7/30/2019 introduction to eop

1/3

Characteristics of developing countries

Developing countries are also called poor countries. Sometimes they are often called underdevelopedeconomics. According to the UN criteria, countries with less than $400 level of per capita incomecountries are designated as low income countries and countries with less than $750 per capita income ascalled less developed economics. These economies are the mid-point between developed andundeveloped economy. It has got the features of both the developed and undeveloped economies.Developing economies refer to India, Pakistan, Brazil, Indonesia and etc.The following are the main characteristics of developing countries:

1-Dualistic Economy

All the sectors of economy have not been developed in developing countries. Employment opportunitiesor activities exist in urban areas whereas traditional production method is used in rural areas.Employment opportunities are less. Hence, these countries have dualistic economy which results in

various problems with formulating economic policies.

2-Vicious Circle of Poverty

Developing countries are poor. They have low per capita income. Low income means less saving, that isless capital and less investment. Low investment leads to less production that means low income. Thevicious circle of poverty is complete. It proves that a poor country is poor because it is poor. It is betterunderstood from the following relation:

Low Investment-Low Production-Low Capital-Low Investment-Low Production-Low Income

3-Lack of Basic Infrastructures

The factors that help for development are called infrastructures. Good road system, highways, telephone,services, big dams and canals, banks and financial services are some examples of the necessaryinfrastructures.

4-Lack of Capital and Technology

Capital deficiency is another common problem of developing countries. Because the countries are poor,they save less which results in low capital formation. They possess less investment capital. In additiontheir existing technology is old and unproductive.

5-Lack of Industries and Enterprises

The industrial sector in developing countries is at the primary stage of development. Its contribution toGDP is less than 10% employing 2 to 4% of the labor force. Industrial growth is very slow.

6-Underutilized Natural Resources

Most of the developing countries are rich in natural resources. However, their exploration and exploitationis limited. Sometimes, foreign companies control them. Generally, raw products are exported at lowprices.

7/30/2019 introduction to eop

2/3

7-General Poverty

Developing countries are poor. By definition, GDP and Per Capita Income are at low level. General livingstandard of people in these countries is very low. Poverty is visibly disturbing every aspect of life. Generalhealth services for people are insignificant. The life expectancy at birth does not exceed 60 years.

8-Socio-cultural Characteristics

Different kinds of social groups reside in a country. They differ in terms of religion, castes, and creeds,cultures and customs, languages and beliefs, etc. Such social and cultural values have deep impact in theeconomy of a nation.

9- Illiteracy:

The important feature of developing economy is its illiteracy. Though efforts are made to eradicateilliteracy but there is still considerable illiteracy and unskilled labor.

10- Agriculture, the main occupation:

Most under developed countries are predominantly agricultural. A great maturity of population is engagedin agriculture and allied occupations. This excessive dependence is due to the fact that non-agriculturaloccupations have not grown at a rate compared with the increase in population. Hence, the growing laborforce has to be absorbed in agriculture sector. Major source of income in case of undeveloped anddeveloping economies is agriculture. A large section of population earns living through agriculture.

Agriculture is the primary sector of these economies

11- Poor health care

The percentage of a countrys budget that is allocated to health services largely determines the standardof health care in that country. If we consider the average percentage of 4% in developing countries asopposed to the 96% in developed countries as shown on the graph on page 12, it is easy to understandwhy the hospitals in many poor countries are in such a shocking condition. There are simply not enoughdoctors and facilities for the number of inhabitants of the countries.

12- Low standard of educationEducation and training determine the standard according to which the population of a country functionsand produces goods and services. One must remember that there are approximately 80 million children inthe poor South who do not go to school at all, therefore one can understand why poor countries are facedwith unemployment. Without the necessary training people cannot be prepared for a vocation. Thismeans that such people have no chance of improving their own conditions.

13-UnemploymentHave you seen this somewhere? Over-population and low literacy are some of the main causes ofunemployment. Everybody would like to have a job in order to make money to earn a living. People whoare unemployed cannot be self-supporting and therefore they are unable to make any contribution to theeconomy of the country.

14-OverpopulationThe population grows much faster in developing countries than in developed countries. Remember that itis not the population alone that will increase at the same time there is a great increase in the need for

7/30/2019 introduction to eop

3/3

food, educational opportunities, housing, energy and job opportunities. Various social, political, economicand ecological problems also increase at the same rate.

15-Control of Govt.:

In poor countries, wealthy persons, landlords and elite class not only control the Government but alsothey have full control over all the major sectors of the economy. This rich class is not interested to solvethe problems of the poor for their welfare but make government policies for their own improvement.

16-Inflation:

High rate of inflation in poor nations causes economic backwardness. Due to high level of price,

purchasing power and saving of the consumers tend to decrease.

17-Market Imperfections:

The market imperfections are found in developing countries. It is due to imperfection of markets, theproductive efficiency in these countries is low and resources are misallocated.