2. Development Gap
Development Gap refers to the widening difference in levels of development between the
world’s richest and poorest countries.
In order to have a better understanding of these development gaps,Economists have broadly
divided the process of Economic development in to 3 stages:
1. The preparatory stage
2. The take-off stage
3. The stage of self sustained growth
3. The Development gap and income distribution in the world economy
The worlds income is distributed extremely unequally between nations and people.
There are many ways of classifying these divisions in the world economy:
1. North-south divide
it is a very basic level
There is the division between rich industrialized countries, mainly concentrated in the northern
hemisphere and poorer non- industrialized countries in the southern hemisphere.
2. Division between continents
There is division between the developed continents of Europe and North America on the one
hand, and the continents of Asia, Africa and Latin America on the other.
4. 3. World bank
It was established by Bretton woods Agreement in 1944 as a development agency to
lend to poor countries,
Classifies these countries in its annual world Development Report into Three board
catergories:
1. Low –income countries
2. Middle –income countries - again split into
* lower middle-income
* Upper middle-income
3. Highincome countries
5. For Example: The level of per capita income in 2007 for all countries
# low income countries containing nearly one billion people – average
level of income per head is only $484 per annum.
#lower to middle income – containing 3.6 billion people – level of per
capita income is $1,832 per annum.
#High income countries containing $38,195.
As a result, * The poorest country is Burundi with $124.
* The richest country is Norway with $82,815.
7. Measures of Development gap
The Measurement of Development gaps between the developed countries and the
developing countries is not very Easy . Some of the measures are :
1. The Range or Absolute income gap
2. Relative income gap
3. Standard deviation
4. Coefficient of variation
5. Gini ratio
8. 1. The Range or absolute income gap method:
One of the measure is range or absolute income gap between the richest and poorest countries.
The absolute method measure the difference in the per capita income of developed and developing
countries.
After a period of Economic development,if there is a decrease in the difference in the per capita
income of those countries,the development Gap is getting narrowed.
If there is a increase in the difference in the per capita income of those countries, the development
gap is getting widen.
9. 2. The Relative income gap method
The relative income gap method,which is the ratio of the richest country to the poorest country.
According to the Relative method,if the gap is to narrow down the relative position of the
developing countries must improve.
3.The standard deviation:
It is a well known statistical measure of dispersion is the standard deviation, which measures the
average sum of the squared deviation of each country per capita income from the average
income for all countries.
It is also called squared root of the variance.
Standard deviation denoted by SD
SD is measured as:
Yi is the per capita income of country i
10. Y=Average level of per capita income of the whole sample
n=number of countries
4.The co-efficient of variation
The relative measure of standard deviation (SD) is called co-efficient of variation.
It is defined as the ratio of standard deviation (SD) to mean deviation expressed in percentage % .
The co-efficient of variation is denoted by CV.
CV = SD/mean ×100
Where,CV is the co-efficient of variation.It is independent units of measurement.
SD is the standard deviation.
There is a positive correlation between the mean and standard deviation.
11. 5.Gini Ratio
The Gini ratio is derived from the Lorenz curve.
Lorenz curve is used to measure the inequality in the distribution of income.
Three measures of inequality need to be clearly distinguished in using the Gini
ratio.
1.Thereis lnternational inequality,with each country treated as a single unit and given
equal weight in the measure.
2.There is international inequality ,with each country treated as a single unit but
weighted by its size of population.
12. Reference
Development Economics [9th Edition] - THIRLWALL
3.There is World or global Inequality,which takes the individual person or household,not the
country,as the unit of measurement,and therefore takes into account not only difference in
income between countries,but also between people within countries
