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. The last section examines rent seeking and corruption and their relationships to state weakness and failure. Subsequent chapters will 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-to middle-income countries), and then decreasing (from middle-to high-income countries). Even so, the proportion of the population in poverty drops as per-capita income increases (see Chapter 6).

Political Framework

VARYING POLITICAL SYSTEMS

In 2000–01, Freedom House (2002) ranked about one-fourth, 34 of 137 LDCs, as free, that is, enjoying political rights and civil liberties. Political rights mean not just a formal electoral procedure but that “the voter [has] the chance to make a free choice among candidates … and candidates are chosen independently of the state.” Civil liberties implies having rights in practice, and not just a written constitutional guarantee of human rights.