Characteristics of countries at different levels of development

Countries at different levels of development often differ in population growth, population structure, income distribution, employment patterns and international trade.

→ These characteristics are linked to differences in income, healthcare, education, technology, infrastructure and government policies.

→ However, countries at the same level of development may have different characteristics.

Population Growth and Structure

Population growth refers to a change in the number of people living in a country over a period of time.

Population size and structure influence the availability of labour, demand for goods and services, government spending and economic development.

Birth Rate

The birth rate is the number of live births per 1,000 people in a population per year.

$\text{Birth rate}=\frac{\text{Live births in a year}}{\text{Total population}}\times1000$

Example:

A country has a population of 5 million and records 75,000 live births in one year.

$\text{Birth rate}=\frac{75,000}{5,000,000}\times1000$

$=\boxed{15\text{ births per 1,000 people}}$

Causes of a high birth rate

Limited access to contraception and family-planning services.
Lower levels of female education and employment opportunities.
Cultural preferences for larger families.
High infant mortality, which may encourage parents to have more children.
Limited access to pensions and social security, making children a source of support in old age.
An agricultural economy where children may contribute to family work.

Causes of a low birth rate

Greater access to contraception and family planning.
Higher female education and employment.
Higher costs of housing, childcare and education.
Later marriage and delayed parenthood.
Greater access to pensions and other forms of old-age support.
Urban lifestyles and changing preferences towards smaller families.

Economic effects of changes in birth rate

→ A high birth rate → larger future labour force → potentially greater productive capacity.

However:

→ More children → higher demand for schools, healthcare and housing → greater pressure on government resources.

A low birth rate may reduce pressure on education and other services, but it can eventually lead to an ageing population and labour shortages.

Death Rate

The death rate is the number of deaths per 1,000 people in a population per year.

$\text{Death rate}=\frac{\text{Deaths in a year}}{\text{Total population}}\times1000$

Example:

A country has a population of 8 million and records 64,000 deaths in one year.

$\text{Death rate}=\frac{64,000}{8,000,000}\times1000$

$=\boxed{8\text{ deaths per 1,000 people}}$

Causes of a high death rate

Poor access to healthcare and medicines.
Malnutrition and unsafe drinking water.
Poor sanitation and inadequate housing.
Infectious diseases and epidemics.
War, natural disasters and environmental hazards.
An ageing population, which may increase the number of deaths per year.

Causes of a low death rate

Better healthcare and medical technology.
Improved nutrition and sanitation.
Access to clean water and vaccination.
Higher living standards and safer housing.
Better disease prevention and public-health services.

Important point: A developed country may have a relatively high crude death rate because it has an older population. This does not necessarily mean its healthcare system is worse. The age structure of the population must also be considered.

Infant Mortality Rate

The infant mortality rate is the number of deaths of children under one year of age per 1,000 live births in a given year.

Example:

A country records 120,000 live births and 2,400 deaths of infants under one year.

$\text{Infant mortality rate} =\frac{2,400}{120,000}\times1000$

$=\boxed{20\text{ deaths per 1,000 live births}}$

Causes of high infant mortality

Inadequate prenatal and maternal healthcare.
Poor nutrition during pregnancy and infancy.
Lack of vaccination and medical treatment.
Unsafe water and poor sanitation.
Premature births and complications during delivery.
Poverty and limited access to hospitals.

Causes of low infant mortality

Better maternal and child healthcare.
Skilled assistance during childbirth.
Improved nutrition and vaccination.
Access to clean water and sanitation.
Higher parental education and awareness.

Why it matters

→ Lower infant mortality → more children survive infancy → improved health and living standards.

→ Falling infant mortality may also contribute to lower birth rates over time, as parents become more confident that their children will survive.

Net Migration

Migration is the movement of people from one place to another to live.

Immigration: people enter a country to live.
Emigration: people leave a country to live elsewhere.

Net migration is the difference between immigration and emigration.

$\text{Net migration}=\text{Immigration}-\text{Emigration}$

Example:

A country receives 300,000 immigrants and has 180,000 emigrants in one year.

$\text{Net migration}=300,000-180,000$

$=\boxed{+120,000}$

The country experiences positive net migration, increasing its population by 120,000 people through migration.

Causes of immigration

Higher wages and better employment opportunities.
Better healthcare, education and living standards.
Political stability and personal safety.
Family reunification.
Demand for skilled and unskilled workers.

Causes of emigration

Unemployment or low wages.
Conflict, political instability or persecution.
Poor access to essential services.
Better opportunities abroad.
Environmental problems and natural disasters.

Economic effects of net migration

Positive net migration:

→ Larger labour force → potentially higher output and tax revenue.

→ Immigration of skilled workers → improved productivity and access to specialised skills.

However:

→ Rapid population growth → greater demand for housing, transport and public services.

Negative net migration:

→ Fewer workers available → possible labour shortages and lower productive capacity.

→ Emigration of skilled workers → loss of human capital, sometimes called brain drain.

However, emigrants may send remittances to families in their home country, supporting consumption and living standards.

Natural Population Growth and Total Population Change

Natural population growth occurs when births exceed deaths.

$\text{Natural population growth rate} =\text{Birth rate}-\text{Death rate}$

When birth and death rates are expressed per 1,000 people, divide their difference by 10 to convert it into a percentage rate.

Example:

Birth rate = 18 per 1,000

Death rate = 7 per 1,000

$18-7=11\text{ per 1,000}$

$\text{Natural growth rate}=\boxed{1.1\%}$

Total population change also includes net migration.

→ Births greater than deaths and positive net migration → population increases.

→ Deaths greater than births and negative net migration → population decreases.

Population Structure

Population structure refers to the composition of a population according to characteristics such as age and sex.

Developing economies may have:

A relatively large proportion of children and young people.
A high dependency ratio in some cases.
A need for greater spending on schools, childcare and healthcare.
A potentially large future workforce if young people receive appropriate education and training.

Developed economies may have:

A higher proportion of older people.
Lower birth rates and longer life expectancy.
Greater spending pressure on pensions, healthcare and elderly care.
Potential labour shortages if the working-age population declines.

A high dependency ratio may place pressure on workers and government finances, although its actual impact depends on employment rates, productivity and public policy.

Optimum Population

Optimum population is the population size at which output or income per person is maximised, given the available resources, technology and organisation.

Underpopulation: the population is below the optimum level.
Optimum population: the population produces the highest output or income per person.
Overpopulation: the population exceeds the optimum level, given existing resources and technology.

Underpopulation

→ Too few workers relative to available resources → some land, capital or natural resources remain underused → potential output is not fully achieved.

Overpopulation

→ Too many people relative to available resources and productive capacity → pressure on housing, food, water, transport and public services → possible lower income per person.

How optimum population may change

→ Investment in machinery and infrastructure → more resources available per worker → optimum population may increase.

→ Improvements in technology and education → higher productivity → a larger population may be supported at a given living standard.

→ Resource depletion or environmental damage → fewer usable resources → optimum population may decrease.

Limitations of the concept

The optimum population is difficult to calculate accurately.
It depends on technology, resources, capital and workers’ skills.
It may change over time as productivity and preferences change.
Maximising income per person does not necessarily maximise happiness, equality or environmental sustainability.

Level of Urbanisation

Urbanisation is an increase in the proportion of a country’s population living in urban areas.

$\text{Urbanisation rate} =\frac{\text{Urban population}}{\text{Total population}}\times100$

Example:

A country has an urban population of 24 million and a total population of 40 million.

$\text{Urbanisation rate} =\frac{24}{40}\times100$

$=\boxed{60\%}$

Causes of urbanisation

Rural-to-urban migration for employment.
Industrialisation and the growth of service industries.
Better access to education, healthcare and transport.
Mechanisation of agriculture, reducing demand for farm labour.
Natural population growth in urban areas.
Expansion of towns and the reclassification of rural settlements as urban.

Advantages of urbanisation

Workers can access a wider range of jobs.
Firms benefit from larger markets and access to labour.
Concentration of firms and workers may create economies of scale.
Shared infrastructure may reduce the cost of providing some services.
Greater access to schools, hospitals and financial services.

Disadvantages of urbanisation

Overcrowding and housing shortages.
Traffic congestion and air pollution.
Pressure on water supply, sanitation and public transport.
Growth of informal settlements where housing and services are inadequate.
Higher land and housing costs.
Rural areas may lose young and skilled workers.

Important distinction: A high urbanisation rate does not automatically indicate a high level of development. Rapid urbanisation without sufficient infrastructure and employment can reduce living standards.

Income Distribution

Income distribution refers to how national income is shared among individuals or households within an economy.

More equal income distribution: income is shared more evenly across the population.
More unequal income distribution: a larger proportion of income is received by a relatively small share of the population.

Income inequality is different from poverty. A country may have relatively low average income but an equal distribution, or high average income with considerable inequality.

Measuring Income Inequality

Two important tools for analysing income distribution are the Lorenz curve and the Gini coefficient.

Lorenz Curve Analysis

The Lorenz curve shows the cumulative percentage of total income received by the cumulative percentage of the population, ranked from the poorest to the richest.

To interpret a Lorenz curve:

The horizontal axis represents the cumulative percentage of the population, from poorest to richest.
The vertical axis represents the cumulative percentage of total income received by that population.
The line of perfect equality represents a situation in which each percentage of the population receives the same percentage of income.
The further the Lorenz curve lies below the line of perfect equality, the greater the income inequality.

Example of cumulative income distribution

Cumulative share of population	Country A: cumulative share of income	Country B: cumulative share of income
Poorest 20%	10%	5%
Poorest 40%	25%	15%
Poorest 60%	45%	30%
Poorest 80%	70%	55%
Entire population	100%	100%

Country A has a more equal distribution than Country B because the poorest 80% receive 70% of income in Country A, compared with 55% in Country B.

How to interpret the Lorenz curve in an examination

→ A curve closer to the line of perfect equality indicates a more equal income distribution.

→ A curve further away from the line indicates greater inequality.

→ If one Lorenz curve lies entirely below another, it indicates greater inequality under the same population and income definitions.

→ If two Lorenz curves cross, it may not be possible to rank the countries’ inequality unambiguously using the curves alone.

Gini Coefficient

The Gini coefficient is a numerical measure of income inequality based on the Lorenz curve.

It ranges from 0 to 1 when expressed as a coefficient, or from 0 to 100 when expressed as an index.

Gini coefficient = 0: perfect equality.
Gini coefficient = 1: perfect inequality in the theoretical extreme.
Higher Gini coefficient: greater income inequality.
Lower Gini coefficient: more equal income distribution.

For the standard Lorenz-curve method:

$\text{Gini coefficient}=\frac{A}{A+B}$

Where:

$A$ = area between the line of perfect equality and the Lorenz curve.
$B$ = area below the Lorenz curve.
$A+B$ = total area below the line of perfect equality.

The Gini index is:

$\text{Gini index}=\frac{A}{A+B}\times100$

Calculation example

Suppose:

Area $A=0.18$
Area $B=0.32$

Then:

$\text{Gini coefficient}=\frac{0.18}{0.18+0.32}$

$=\frac{0.18}{0.50}=\boxed{0.36}$

As an index:

$0.36\times100=\boxed{36}$

A Gini coefficient of 0.36 indicates greater inequality than a coefficient of 0.25, but less inequality than a coefficient of 0.50.

Causes of Income Inequality

Differences in education, qualifications and skills.
Differences in productivity and wages.
Ownership of land, property, shares and businesses.
Differences in inheritance and wealth.
Unemployment and underemployment.
Differences in bargaining power and trade union membership.
Discrimination in employment and pay.
Differences in tax rates and welfare payments.
Technological change that raises demand for some skills more than others.

Effects of Income Inequality

Possible disadvantages

Greater poverty among low-income households.
Unequal access to education, healthcare and housing.
Reduced opportunities for social mobility.
Lower consumption by poorer households, potentially reducing aggregate demand.
Social tension and reduced social cohesion.

Possible arguments against assuming all inequality is harmful

Differences in earnings may reward education, risk-taking and innovation.
Higher potential rewards may encourage entrepreneurship and investment.
Income inequality does not always mean that absolute living standards are falling.

The overall effect depends on the extent of inequality, whether basic needs are met and whether people have fair access to opportunities.

Economic Structure

Economic structure refers to the composition of economic activity, including the sectors in which output is produced and workers are employed.

The three main sectors are the primary, secondary and tertiary sectors.

Primary Sector

The primary sector involves extracting or obtaining natural resources.

Examples: agriculture, fishing, forestry, mining and oil extraction.

Characteristics often associated with lower levels of development

A relatively high proportion of employment in agriculture and other primary activities.
Greater dependence on weather and natural conditions in some industries.
Lower productivity where machinery, irrigation and technology are limited.
Greater vulnerability when export earnings depend on a few commodities.

Why the primary sector may employ a large proportion of workers

→ Limited industrial development → fewer manufacturing jobs → many workers remain in agriculture and other primary activities.

However, a country can have a large primary sector and still earn high incomes if it has productive agriculture or valuable natural resources.

Secondary Sector

The secondary sector processes raw materials and manufactures goods. It also includes construction.

Examples: food processing, textiles, car manufacturing, steel production and construction.

Role in development

Creates employment outside agriculture.
Adds value to raw materials.
Can increase productivity through machinery and specialisation.
May generate export earnings.
Can encourage the development of transport, energy and other infrastructure.

Example:

→ Cotton is grown in the primary sector → cotton is made into fabric in the secondary sector → fabric is sold to consumers or exported.

Processing cotton domestically adds value and can create additional employment.

Limitations

→ Manufacturing growth may be limited by inadequate infrastructure, skills, investment or access to markets.

→ Automation may raise output but reduce the number of workers needed for each unit of production.

→ Industrial pollution may reduce environmental quality.

Tertiary Sector

The tertiary sector provides services rather than extracting raw materials or manufacturing goods.

Examples: retail, banking, transport, education, healthcare, tourism, telecommunications and hospitality.

Role in development

Provides essential services to households and firms.
Creates employment in areas such as healthcare, education and finance.
Supports primary and secondary production through transport, banking and communication.
Can generate substantial export earnings through tourism, IT and other services.

Developed economies often have a large tertiary sector because rising incomes increase demand for services and because agriculture and manufacturing can produce more output with fewer workers.

However, a large service sector does not automatically indicate high development. Some low-income economies have many workers in low-paid informal services.

Changes in Employment Composition as Economies Develop

A common pattern is:

Lower level of development

→ A large proportion of workers employed in agriculture and other primary activities.

→ Industrialisation expands manufacturing and construction.

Middle stages of development

→ Employment shifts towards manufacturing and urban services.

→ Productivity and wages may rise as workers move into more productive activities.

Higher level of development

→ A smaller proportion of workers may be required in primary and secondary production because of mechanisation and productivity improvements.

→ A larger proportion work in services, including finance, education, healthcare, technology and professional services.

Important: This is a general pattern, not a rule that every country follows. Some economies develop through services, while others remain major exporters of natural resources.

Employment Composition and Development

Sector	Typical role in development	Possible limitations
Primary	Provides food, raw materials and export earnings	Low productivity or dependence on commodities
Secondary	Processes raw materials, adds value and creates industrial employment	Pollution, capital requirements and automation
Tertiary	Provides essential services and supports other sectors	Informal, low-paid or insecure service employment

When comparing countries, consider both the proportion of workers in each sector and the productivity and quality of employment within that sector.

Pattern of Trade at Different Levels of Development

International trade involves the export and import of goods and services.

The pattern of trade refers to the types of goods and services a country exports and imports, and how these patterns change as the economy develops.

Economies at Lower Levels of Development

Some lower-income economies depend heavily on primary-product exports, such as agricultural products, minerals and fuels.

They may import manufactured goods, machinery, vehicles, medicines and advanced technology.

Reasons

Limited manufacturing capacity.
Lack of capital, skills or infrastructure.
Comparative advantage in particular natural resources or agricultural products.
Dependence on a narrow range of export industries.

Possible disadvantages

Export earnings may fluctuate when world commodity prices change.
Poor harvests or changes in global demand may reduce export revenue.
Dependence on a small number of exports can make the economy vulnerable.
Imported machinery and manufactured goods may be expensive relative to export earnings.

Example:

A country that exports coffee but imports machinery may experience lower export revenue if the world price of coffee falls. It may then find it harder to pay for essential imports.

Economies at Middle Levels of Development

As industrialisation progresses, some economies increase exports of manufactured goods while continuing to export primary products.

They may import machinery, technology, energy and intermediate goods used in production.

Reasons

Greater investment in factories and infrastructure.
Improvements in education and technical skills.
Development of domestic supply chains.
Expansion of export-oriented manufacturing.

Possible advantages

Greater diversification of export earnings.
More industrial employment.
Higher value added through processing.
Increased opportunities to participate in global supply chains.

Possible limitations

Dependence on imported components and technology.
Competition from other manufacturing economies.
Risk of job losses when global demand falls.
Environmental costs from rapid industrialisation.

Economies at Higher Levels of Development

Many higher-income economies export a mixture of sophisticated manufactured goods and services.

Examples include advanced machinery, pharmaceuticals, financial services, software, engineering and professional services.

They may import raw materials, energy, consumer goods and intermediate products.

Reasons

High levels of capital investment and technological development.
Skilled labour and research capabilities.
Developed infrastructure and financial systems.
Established firms and international supply networks.
Greater ability to produce specialised, high-value goods and services.

Possible advantages

Higher value added and potentially greater export earnings.
Diversified exports may reduce dependence on one product.
Knowledge-intensive industries can support productivity growth.

Possible limitations

Some economies remain dependent on particular industries or markets.
Global competition can reduce demand for certain exports.
Higher incomes and production may increase demand for imported resources.
Service exports may be affected by changes in technology, regulation or international demand.

How Trade Patterns May Change with Development

Feature	Lower levels of development	Middle levels of development	Higher levels of development
Exports	Often primary products	Increasing manufactured goods alongside primary products	Often high-value manufactured goods and services
Imports	Machinery, manufactured goods, technology	Machinery, components, energy and technology	Raw materials, consumer goods, components and specialised products
Employment	Often a large primary-sector workforce	Growing manufacturing and urban employment	Often a large service-sector workforce
Main vulnerability	Commodity price fluctuations	Global manufacturing competition and imported inputs	Global demand, technology changes and industry concentration

These are common patterns rather than fixed stages. A resource-rich high-income economy may export large quantities of oil or minerals, while a developing economy may be a major exporter of manufactured goods or services.

Why the Pattern of Trade Matters for Development

Export diversification

→ More types of exports → less dependence on one product or market → potentially more stable export earnings.

Moving into higher-value production

→ Processing raw materials domestically → greater value added → potentially higher wages, profits and tax revenue.

Access to imported capital goods

→ Imports of machinery and technology → higher productivity → increased productive capacity.

Exposure to international competition

→ Greater competition → pressure to improve efficiency and quality.

However, less competitive domestic firms may lose market share or close, causing unemployment in affected industries.

Dependence on imported essentials

→ Lower export earnings or higher import prices → increased pressure on the balance of payments.

Overall conclusion: As economies develop, employment often shifts from primary activities towards manufacturing and services, while exports may become more diversified and higher in value. Nevertheless, the impact on living standards depends on productivity, job quality, income distribution, infrastructure and the ability to manage risks from international trade.