DISCLAIMER: Every reasonable effort is made to ensure the accuracy of the information used in the creation of this
reference material, without prejudice to the existing copyrights of the authors. As an off-shoot of the innumerable
difficulties encountered during these trying times, the authors endeavored to ensure proper attribution of the esteemed
original works, by way of footnotes or bibliography, to their best abilities and based on available resources, despite the
limited access and mobility due to quarantine restrictions imposed by the duly constituted authorities.
We make no warranties, guarantees or representations concerning the accuracy or suitability of the information
contained in this material or any references and links provided here. Links to other materials in our CPOD and CAM
was made in good faith, for non-commercial teaching purposes only to the extent justified for the purpose, and
consistent with fair use under Sec. 185 of Republic Act No. 8293, otherwise known as the Intellectual Property Code of
the Philippines.
PRELIM continuation…
#05 Lecture notes: (for lectures and discussions only)
Book references and suggested readings:
A. Economic Development 12th Edition by Michael P. Todaro and Stephen C. Smith
Copyright 2015,2012,2009 by Michael P. Todaro and Stephen Smith
B. Economics by Paul A. Samuelson and William D. Nordhaus
Copyright 2010,2005,2001 by McGraw Hill Companies, Inc.
C. Issues in Philippine Economic Development
Copyright 1995 by tereso Tulao Jr., Gerardo Largosa, Christina Castill
D. Economics (volume 3)
Philippine Economic and Development Issues
Copyright Gerardo Sicat, 1983, 2003
E. Economic Development in the third World
@Michael P. Todaro
Comparative Economic Development – In Global Context
It is more appropriate to discuss economic development with comparison between different economies in such a way
that we will find whether the policies made have solve the lingering problems of development. Both developed and
developing countries have made substantial progress when it comes to economic development. However, output per
worker, life expectancy, literacy, income, and other indicators of economic development differ much between developed
and developing countries that inequality seems a feature striking enough to acknowledge the presence of contrast in our
global economy. We will begin understanding economic development with the developing countries.
Developing World – classifications of countries
The Organization for Economic Cooperation and Development (OECD) and the United Nations classified countires
according to their economic status. The World Bank ( International Bank for Reconstruction and development) has
provided a classification that ranked economies with population not less than 30,000 according to their levels of Gross
National Income (GNI) per capita: On year 2011 level, A. Low-income countries (LICs) GNI per capita of $1,025 or less;
B. Lower-middle-income countries (LMCs) GNI per capita of $1,026 to $4,035; C. upper-middle-income countries (UMCs)
GNI per capita $4,036 to $12,475; D. high-income OECD countries GNI per capita $12,475 or more.
High income countries with one or two highly developed export but with significant parts of population remain
uneducated, in poor health and social development are viewed as low for country’s income as such classified as
developing. Some high income countries having a lingering economic problems are also classified as developing
countries. Also a special disctinction is made among upper-middle-income or newly high-income economies as newly
industrializing countries (NICs) which are countries at a relatively advance level of economic development with a
substantial and dynamic industrial sector and with close links to the international trade, finance, and investment system.
Another classification is made according to the degree of indebtedness like the World Bank’s classification of severely
indebted, moderately indebted, and less indebted. The United Nations Development Programme (UNDP) classifies
countries based on their level of human development that includes educational attainment and health as low, medium,
high, and very high. Another known classification is the United Nations designation, as of 2012, of the least developed
countries for inclusion a country should meet three criteria: low income, low human capital, and high economic
vulnerability. The classification of countries as developed and developing is a useful guide for analytical purposes.
Basic Indicators of Economic Development
1. Real income per capita adjusted for purchasing power- The Gross National Income (GNI) per capita is the
common measure of the overall level of economic activity and being used as a summary index of the relative
economic well-being of people in different countries. Gross National Income (GNI) per cpita is the total domestic
and foreign value added (portion of a product’s final value that is added at each stage of production) claimed by
a country’s residents without making a deductions for depreciation (the wearing out of equipment and other
FOOTNOTES: Materials contained in the learning packets have been copied and conveyed to you by or on behalf of
Pamantasan ng Cabuyao pursuant to Section IV- The Copyright Act (RA) 8293 of the Philippines Intellectual Property
Code. You are not allowed by the Pamantasan ng Cabuyao to reproduce or convey these materials. The content may
contain works which are protected by copyright under RA 8293. You may be liable to copyright infringement for any
copying and/or distribution of the content and the copyright owners have the right to take legal action against such
infringement. Do not remove this notice.
(5)
DISCLAIMER: Every reasonable effort is made to ensure the accuracy of the information used in the creation of this
reference material, without prejudice to the existing copyrights of the authors. As an off-shoot of the innumerable
difficulties encountered during these trying times, the authors endeavored to ensure proper attribution of the esteemed
original works, by way of footnotes or bibliography, to their best abilities and based on available resources, despite the
limited access and mobility due to quarantine restrictions imposed by the duly constituted authorities.
We make no warranties, guarantees or representations concerning the accuracy or suitability of the information
contained in this material or any references and links provided here. Links to other materials in our CPOD and CAM
was made in good faith, for non-commercial teaching purposes only to the extent justified for the purpose, and
consistent with fair use under Sec. 185 of Republic Act No. 8293, otherwise known as the Intellectual Property Code of
the Philippines.
PRELIM continuation….
#06 Lecture notes: (for lectures and discussions only)
Book references and suggested readings:
A. Economic Development 12th Edition by Michael P. Todaro and Stephen C. Smith
Copyright 2015,2012,2009 by Michael P. Todaro and Stephen Smith
B. Economics by Paul A. Samuelson and William D. Nordhaus
Copyright 2010,2005,2001 by McGraw Hill Companies, Inc.
C. Issues in Philippine Economic Development
Copyright 1995 by tereso Tulao Jr., Gerardo Largosa, Christina Castill
D. Economics (volume 3)
Philippine Economic and Development Issues
Copyright Gerardo Sicat, 1983, 2003
F. Economic Development in the third World
@Michael P. Todaro
forms of capital that is written off to the value of capital stock) of the domestic capital stock ( total amount of physical
goods existing at a particular time that have been produced for use in the production of other goods and services). The
GNI comprises Gross Domestic Product, which is the measure of the total value for final use of output produced by an
economy both by residents and non-residents, plus the difference between the income residents receive from abroad for
factor services (labor and capital) less payments made to nonresidents who contribute to the domestic economy.
The GNI per capita comparisons between developed and less developed countries use the official foreign-exchange
rates to convert national currency figures into U.S. dollars which does not reflect the relative domestic purchasing power
of different currencies. The use of Purchasing Power Parity instead is helpful to make a relative comparison of GNIs and
GDPs as conversion factors. Purchasing Power Parity (PPP) means as the number of units of a foreign country’s
currency required to purchase identical quantity of goods and services in the local developing country market as $1
would buy in the United States. In using PPP nontraded services is lower in developing countries since wages are much
lower and PPP measures of GNI per capita estimates is higher than using foreign-exchange rate as a conversion factor.
Adjustments for differing relative prices across countries are made so as to measure living standards.
2. Health as measured by life expectancy, undernourishment, and child mortality- Life expectancy is the average
number of years newborn childred live subject to mortality risks prevailing for their group at the time of their
birth. Undernourishment means consuming little food to maintain normal levels of activity. Birth rate is also an
indicator since high fertility can be both a cause and a consequence of underdevelopment.
3. Educational Attainment as measured by literacy and schooling – Literacy means a fraction of adult males and
females reported or estimated to have basic abilities to read and write; functional literacy usually is lower than
the estimated numbers.
Diversity and Commonality of Developing Countries
Though developing countries have in common in their historical and economic attributes which led them to experience
development problems that is being studied within same analytical framework in development economics it is proper to
take note of the diversity even within those areas of commonality because different development problems require
different policies and strategies for development.
Ten (10) areas of commonality with diversity in the developing countries
1. Lower levels of Living and Productivity- The wide disparity in income shows large gaps in output per worker
between developed and developing countries. Low level of income leads to low level of investment in education
and health and also in plant and equipment and infrastructure that lead to low productivity and economic
stagnation. Income growth rates varied in different developing countries with rapid growth in East Asia, slow or
even no growth in sub-Saharan Africa, and intermediate growth rates levels in other regions.
FOOTNOTES: Materials contained in the learning packets have been copied and conveyed to you by or on behalf of
Pamantasan ng Cabuyao pursuant to Section IV- The Copyright Act (RA) 8293 of the Philippines Intellectual Property
Code. You are not allowed by the Pamantasan ng Cabuyao to reproduce or convey these materials. The content may
contain works which are protected by copyright under RA 8293. You may be liable to copyright infringement for any
copying and/or distribution of the content and the copyright owners have the right to take legal action against such
infringement. Do not remove this notice.
(6)
DISCLAIMER: Every reasonable effort is made to ensure the accuracy of the information used in the creation of this
reference material, without prejudice to the existing copyrights of the authors. As an off-shoot of the innumerable
difficulties encountered during these trying times, the authors endeavored to ensure proper attribution of the esteemed
original works, by way of footnotes or bibliography, to their best abilities and based on available resources, despite the
limited access and mobility due to quarantine restrictions imposed by the duly constituted authorities.
We make no warranties, guarantees or representations concerning the accuracy or suitability of the information
contained in this material or any references and links provided here. Links to other materials in our CPOD and CAM
was made in good faith, for non-commercial teaching purposes only to the extent justified for the purpose, and
consistent with fair use under Sec. 185 of Republic Act No. 8293, otherwise known as the Intellectual Property Code of
the Philippines.
PRELIM continuation….
#07 Lecture notes: (for lectures and discussions only)
Book references and suggested readings:
A. Economic Development 12th Edition by Michael P. Todaro and Stephen C. Smith
Copyright 2015,2012,2009 by Michael P. Todaro and Stephen Smith
B. Economics by Paul A. Samuelson and William D. Nordhaus
Copyright 2010,2005,2001 by McGraw Hill Companies, Inc.
C. Issues in Philippine Economic Development
Copyright 1995 by tereso Tulao Jr., Gerardo Largosa, Christina Castill
D. Economics (volume 3)
Philippine Economic and Development Issues
Copyright Gerardo Sicat, 1983, 2003
E. Economic Development in the third World by Michael P. Todaro
The common misperception that low-income result from a country’s too small to be self-sufficient or too large to
overcome economic inertia does not hold semblance of reality since there is no correlation between country size
in area or population and economic development. The 12 most populous countries belong either in low-income,
lower-middle-income, upper-middle-income, and high-income countries. While the least populous countries
primarily belong to lower-middle-income and upper-middle income countries.
2. Lower levels of Human Capital – Compared with developed countries, much of the developing countries have
lagged in its average levels of nutrition, health (measured by undernourishment and life expectancy), and
education (measured by literacy). There are complementarities between progress in health and education
example in World Bank, World Development Indicators Data of 1990-2012 Under-5 Mortality Rates, under-5
mortality rates improve as mother’s education levels rise.
3. Higher levels of Inequality and Absolute Poverty- In global scale, the poorest 20% of people receive about 1.5 %
of world income which corresponds to about 1.2 billion people living in extreme poverty on less than $1.25 per
day at purchasing power parity. The large gap in per capita incomes between rich and poor countries shows
enormous global economic disparities. However, it is also necessary to look into the gap between rich and poor
within each developing country. Inequality varies among developing countries with much lower inequality in
Asia. Somehow, we must look into at how income is distributed and who benefits from economic development
and why.
4. Higher Population Growth Rate- Global population increases from just under 1 billion in 1800 to 1.65 in 1900 to
over 6 billion in 2000 to 7 billion in 2012. Rapid population growth started in Europe and other developed
countries but in recent account, most population growth has been confined in the developing world. In
comparison with developed countries which have birth rates near or even below replacement levels (zero
population growth), the low-income developing countries have a very high birth rate. More than 5/6 of all the
people of the world live in developing countries and around 97% of net population growth (births less deaths) in
2012 happened in developing countries. There is a wide range of Crude Birth Rates (the number of children
born alive each year per 1,000 population).
5. Greater Social Fractionalization- Low-income countries usually have social divisions such as ethnic and
linguistic groupings known as Fractionalization. The bigger the ethnic, linguistic, and religious diversity in a
certain country the more chances that internal strife and political instability will occur. Conflict affects the
realization of an otherwise been positive development progress. However, Ethnic or religious diversity do not
necessarily lead to inequality, turmoil, or instability, and the impact of which could not be made. There are
instances of successful economic and social integration of minority ethnic population like in Malaysia and
Mauritius. In the United States, diversity is cited as source of innovation and creativity. In a sense, the
composition of social divisions, ethnic, or religious, or linguistics of a developing country and either or not it will
lead to conflict or cooperation are important determinants of the success or failure of development initiatives.
FOOTNOTES: Materials contained in the learning packets have been copied and conveyed to you by or on behalf of
Pamantasan ng Cabuyao pursuant to Section IV- The Copyright Act (RA) 8293 of the Philippines Intellectual Property
Code. You are not allowed by the Pamantasan ng Cabuyao to reproduce or convey these materials. The content may
contain works which are protected by copyright under RA 8293. You may be liable to copyright infringement for any
copying and/or distribution of the content and the copyright owners have the right to take legal action against such
infringement. Do not remove this notice
(7)
DISCLAIMER: Every reasonable effort is made to ensure the accuracy of the information used in the creation of this
reference material, without prejudice to the existing copyrights of the authors. As an off-shoot of the innumerable
difficulties encountered during these trying times, the authors endeavored to ensure proper attribution of the esteemed
original works, by way of footnotes or bibliography, to their best abilities and based on available resources, despite the
limited access and mobility due to quarantine restrictions imposed by the duly constituted authorities.
We make no warranties, guarantees or representations concerning the accuracy or suitability of the information
contained in this material or any references and links provided here. Links to other materials in our CPOD and CAM
was made in good faith, for non-commercial teaching purposes only to the extent justified for the purpose, and
consistent with fair use under Sec. 185 of Republic Act No. 8293, otherwise known as the Intellectual Property Code of
the Philippines.
PRELIM continuation…
#08 Lecture notes: (for lectures and discussions only)
Book references and suggested readings:
A. Economic Development 12th Edition by Michael P. Todaro and Stephen C. Smith
Copyright 2015,2012,2009 by Michael P. Todaro and Stephen Smith
B. Economics by Paul A. Samuelson and William D. Nordhaus
Copyright 2010,2005,2001 by McGraw Hill Companies, Inc.
C. Issues in Philippine Economic Development
Copyright 1995 by tereso Tulao Jr., Gerardo Largosa, Christina Castill
D. Economics (volume 3)
Philippine Economic and Development Issues
Copyright Gerardo Sicat, 1983, 2003
E. Economic Development in the third World
@Michael P. Todaro
6. Larger Rural Population but Rapid Rural-to-Urban Migration- Economic Development is also characterize by a
shift from agriculture to manufacturing to services. In developing countries, there is a higher share of population
living in rural areas and correspondingly less in urban areas. Rural areas in comparison to urban areas are
poorer and with none or few markets, limited information, and social stratification. An influx of hundreds of
millions of people from rural to urban areas fueled rapid urbanization coupled with its own urban problems.
7. Lower levels of Industrialization and Manufactured Exports- High productivity and incomes associated with
industrialization lead to modernization and economic development as such industrialization become high
national priority of developing countries. The share of employment in agriculture in developing countries is
higher than the developed countries however there is low productivity in agriculture in developing countries
compared to other sectors in their own economies. Developing countries, along with lower industrialization,
have a high dependence on primary exports such as agriculture and mineral exports. In some degree, most
developing countries ventured into manufacturing of goods for exports though with less advanced skills and
technology.
8. Adverse Geography- Primarily, developing countries are located in tropical and subtropical region as such
susceptible more to tropical pests and parasites, endemic diseases, water resource constraints, and extreme
heat. Before colonization, some tropical and sub-tropical regions had a higher income per capita than Europe.
The presence of common and adverse geographic features of developing countries compared to temperate
zones countries suggest that it is advantageous to study tropical and sub-tropical developing countries.
9. Underdeveloped Markets-The legal and institutional foundations for markets in developing countries are
extremely weak as such imperfect markets and incomplete information are prevalent that makes domestic and
financial markets work inefficiently. Some of the aspects of the market developing countries lack: 1. A legal
systems that enforces contracts and validates property rights, 2. S stable and trustworthy currency, 3. An
infrastructure of roads and facilities that facilitates economic activity and markets, 4. A well-developed and
efficiently regulated banking and insurance systems, 5. Substantial market information for consumers and
producers regarding prices, quantities, and qualities of products and resources along with creditworthiness of
potential borrowers, 6. Social norms that facilitates successful long-term business relationships.
10. Lingering Colonial Impacts and Unequal International Relations- Most developing countries are once colonies of
Europe or other foreign powers. Colonial era institutions are often favored or are focused on extraction of wealth
instead of creation of wealth. Colonial history matters not only because of stolen resources but because colonial
powers determine whether the legal and other institutions would encourage either investment by the broad
population or facilitate exploitation of human and other resources for the benefit of the colonizing elite and
create or reinforce inequality. Development-facilitating or development-inhibiting institutions tend to have a long-
life span. Relatedly, developing countries are less well organized and influential in international relations, with
sometimes adverse effects for development.
FOOTNOTES: Materials contained in the learning packets have been copied and conveyed to you by or on behalf of
Pamantasan ng Cabuyao pursuant to Section IV- The Copyright Act (RA) 8293 of the Philippines Intellectual Property
Code. You are not allowed by the Pamantasan ng Cabuyao to reproduce or convey these materials. The content may
contain works which are protected by copyright under RA 8293. You may be liable to copyright infringement for any
copying and/or distribution of the content and the copyright owners have the right to take legal action against such
infringement. Do not remove this notice
(8)
