What Is a Developed Economy?

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  • Written By: Marlene Garcia
  • Edited By: Daniel Lindley
  • Last Modified Date: 23 October 2019
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A developed economy defines a nation with a healthy per capita income and low birth rate. Its citizens enjoy a high standard of living, educational opportunities, and access to adequate health care. Also called an industrialized country, a developed economy is measured by a country’s gross domestic product, which typically is well diversified.

Most countries with a developed economy export goods worldwide. These regions’ banking, financial, and political systems typically remain stable and contribute to growth and productivity. People living in a developed economy generally live longer because of access to health care and proper nutrition. They tend to be skilled and educated workers who earn decent salaries.

Countries without better economies, often called lesser-developed countries, face difficulties with poverty and lower life expectancies. Workers typically lack skills or training, leading to lower annual incomes. Governments in these countries do not contribute adequate resources to education, health care, or creating new infrastructure.

A lesser-developed economy often experiences a high birth rate linked to lack of birth control and poverty. In some areas, citizens lack clean drinking water and adequate nutrition, leading to premature deaths. The main source of income in these countries often consists of agriculture, forcing importation of needed goods. Countries under this classification might also face political instability and a high crime rate, and lack modern infrastructure.


Another economic category used to rank a country’s financial stability is described as a newly industrialized country. These nations began experiencing growth in manufacturing and per capita incomes. Financial systems and governments in these countries are often considered fairly modern and adequate. These emerging economies might face problems raising capital to finance continued growth without relying on loans from developed countries.

A term often used to define a country with a lesser-developed economy is Third World country. This definition was coined during the Cold War to identify a country’s political beliefs when they fell outside of communism or capitalism. The term evolved into a description of a nation lacking self-sufficiency and experiencing high birth rates and poverty.

The World Bank uses income per capita to classify countries, previously measured by gross national product. A formula based on earnings and financial health ranks each country annually. In some instances, the bank uses geographical information to determine if a country is a developed economy or falls under another designation.


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Post 3

@SarahGen-- The other issue is population. The greater the population, the less GDP (gross domestic product) per individual. So the greater the population, the less money and resources each individual has access to. This is why China has been working so hard to reduce their population, in order increase development.

I think that it's better to call countries "developing" countries, rather than "less developed" or "under-developed." Because eventually they will get there.

Post 2

@SarahGen-- People in developing countries have more children because the infant mortality rate is also high in these countries. They lose children to starvation, disease and conflict frequently. Of course, birth control is one factor, but the infant mortality rate is a bigger issue.

People in developed countries don't have as many children because they know that their children will survive. They have access to basic needs like food, clean water, medical treatment and they live in a peaceful environment.

This is why birth rate and infant mortality rate will always be important data in determining how developed a country is. It doesn't make sense to only look at birth rate, we have to look at the infant mortality rate and the average lifespan as well.

Post 1

I don't understand the connection between development and birth rate. I thought that the birth rate is related to culture. The birth rate in Europe and the US is lower than in Asia, but isn't that because we want less children? We could have more children if we wanted.

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