Scope of the Chapter

This chapter surveys the characteristics of developing countries, with particular emphasis on low-income economies. It looks at income distribution, political framework, family system, relative size of agriculture and industry, technology and capital levels, saving rates, dualism, international trade dependence, export patterns, population growth, labor-force growth, literacy and skill levels, and the nature of economic and political institutions, including governance; democracy and dictatorship; transparency; social capital; the state bureaucracy; tax-collecting capability; a legal and judicial system; property and use rights; statistical services and survey data; and land, capital, insurance, and foreign-exchange markets. Near the end of this chapter, we examine rent seeking and corruption and their relationships to state weakness and failure. Subsequent chapters expand on economic patterns of development.

Varying Income Inequality

As economic development proceeds, income inequality frequently follows an inverted U-shaped curve, first increasing (from low-income countries [LICs] to middle-income countries [MICs]) and then decreasing (from MICs to high-income countries [HICs]). Even so, the proportion of the population in poverty drops as per capita income increases (Chapter 6).