The Problems of Development Gap between Developed and Developing Nations: Is There Any Sign of Convergence?

The Problems of Development Gap between Developed and Developing Nations: Is There Any Sign of Convergence?

Debashis Mazumdar (Bangabasi College, India)
DOI: 10.4018/978-1-5225-0215-9.ch002
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Abstract

The persistently large income gap between the Developed Countries (DCs) of the North and relatively Less Developed and Developing Countries (LDDCs) of the South is one of the most notable features of the international community over the last few decades. Such large disparities in income are paralleled by huge gaps in other non-monetary indicators of well being. Different research works in this field have indicated that the average annual growth rate of per capita income in LDDCs has been faster compared to that in DCs particularly since early 1990s indicating a sign of convergence in the growth process. However, the absolute gap between the DCs and LDDCs in terms of per capita GNP has widened over years. In this chapter, an attempt has been made to indicate the pattern of ß-convergence and s- convergence in income growth between DCs and LDDCs during 1960-2012. The study observes that there remains a definite indication of ß and s convergence in the growth rate of real PCI across different groups of nations particularly during the period 2000-2013.
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Objectives

The study is essentially intended to enquiring the relevance of the convergence projection of the Neo-Classical growth doctrine among the countries in terms of per capita income (PCI) in the long-run. Hence, in this paper, our main objective is to find out whether the growth rates of per capita income in the DCs and the LDDCs have converged over time and whether that growth convergence has been accompanied by a substantial reduction in North–South gap in living standards over the last few decades or not.

So, we want to focus our attention to different aspects of ‘development divergence’ in the backdrop of ‘growth convergence’. That is, have the poor countries been catching up with rich countries in recent times? Is such a convergence in the process of economic growth necessarily implying a convergence in the process of economic development across nations? This is an important issue in development economics because the polarization of the world into two disparate components does not bode well for international peace or prosperity, especially in the long-run. Conversely, our objective is to get an answer to the question that can we expect an increasingly more equitable distribution of resources among the nations to contribute substantially toward the formation of a more stable international order? This paper is but a modest attempt to review these aspects.

Key Terms in this Chapter

? Convergence: It is defined by a negative correlation between the growth rate of per capita income and the initial income level. This convergence is usually conditional because countries have different structural characteristics (propensity to save, population growth rate, technological progress, etc .).

Developed Countries: The countries with high per capita income as per World Bank Classification and the countries with very high and high human development as per UNDP classification can be considered as developed countries. In most cases, it is observed that the countries with high per capita income are also the countries with high human development.

Middle Income Countries: As per World Bank classification, middle-income economies are those with a GNI per capita of more than $1,045 but less than $12,746; Lower-middle-income and upper-middle-income economies are separated at a GNI per capita of $4,125 in 2013.

Developing Economies: The low-income and middle-income economies, as per World Bank classification, are sometimes referred to as developing economies.

Low-Income Countries: Each year on July 1, the World Bank revises analytical classification of the world's economies based on estimates of gross national income (GNI) per capita for the previous year. The updated GNI per capita estimates are also used as input to the World Bank's operational classification of economies that determines lending eligibility. As of 1 July 2014, low-income economies are defined as those with a GNI per capita, calculated using the World Bank Atlas method, of $1,045 or less in 2013.

s Convergence: When the dispersion of real per capita income across a group of economies falls over time, it signifies s -convergence.

High Income Countries: As per World Bank classification, high-income economies are those with a GNI per capita of $12,746 or more in 2013.

Least Developed Countries: As per UN definition, the threshold for considering a country as least developed country is based on a three-year average of the level of GNI per capita, which the World Bank uses for identifying low-income countries. The threshold for inclusion in this category is $1,035 in 2015.

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