Comparativ

e Economic
Developme
nt
Learning Outcomes:

At the end of this lesson, the students should be

able to:
a. Distinguish the developing countries
from developed countries in respect to the
development parameters;
b. Identify the basic indicators of
development;
c. Understand the role of GDP, GNI, and
HDI to economic development.
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10 Important
Common
Features of
Developing
Countries
 These areas are the following:
Lower
Lower Higher levels Higher
levels of
levels of of inequality population
living and
human and absolute growth
productivit
capital poverty rates
y

Greater social Larger rural populations

Lower levels of
fractionalizatio but rapid rural-to-urban
industrialization
n migration

Lingering colonial
Underdevelope
Adverse impacts such as poor
d financial and
geography institutions and often
other markets
external dependence.
Defining the Developing World
 The most common way to define the
developing world is by per capita
income.
 International agencies like Organization for
Economic Cooperation and Development
(OECD) and the United Nations, offer
classifications of countries by their
economic status.
 The best-known system is the World
Bank of the International Bank for
Reconstruction and Development (IBRD).
World Bank is an organization
known as an “international
financial institution” that
provides development funds to
developing countries in the
form of interest-bearing loans,
grants, and technical
assistance.

 Inthe World Bank’s

classification system, 213
economies with a population
of at least 30,000 are ranked
by their levels of gross
Classification of Economies by World
Bank
The Philippines remained
as a lower-middle
economy under the World
Bank's latest classification
as the country's gross
national income (GNI) per
capita at $3,950 in 2022
fell within the bracket for
lower-middle income
economies of $1,136 -
$4,465 which was raised
 How does the World Bank
classify countries?
Income is measured using gross
national income (GNI) per capita, in
U.S. dollars, converted from local
currency using the World Bank Atlas
method. Estimates of GNI are obtained
from economists in World Bank country
units; and the size of the population is
estimated by World Bank demographers
from a variety of sources, including the
Some of the countries classified by
the World Bank for the year 2022
High-Income Economies ($ 13,846 or more)
Canada, Singapore, United States, Switzerland, UAE,
Spain, etc.
Upper-Middle Income Economies ($ 4,466 to $ 13,845)
China, Thailand, South Africa, Indonesia, Iraq, Brazil, etc.
Lower-Middle Income Economies ($1,136 to $4,465)
India, Philippines, Cambodia, Vietnam, Morocco, Ghana,
etc.
Low Income Economies ($1,135 or less)
Afghanistan, Ugandan, Sudan, Yemen, Rep., Ethiopia, etc.
Reference:
 The United Nations
Development Programme
(UNDP) classifies countries
according to their level of human
development, including health and
education attainments as low,
medium, high, and very high.
 For the least developed
countries, they are classified as
such if they meet each of the three
criteria: low income, low human
 Basic Indicators of
• Development
Real income per capita –
adjusted for purchasing power;
• Health – as measured by life
expectancy, undernourishment,
and child mortality;
• Educational attainments – as
measured by literacy and
schooling.
 Gross National Income
 The most common measure of the overall
level of economic activity.
 The total amount of money earned by a
nation’s people and businesses, both inside
and outside the country’s or region’s
borders.
 Compensation paid to resident employees by
foreign firms and income from overseas
property owned by residents is added to
GDP, while compensation paid by resident
firms to overseas employees and income
Gross Domestic Product

 Thetotal final output of goods

and services
−Produced by the country’s
economy within the country’s
territory,
−By residents and nonresidents,
regardless of its allocation
between domestic and foreign
claims.
Purchasing Power Parity
 An economic theory that compares
different countries’ currencies through
a “basket of goods” approach.
 According to this concept, two
currencies are in equilibrium ----
when a basket of goods is priced the
same in both countries, considering
the exchange rates.
Importance of Purchasing
Power Parity
 It bridges the gap between developed and
developing nations.
For example, the 2017 purchasing power
parity for the gross domestic product for the
Philippine peso was 19.385 with reference to the
U.S. dollar. This means that 19.385 pesos worth
of commodities in the Philippines is equivalent to
$1 worth of comparable commodities in the U.S.,
on average. When converted based on
purchasing power parities from 2011 for the
commodities consumed by the households, the
international poverty threshold of $1.90 a day
buys the same volume of commodities across all
 Health and
Education as
Indicators of
Development
 Health and
Education as
Indicators of
Development
 Life
Expectancy –
the number of
years a person is
expected to live
based on the
statistical
average.
Health and Education as Indicators of
Development
 Undernourishment – means consuming too
little food to maintain normal levels of activity;
the problem of hunger.
Health and Education as Indicators of
Development
 High fertility – can be both a cause and a
consequence of underdevelopment, so the birth rate
is reported as another basic indicator.
Health and Education as
Indicators of Development
 Literacy

– the fraction
of adult males
and females
reported or
estimated to have
basic abilities to
read and write.
Human Development Index
 Anindex measuring national socioeconomic development,
based on combining measures of education, health, and
adjusted real income per capita.
 Ranksthe country on a scale of 0 (lowest human
development) to 10 (highest human development) based
on three goals:
1. Long and Healthy Life
2. Knowledge
3. Decent Standard of Living
a. Diminishing Marginal Utility – the concept
that the subjective value of additional consumption
lessens as total consumption becomes higher.
 Significance of HDI
 Has made a major contribution to improving
our understanding of what constitutes
development;
 Classifies which countries are experiencing
development and which are not;
 Identify also whether various significant
groups within that country are participating
in that development; and
 Allows the nations to take a broader
measure of their development performance.
 Let’s Check!
Choose the letter of the correct answer.
1. Which organization provides
development funds to developing
countries in the form of interest-bearing
loans, grants, and technical assistance?
a. International Bank c. World
Bank
b. Commercial Bank d. Central
Bank
Let’s Check!
Choose the letter of the correct answer.
2. The Philippines is classified by the
World Bank as ______.
a. Low Income
b. Lower-Middle Income
c. Upper-Middle Income
d. High Income
Let’s Check!
Choose the letter of the correct answer.

3. The following are the basic

indicators of development, EXCEPT:
a. Real Income per capita
b. Educational Attainment
c. Health
d. Standard of living
Let’s Check!
Choose the letter of the correct answer.
4. Which indicator of development
refers to the number of years a
person is expected to live?
a. Life Expectancy
b. Undernourishment
c. High Fertility
d. Literacy
Let’s Check!
Choose the letter of the correct answer.
5. Which of the following measures the
education, health, and adjusted real income
per capita to determine the country’s socio-
economic development?
a. Gross Domestic Product
b. Gross National Income
c. Program for International Student
Assessment
d. Human Development Index
Let’s Check!

TRUE or FALSE.
6. GNI is the total final
output of goods and
services.
Let’s Check!

TRUE or FALSE.
7. GDP is total amount of
money earned by a nation’s
people and businesses, both
inside and outside the
country’s or region’s borders.
Let’s Check!

TRUE or FALSE.
8. Purchasing power
parity pertains to the
“basket of goods”
approach.
Let’s Check!

TRUE or FALSE.
9. Purchasing power
parity bridges the gap
between developing and
developed countries.
Let’s Check!

TRUE or FALSE.
10. HDI determines which
countries are developing but
does not encompass to the
people living in that country,
whether they are participating to
the development or not.
Experiential Exercise

Philippines is classified as Lower-

Middle Income Economy by the
World Bank.
Based on what you’ve learned today,
what key areas does the Philippines
need to focus to accelerate its
economic growth and improve the
standard of living of the Filipinos?