Differences in economic development between countries
Economic development
- Economic development - a broad improvement in living standards and economic well-being, including income, health, education, opportunity and structural change.
- Productivity - output produced per unit of input, such as output per worker per hour.
- Saving - income not spent on current consumption.
- Investment - spending on capital goods, education or other capacity that can raise future production.
Countries differ because development factors reinforce one another. The same influence can be both a cause and a consequence: education raises productivity and income, while higher income and tax revenue make better education easier to finance.
The named international differences
| Difference | How it affects development | How development can affect it |
|---|---|---|
| Income | Higher income allows more consumption, saving, health and education. | Higher productivity and better jobs raise income. |
| Productivity | More output per worker supports higher wages, profit, competitiveness and tax revenue. | Education, health, capital and infrastructure raise productivity. |
| Population growth | Rapid growth can enlarge the labour force but may spread income and public services more thinly. | Education, healthcare, urbanisation and security often reduce birth and death rates. |
| Size of economic sectors | Heavy dependence on primary products can create unstable export income; manufacturing and services may add more value. | As income and productivity rise, labour often moves from agriculture into industry and services. |
| Saving and investment | Saving can finance capital, technology and infrastructure; investment raises future capacity. | Higher and more secure income makes saving easier and attracts investment. |
| Education | Skills raise employability, productivity, health knowledge and ability to use technology. | Higher tax revenue allows wider, better-quality schooling. |
| Healthcare | Healthy workers are more productive; lower infant mortality and longer lives improve welfare. | Higher income funds sanitation, staff, medicine and hospitals. |
| Natural resources | Resources can provide energy, inputs, exports and government revenue. | Development supplies technology and institutions to use resources efficiently and sustainably. |
Primary, secondary and tertiary sectors
- Primary sector - activities that extract or harvest natural resources, such as farming, fishing and mining.
- Secondary sector - activities that manufacture or construct goods.
- Tertiary sector - activities that provide services, such as transport, retail, finance, healthcare and education.
A large primary sector is not automatically a sign of low development, and natural resources can support high incomes. The issue is often low productivity, limited processing and dependence on volatile commodity prices. Moving into higher-productivity manufacturing and services can raise value added, but it requires skills, capital, infrastructure and markets.
Natural resources: opportunity and risk
| How resources may help | Why resources may not create development |
|---|---|
| Export revenue, jobs, energy and tax income can finance infrastructure, education and health | Prices may be unstable; resources may be depleted; profits may leave the country |
| Resource-based industries can support suppliers and processing | Corruption, conflict, weak institutions or unequal ownership may concentrate gains |
| Foreign investment may bring capital, skills and technology | Pollution and environmental damage may reduce health and future production |
A* judgement: Natural resources are neither necessary nor sufficient for development. Their effect depends on productivity, ownership, institutions, investment of revenue and environmental management.
A reinforcing development cycle
Improved education and healthcare -> healthier, more skilled workers -> higher productivity -> higher wages, profit and tax revenue -> more saving, investment and public services -> further improvements in productivity and living standards.
The reverse cycle can trap a country: low income -> little saving and tax revenue -> weak capital, schools, health and infrastructure -> low productivity -> low income. External finance can help, but only when projects are productive and debt remains manageable.
Avoid stereotypes: Countries do not follow one fixed path. Compare evidence, identify the strongest linked causes and explain why the effect may differ by institutions, population structure, geography and policy.