of Country Excludes Excludes Excludes

Source: https://www.thebalance.com/gross-national-income-4020738

Other additions to the NHDI 32

 Cont’d: …What Is New in NHDI?
2.The education index: Two new components have been added:
• Average actual educational attainment of whole population
• Expected attainment (accomplishment)of today’s children

3.Expected educational attainment is ambiguous(unclear) as it is not an achievement but UN forecast.

4.Two previous components of education index: literacy and enrollment, have been dropped.

• In contrast to expected attainment, literacy is clearly an achievement, and even enrollment is at

least a modest achievement. However, literacy has always been badly and too infrequently
measured and is inevitably defined more modestly in a less developed country.

• For enrollment: it is no guarantee that a grade will be completed or for that matter that anything is
learned or that students (or teachers) even attend.

Other amendments are …

33
 Cont’d: …What Is New in NHDI

5.The upper goalposts (maximum values) in each dimension have been increased to the
observed maximum rather than given a pre-defined cutoff(limit).

6. The lower goalpost for income has been reduced.

7. NHDI is computed with a geometric mean: is a type of mean or average, which indicates the central
tendency or typical value of a set of numbers by using the product of their values (as opposed to the
arithmetic mean which uses their sum).

Ow the equation of NHDI looks like ?

34
 Cont’d: …What Is New in NHDI

• 8. Rather than using the common logarithm (log), the NHDI uses natural log
(ln).This reflects a more usual construction of indexes.

The New Human Development Index Introduced by UNDP

in 11.2010

Lets take a numerical example 35

Computing the New HDI: China

Calculations for education index:

.568*.553 = .314104 then you take square root= .5604
.951: is China's upper goal ambitious in education index.
HDI = First : You multiply .847X.589X.584 =.2913 Second: on your calculator: .2913 exponential to .333333333(=1/3)36
 More Info to solve NHDI
 lower and upper goal limit for real per capita income =163.
 Anticipated ‫ المتوقع‬maximum goalpost for income ‫= أعلى حد متوقع للدخل ممكن هاى الدول(الصين) تحققه‬
108,201
 0: No one goes to schooling .We use this info for both Expected years of schooling index & for
Mean years of schooling calculations.

 Upper goalpost ‫ الهدف‬for expected years of schooling (years) =20.6

 Upper goalpost for mean years of schooling(years) = 13.2
 .568*.553 = .314104 then you take square root= .5604

 .951: is China's upper goal ambitious in education index.

 Life Expectancy(Anticipated ‫=)متوقع‬83.2 years

 Life Expectancy(Lower Goalpost ) = 20 years
 Human Development Index Meaning
• HDI for grouping countries that were introduced in the 2014 Report:
• Very high human development : 0.800 and above
• High human development : 0.700–0.799
• Medium human development: 0.550–0.699
• Low human development: Below 0.550

38
 China NHDI
2010 2019
.663 0.761
Life expectancy at birth (years) 74.41 76.9

Expected years of schooling (years) 12.5 14

Gross national income (GNI) per capita (constant 2017 PPP$) $4,340 16,057

39
 NHDI 2020
Country HDI index *Expected **Mean
Gross national
Life expectancy years of years of
income (GNI) per
at birth (years) schooling schooling
capita (PPP $)
SDG3 (years) (years)
SDG 8.5
SDG 4.3 SDG 4.6
USA .926 78.9 16.3 13.4 63,826
Jordan 0.729 74.5 11.4 10.5 9,858
Afghanistan 0.511 64.8 10.2 3.9 2,229
*Expected years of schooling is the number of years a child of school entrance age is expected to spend at school, or
university, including years spent on repetition. It is the sum of the age-specific enrolment ratios for primary, secondary, post-
secondary non-tertiary and tertiary education. expected years of schooling is weighted by population ages 5–24.

**Mean Years of SCHOOLING: Average number of completed years of education of a country's population aged 25 years and
older, excluding years spent repeating individual grades. Is weighted by population ages 25 and older.

Source:
UNESCO Institute for Statistics (2020), Barro and Lee (2018),

Source: http://hdr.undp.org/en/content/latest-human-development-index-ranking
http://hdr.undp.org/en/countries/profiles/AFG 40
 Table 2.4
2013 New
Human
Development
Index
and
its
Components
for
Selected
Countries

That bring us to the common traits of developing countries 41

2.4 Characteristics of Developing World : Diversity within Commonality

• There are 10 characteristics are common among developing countries on average

and with great diversity in comparison with developed countries:
1. Diversity within Commonality
2. Lower levels of living and productivity
3. Lower levels of human capital (health, education, skills)
4. Higher Levels of Inequality and Absolute Poverty
• Absolute Poverty
• World Poverty
5. Higher Population Growth Rates
• Crude Birth rates

42
What else?
Cont.’d… Characteristics of the Developing World: Diversity within Commonality

6. Greater Social Fractionalization

7. Larger Rural Populations but Rapid Rural-to-Urban Migration

8. Lower Levels of Industrialization and Manufactured Exports

9. Adverse Geography
• Resource endowments

And more of characteristics 43

Cont.’d …..2.4 Characteristics of the Developing World: Diversity within Commonality

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

Lets start with the 1st one : Diversity within Commonality 44

 2.4 Characteristics of the Developing World: Diversity within Commonality

1. Diversity within Commonality

• The wide range of income, health, education, and HDI indicators

• This wide range of income ,education …etc. is sometimes called “Ladder of

Development”

Lets see The 2010 New Human Development Index (NHDI), table 2.6 45
 TABLE 2.6
The
2010
New
Human
Development
Index
(NHDI),
2008 Data

46
Let s see the 2nd Characteristics
 2.Lower Levels of Living and Productivity
• There is a vast gulf(gap) in productivity between advanced economies
such as US and developing nations(India and Congo), but also a wide
range among these and other developing countries.

• Also, income growth rates have varied greatly in different developing

regions and countries, with rapid growth in East Asia, slow or even no
growth in sub-Saharan Africa, and intermediate levels of growth in other
regions.

What are these countries in East Asia and Pacific 47

 East Asia and Pacific (just to know )
American Samoa Korea, Rep. Philippines
Australia Lao PDR Samoa
Brunei Darussalam Macao SAR, China Singapore
Cambodia Malaysia Solomon Islands
China Marshall Islands Taiwan, China
Fiji Micronesia, Fed. Sts. Thailand
French Polynesia Mongolia Timor-Leste
Guam Myanmar Papua New Guinea

Hong Kong SAR, China Nauru Tonga

Indonesia New Caledonia Tuvalu

Japan New Zealand Vanuatu

Kiribati Northern Mariana Islands Vietnam

Korea, Dem. People's Rep. Palau

And examples of countries in Sub Sahara Africa 48

 Sub-Saharan Africa (SSA)Countries(Just to know)
Source:
Angola Gabon Nigeria
https://datahelpdes
Benin Gambia, The Rwanda k.worldbank.org/kn
owledgebase/articl
es/906519-world-
Botswana Ghana São Tomé and Principe bank-country-and-
lending-groups
Burkina Faso Guinea Senegal
Burundi Guinea-Bissau Seychelles
Cabo Verde Kenya Sierra Leone
Cameroon Lesotho Somalia

Central African Republic Liberia South Africa

Chad Madagascar South Sudan

Comoros Malawi Sudan
Congo, Dem. Rep. Mali Swaziland
Congo, Rep Mauritania Tanzania
Côte d'Ivoire Mauritius Togo
Equatorial Guinea Mozambique Uganda
Eritrea Namibia Zambia
Ethiopia Niger Zimbabwe
Lets see how income diversity of income and Productivity looks like 49
Figure 2.3(a)
Developing
regions
lag far
behind
the
developed
world
in
productivity
measured
as
output
per
worker.

And diversity
in income

50
 Figure 2.3 (b) Shares of Global Income, 2008.

Source: Figure 2.3a, Data from World Bank, World Development Indicators 2013 (Washington, D. C.: World Bank, 2013), p.24.

But is there is a relation between country size and development 51

 South Asia Region(SAR)Just to Know

• Afghanistan
• Bangladesh
• Bhutan
• India
• Maldives
• Nepal
• Pakistan
• Sri Lanka

52
 Cont. 2.Lower Levels of Living and Productivity

• One common misperception is that low incomes result from a country’s

being too small to be self-sufficient or too large to overcome economic
inertia(lazy/to remain unchanged).

• However, there is No necessary correlation between country size in

population or area and economic development.

• Rather, the 12 most populous countries include representatives of all four

categories: low-, lower-middle-, upper-middle- and high-income countries.

53
Lets see table 2.5
Table 2.5 The 12 Most and Least Populated Countries and Their Per Capita Income, 2008

Lets see Number 3.Lower Levels of Human Capital 54

 3.Lower Levels of Human Capital

• Human capital: Such as health, education, and skills—is vital to economic

growth and human development.

• Link between education and productivity by:

1.Adam Smith’s (1771): His classic statement : ‘a man educated at the expense of
much labour and time to any of those employments which require extraordinary
‫ استثنائي‬dexterity ‫ براعه‬and skill, may be compared to one of those expensive
machines.
2.Alfred Marshall (1890):referred to industrial training as: a national investment

3.Schultz (1960,1961,1971)
Investment in Human capital is the same as investment in machines.

Lets see an example of Education as a measure for human capital 55

 Table 2.8 Primary School Enrollment and Pupil-Teacher Ratios, 2010

Net Primary School Enrollment: Percentage of children in the age group that officially corresponds to primary schooling who attend primary
school.

Primary Pupil-teacher ratio: average number of pupils per teacher in primary school.

56
Let’s see the comments on this table
 Cont.’d …3.Lower Levels of Human Capital
• Enrollments have strongly improved in recent years, but student
attendance and completion, along with
attainment(acquisition/acquiring) of basic skills such as functional
literacy*, remain problems.

• Indeed, teacher truancy(absenteeism) remains a serious problem in

South Asia and sub-Saharan Africa.

*Functional illiteracy is reading and writing skills that are inadequate "to manage daily living and employment
tasks that require reading skills beyond a basic level". Functional illiteracy meaning the inability to read or write
simple sentences in any language. It is that a person who can engage in all those activities in which literacy is
required for effective function of his or her group and community and also for enabling him or her to continue
to use reading, writing and calculation for his or her own and the community’s development.(Source: UNESCO
Institute of Statistics http://uis.unesco.org/en/glossary-term/functional-literacy
Another example for human capital…..the relation between mothers education and mortality 57
Figure 2.5 Correlation between Under-5 Mortality and Mother’s Education

Lets see Nr.4: Higher Levels of Inequality and Absolute Poverty 58

 4.Higher Levels of Inequality and Absolute Poverty
• Globally, the poorest 20% of people receive just 1.5% of world income.

• The lowest 20% roughly corresponds to approximately 1.4 billion people

living in extreme poverty on less than $1.25 per day at PPP.

• Bringing the incomes of those living on less than $1.25 per day up to this
minimal poverty line would require less than 2% of the incomes of the
world’s wealthiest 10%.

• Thus the scale of global inequality is immense(big).

Lets see number of People Living in Poverty 59

Figure 2.6 Number of People Living in Poverty by Region, 1981–2008

60
Lets see 5.Higher Population Growth Rates
 5.Higher Population Growth Rates
• Global population has skyrocketed since the beginning of the industrial era, from just
under 1 billion in 1800 to 1.65 billion in 1900 and to over 6 billion by 2000. and 7 billion

• Population dynamics* varies widely among developing countries.

• Populations of some developing countries, particularly in Africa, continue to grow

rapidly.

*size and age composition of Populations as dynamical systems, and the biological and environmental processes
driving them (such as birth and death rates, and by immigration and emigration). Example scenarios are: aging
populations , population growth or population decline.
Lets see Crude Birth Rates Around 61
 Table 2.7 Crude Birth Rates Around the World, 2012

Jordan crude Birth Rate in 2020: 21.11 births per thousand population
Source: http://dosweb.dos.gov.jo/population/births-and-deaths/

*Crude birth rate The number of children born alive each year per 1,000 population
62
And
 Cont.’d.. 5.Higher Population Growth Rates

• From 1990 to 2008, population in:

low-income countries grew at 2.2% per year, compared to
1.3% in the middle-income countries,
 at 0.7% per year in High-income countries , reflecting both births and
immigration.

• As of 2010, the average rate of population growth was about 1.4% in the
developing countries.

What are the implications of this higher population growth rate 63

 Cont.’d 5.Higher Population Growth Rates

• By contrast, the proportion of people over the age of 65 is much

greater in the developed nations. Both older people and children are
often referred to as an economic dependency burden in the sense that
they must be supported financially by the country’s labor force (usually
defined as citizens between the ages of 15 and 64).

• Dependency burden (Age Dependency burden)The proportion of the

total population aged 0 to 15 and 65+, which is considered
economically unproductive and therefore not counted in the labor
force.

64
Lets see an example of dependency burden
 Cont.’d.. 5.Higher Population Growth Rates

Low income countries 66 Children under 15 for 100 working age (15-65)
Middle income countries 41 Children under 15 for 100 working age (15-65)
High income countries 26 Children under 15 for 100 working age (15-65)

Low income countries 6 people over 65 per 100 working age adults 72 per 100

Middle Income countries 10 people over 65 per 100 working age adults NA

High Income countries 23 people over 65 per 100 working age adults 49 per 100

N/A: Not Available

65
How elder people are supported in both developing and developed countries
 Cont.’d.. 5.Higher Population Growth Rates
• But in rich countries, older citizens are supported by their lifetime savings and
by public and private pensions.

• In contrast, in developing countries, public support for children is very limited.

• So dependency has a further magnified(large) impact in developing countries.

• Not only are developing countries characterized by higher rates of population

growth, but they must also contend(compete) with greater dependency
burdens than rich nations.

The 6th commonality is …. Greater Social Fractionalization 66

 ‫‪Population opportunity in Jordan‬‬
‫الفرصة السكانية والتي تعني بلوغ نسبة السكان في اعمار القوى البشرية اعلى مستوى لها وان •‬
‫تكون نسبة اإلعالة العمرية في ادنى نسبة لها‪ ،‬ستبدأ في الحصول في االردن بحلول العام ‪.2030‬‬

‫‪67‬‬
 6. Greater Social Fractionalization

Fractionalization Significant ethnic, linguistic, and other social divisions

within a country.

• Low-income countries often have ethnic, linguistic, and other forms of

social divisions, sometimes known as fractionalization.

• This is sometimes associated with civil strife ‫حرب أهليه‬and even violent
conflict, which can lead developing societies to divert considerable energies
to working for political accommodations if not national
consolidation(integration).

So what is the problem of developing world 68

 Cont’d. ………6. Greater Social Fractionalization

• The broader point is the ethnic and religious composition of a

developing nation.

• Whether or not that diversity leads to conflict or cooperation can be

important determinants of the success or failure of development
efforts.

Rwandan genocide: The Rwandan genocide occurred between 7 April and 15 July 1994 during the Rwandan Civil War. During
this period of around 100 days, members of the Tutsi minority ethnic group, as well as some moderate Hutu and Twa, were
slaughtered ‫ ذبح‬by armed militias. The most widely accepted scholarly estimates are around 500,000 to 800,000 Tutsi
deaths. Estimates for the total death toll (including Hutu and Twa victims) are as high as 1,100,000.
https://www.bbc.com/news/world-africa-26875506
The 7th commonality : Larger Rural Populations 69
 7.Larger Rural Populations but Rapid Rural-to-Urban Migration
• In developing countries, a much higher share of the population lives in rural
areas(countryside).

• Although modernizing are in many regions, rural areas are poorer and tend to
suffer from missing markets, limited information, and social stratification ‫الطبقات‬
‫االجتماعية‬.

• A massive population shift is also under way as hundreds of millions of people are
moving from rural to urban areas, fueling rapid urbanization.

Lets see distribution of urban population in developed countries and developing regions (table 2.8 )

70
Cont. 7.Larger Rural Populations but Rapid Rural-to-Urban Migration

Table 2.8 The Urban Population in Developed Countries and Developing Regions

71
Lets see the 8th community : Lower Levels of Industrialization
 8.Lower Levels of Industrialization and Manufactured Exports

• Industrialization is associated with high productivity and incomes and has

been a hallmark ‫ شيء مميز‬of modernization and national economic power.

• It is no accident that most developing-country governments have made

industrialization a high national priority, with a number of prominent
success stories in Asia.

72
Lets see share of different sectors across countries ( table 2.9)
 Table 2.9
Share
of the
Population
Employed
in the
Agricultural,
Industrial,
and
Service
Sectors in
Selected
Countries,
(2004–2008)
by
Gender (%)

Let s see comments on this table 73

 Cont’d. ..8.Lower Levels of Industrialization and Manufactured Exports

• In developed countries, agriculture represents a very small share of

employment and output— about 1% in US and UK—although productivity is
not disproportionately low.

• Share of employment in industry in (US and UK) is actually smaller now than in
some developing countries, particularly among women, as developed
countries switch to the service sector.

• An often suggested but controversial “Pattern of Development” is that the

share of employment in industry begins to slowly decline (and the service
sector continues to expand) after developed-country status is reached.

Lets talk about the 9th commonality within diversity: Adverse geography 74
 9. Adverse Geography
• Resource endowment A nation’s supply of usable factors of production including mineral
deposits, raw materials, and labor.

• The extreme case of favorable physical resource endowment is the oil-rich Persian gulf
states.

• At the other extreme are countries like: Chad, Yemen, Haiti, and Bangladesh, where
endowments of raw materials and minerals and even fertile land (rich/fruitful land)are
relatively minimal(small).

What else can be said about adverse geography and resource endowments 75
 Cont.’d 9. Adverse Geography

• However, as the case of Congo shows vividly(clearly), high mineral wealth is

no guarantee of development success.

• Conflict over the profits from these industries has often led to a focus on the
distribution of wealth rather than its creation………… and to social strife(fight),
undemocratic governance, high inequality, and even armed conflict, in what
is called the “Curse of Natural Resources.”‫لعنة الموارد الطبيعية‬

In Congo there is: Limitless water ‫ال حدود للماء‬, (world's second-largest river), has gentle climate and rich soil make
it fertile, it has a soil abundant deposits of copper, gold, diamonds, cobalt, uranium, coltan and oil are just some
of the minerals that should make it one of the world's richest countries.

The next commonality: Underdeveloped Markets 76

 10.Underdeveloped Markets
• In many developing countries, legal and institutional foundations for markets are
extremely weak, with the result that domestic markets, not only financial markets,
have worked less efficiently.

• Imperfect market: A market in which the theoretical assumptions of perfect

competition are violated(break) by the existence of, for example, a small number of
buyers and sellers, barriers to entry, and incomplete information(The absence of
information that producers and consumers need to make efficient decisions resulting
in underperforming markets).

• An imperfect market arises whenever individual buyers and sellers can influence prices
and production, or otherwise when perfect information is not known to all market
actors.

What other aspects of market underdevelopment 77

 Cont. 10.Underdeveloped Markets
Some aspects of market underdevelopment as they often lack:
(1) a legal system that enforces contracts and validates(support) property rights;
(2) a stable and trustworthy currency;
(3) an infrastructure* of roads and utilities that results in low transport and
communication costs so as to facilitate inter-regional trade;
(4) a well-developed and efficiently regulated system of banking and insurance,
with broad access and with formal credit markets that select projects and
allocate loanable funds on the basis of relative economic profitability and
enforce rules of repayment;

*Infrastructure: Facilities that enable economic activity and markets, such as

transportation, communication and distribution networks, utilities, water, sewer ‫الصرف‬
‫الصحي‬, and energy supply systems.

What other aspect of underdeveloped market 78

 Cont. 10.Underdeveloped Markets

• (5) substantial market information for consumers and producers about prices,
quantities, and qualities of products and resources as well as the
creditworthiness of potential borrowers; and

• (6) social norms ‫ األعراف واألخالقيات االجتماعية‬that facilitate successful long-term

business relationships.

The last commonality : Lingering(Permanent) Colonial Impacts and Unequal International Relations
79
 11.Lingering(Permanent‫ )دائم‬Colonial Impacts and Unequal International
Relations
• Colonial Legacy ‫ التراث االستعماري‬Most developing countries were once colonies
‫مستعمرات‬of Europe or other foreign powers, and institutions created during the colonial
period often had pernicious(harmful) effects on development that in many cases have
persisted to the present day.

• External Dependence Relatedly, developing countries have also been less well organized
and influential in international relations, with sometimes adverse consequences for
development. For example: Agreements within World Trade Organization (WTO) and its
predecessors ‫ أسالف‬concerning matters such as: agricultural subsidies in rich countries
that harm developing country farmers and one-sided regulation of intellectual property
rights have often been relatively unfavorable to the developing world and have persisted
to the present day.

80
So the conclusion….is
 The Conclusion is

• The position of developing countries today is in many important ways

significantly different from that of the currently developed countries when
they embarked(start) their era of modern economic growth.

• So the question is : how low-income countries today differ from developed

countries in their earlier stages?

So how low-income countries today differ from developed countries in their earlier stages? 81
 2.5 Are Living Standards of Developing and Devolved Nations
Converging?
• At the dawn of the industrial era*average real living standards in the richest countries were
no more than 3 times as great as those of the poorest. Today, the ratio approaches 100 to 1.

• As noted by Lant Pritchett**, there is no doubt that today’s developed countries have
enjoyed far higher rates of economic growth averaged over two centuries than today’s
developing countries, a process known as divergence(difference).

*The Industrial Revolution was the transition to new manufacturing processes in Europe and the US, in the period from
about 1760 to sometime between 1820 and 1840

**is an American development economist. He is currently Professor of the Practice of International Development at the Kennedy School of
Government at Harvard University.

What does this term means? 82

 Cont. 2.5 Are Living Standards of Developing and Devolved Nations Converging?

• Divergence: A tendency for per capita income (or output) to grow faster in higher
income countries than in lower-income countries, so that the income gap widens
across countries over time.

• Convergence :The tendency for per capita income (or output) to grow faster in lower
income countries than in higher-income countries so that lower-income countries are
“catching up” over time.

• When countries are hypothesized to converge not in all cases but other things being
equal (particularly savings rates(s), labor force growth(L), and production
technologies), then the term Conditional Convergence is used.

• Relative Country Convergence :The most widely used approach is simply to examine
whether poorer countries are growing faster than richer countries.

Lets see an example of relative convergence 83

 Cont’d….2.5 Are Living Standards of Developing and Devolved Nations Converging?

Period China Average Income Congo Average Income

1980 3% of US 5% of US
2007 14% of US 1% US

But globally, evidence for relative convergence is

weak at best, even for the most recent decades.

We can compare also with BRICK countries : BRICS is the acronym coined to associate five major emerging
economies: Brazil, Russia, India, China, and South Africa.
Lets see other example relative Country Convergence 84
 Cont… Relative Country Convergence

• With the recent rapid growth in China, and the acceleration of growth in South Asia as
well, these regions are currently on a path of: relative country convergence.

Period High income OECD South Asia China

income growth income growth income growth
(1990-2003) 24% 56% 196%

• But, due to their relatively low starting income levels, despite higher growth, income
gains were still smaller in absolute amount than in the OECD.

Lets see Figure 2.7 on relative convergence

85
Figure 2.8 Growth Convergence versus Absolute Income Convergence

Lets see the relation between Country Size, Initial Income Level, and Economic Growth 86
Figure 2.7 Relative Country Convergence: World, Developing Countries, and OECD (continued)

87
Cont……Figure 2.7

Lets compare Growth Convergence versus Absolute Income Convergence 88

Figure 2.9 Country Size, Initial Income Level, and Economic Growth

89
Comment on figure 2.9 above is as follows
 Population-Weighted Relative Country Convergence

• The high growth rate in China and India is particularly important because
more than one-third (1/3)of the world’s people live in these two countries.

• This approach frames the question so as to weight the importance of a

country’s per capita income growth rate proportionately to the size of its
population.

-END- 90