What Defines a Developed Economy?
A developed economy is indicative of a nation that exhibits significant economic growth along with a secure environment supporting that growth. Components such as income per capita or per capita Gross Domestic Product (GDP), the extent of industrialization, high standards of living, and substantial technological infrastructure are typically employed to gauge the development level of a country.
Even noneconomic determinants play a role; the Human Development Index (HDI), which integrates data on education levels, literacy rates, and health metrics into a single figure, is also a valuable tool in evaluating an economy’s developmental status.
Enthralling Highlights
- Economies with notable economic growth and security are classified as developed.
- Core determinants include income per capita or per capita GDP.
- A high per capita GDP is essential but not the sole criterion—inequities and poor infrastructure can undermine development status.
- Noneconomic criteria like the Human Development Index are also pivotal in evaluations.
- Globalization aids developing economies in enhancing standards of living and increasing income levels.
The Essence of a Developed Economy
The commonly relied-upon metric for distinguishing between developed and developing economies is per capita gross domestic product (GDP). No fixed threshold exists, but values typically ranging from $12,000 to $30,000 per capita GDP are zones that economists argue over. The United States exhibited a per capita GDP of $65,111 in 2019.
However, high GDP alone cannot affirm a nation’s developed status. Other factors like standard of living, measured via indicators like infant mortality rates and life expectancy, offer additional evidence—developed nations typically see fewer than 10 infant deaths per 1,000 live births and life expectancies of over 75 years.
Illustrative Case
Take Qatar, for instance—despite having one of the highest per-capita GDPs globally in 2021 at around $62,000, it isn’t deemed a developed economy by the United Nations, due to severe income inequality, lack of comprehensive infrastructure, and limited educational access for its broader population. Developed economies encompass nations like the United States, Canada, and the bulk of western Europe including the UK and France.
The Impact of the Human Development Index
The Human Development Index (HDI) by the United Nations assesses diverse criteria—literacy rates, educational accessibility, and healthcare access—and summarizes the findings into a standardized figure between zero and one. Developed economies typically score above 0.8 on the HDI.
In the 2020 HDI rankings, Norway topped the chart at 0.957. The top ten nations included Norway, Ireland, Switzerland, Hong Kong, Iceland, Germany, Sweden, Australia, Netherlands, and Denmark, while the United States ranked 17th at 0.926. Niger recorded the lowest HDI score at 0.394.
Developing Economy Dynamics
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Related Terms: emerging economies, industrialization, economic security.
References
- United Nations. “World Economic Situation and Prospects, 2021”, Page 126.
- United Nations. “Latest Human Development Index Ranking”.
