Developing Countries: Definitions, Concepts and Comparisons

 Developing Countries: Definitions, Concepts
and Comparisons
What is a “developing country?” How does one know whether a country is
actually developing? How can we measure the progress countries are making in
development? There are many measures used which seek to identify and rank
countries in terms of their levels of development. Most focus on income levels, due
to the premise that countries are more developed when their annual levels of per
capita income rise. Others examine social, structural and other criteria, due to the
premise that these are also important attributes of development. In general,
development is a multi-dimensional concept that encompasses economic, social and
political criteria. This report seeks to clarify how some of the major criteria are
measured and defined.
This is not merely a theoretical issue. 

The 108th Congress will be considering
legislation relating to this issue. This will include, among other things, foreign aid
appropriations, authorizations for U.S. contributions to multilateral development
banks and the proposed Millennium Challenge Account (MCA). Typically, there has
been much debate about the goals and priorities to be emphasized and the criteria to
be used for determining whether development aid programs have been effective in
accomplishing desired goals. Some of the disagreement appears to stem from
differing concepts about development and the development process.
Everycountryis unique. Nevertheless, countries often can be grouped according
to their economic, social and political situation. In some cases, it is important to
rank countries in order to see which are eligible for benefits established by law or
international agreement. For example, some less developed countries are eligible for
trade or foreign aid benefits which are not available to countries at higher levels of
development. These include access to grants and low-cost concessional aid from
international financial institutions and some bilateral aid programs and tariff
exemptions under the World Trade Organization's General Schedule of Preferences
(GSP). Likewise, analysts often group countries according to their levels of
development in order to study their internal dynamics and determine which
development policies or methods might be most appropriate for a given country.
This report evaluates development from several different perspectives. Using
a series of reports which are issued periodically by various organizations, it shows
how countries rank in their levels of development according to diverse criteria.
Countries that rank high according to one measure may rank lower according to
another. At one time, it was commonly believed that raising a country’s average per
capita income level would lead to improvements in most other areas. Time and
experience have shown, however, that social conditions and the general well-being
of people may not necessarily improve when a country’s average income level
increases. The link between countries’ levels of per capita income and their levels
of social development (measured byhealth and educational criteria) is not necessarily
For a discussion of U.S. foreign aid programs over the years, see CRS Report 98-916 F,
Foreign Aid: An Introductory Overview of U.S. Programs and Policy,

 by (nam e*redacted) and
(name *redacted), updated April 6, 2001 and CRS Report 97-62 F, The Marshall Plan: Design,
Accomplishments and Relevance to the Present, by (nam e*redacted), January 6, 1997.
U.S. Congress. House of Representatives. Committee on Foreign Affairs. Report of the
Task Force on Foreign Assistance. 101st Congress, 1st Session, Document 101-32. February
1989, p. 27.
strong. Countries with relatively high levels of per capita income may rank lower in
their social and structural development. By contrast, some poor countries rank with
the advanced countries in their systems of governance and their levels of individual
and economic freedom.
This report examines four criteria which are often used today to rank and assess
countries’ levels of development. These are: (1) per capita income; (2) economic and
social structure; (3) social conditions; (4) the prevailing level of governance and
freedom. Specific studies or annual reports relevant for each category are cited and
discussed. At the end of the discussion, a few comments are made about the possible
relationship of these concepts. A series of statistics and tables are provided at the end
of the repor

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