Economic and Social Structure
as a Measure of Development
Few reports encapsulate in a single index the changes in economic and social
conditions which accompany development. Nevertheless, the many connotations
which surround the concept of “modernization” demonstrate that changes in these
areas are often intrinsic to the development process. Few countries have been able
to raise their income level, their productive capacity and their standard of living
without experiencing some major changes in social patterns and the underlying
structure of their economy.
Changes in the Structure of the Economy
Generally, as economic development occurs, the structure of the economy
changes. Capital and skilled labor are substituted for unskilled labor and an
increased share of the work force is concentrated in manufacturing and skilled
services.18 There seems to be a tendency in most countries that, as income levels and
social conditions improve, the locus of economic activity shifts from rural to urban
areas. Total output from agriculture mayexpand, as productivity levels in agriculture
increase. However, the share of the workforce involved in agriculture tends to shrink
and agriculture’s share of national output declines.
CRS-10
19 Data for most low-income countries are lacking. Data for many from the early 1980s
show that 70% to 80% of the population or more was employed in agriculture. More recent
data are available for only a few countries. These suggest, however, that the shares for
many countries have not changed greatly. Sri Lanka moved from 49% male and 51% female
in agriculture to 38%/49% during the past two decades. Madagascar went from 73%/93%
to 77%/76% during the same period, the male agricultural rate being higher in the end.
Figure 1. Percent of
Workforce in Agriculture
Figure 2. Urbanization and
Improved Sanitation
This can be seen in Figure 1. According to World Bank statistics, about 4% of
men and 2% of women in high income countries were employed in agricultures,
while the ratios in upper middle-income countries were 22% for men and 21% for
women. Data for lower income countries are more sketchy. However, Bank data
show that portion for lower middle-income countries ranges between 30% and 60%
and the percentages for lower-income countries is likely much higher.19
Urbanization
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20 Henderson observes that the costs of urban concentration increase substantially after a
point because the costs of excessive concentration (congestion, pollution) outstrip the city’s
capacity to deal with them. Economic activity is more spread out, he says, in a mature
system of cities. This implies that the development trend in this area moves beyond massive
agglomerations towards a more diffused pattern. Vernon Henderson. “Urbanization in
DevelopingCountries.” The World Bank Research Observer 17:1 (Spring 2002), pp. 89-112.
21 The figure for access to sanitation in high-income countries is based on data for
“developed countries” published by the U.N. Department of Economic and Social Affairs.
See: [http://unstats.un.org/unsd/mi/mi_results.asp?row_id=668].
Likewise, there seems to be a tendency for people to move towards urban areas
as development occurs. The share of the population in urban areas and in large cities
generally increases as income levels increase for middle-income and higher-income
countries. This is shown in Figure 2. Among other things, urbanization increases
the efficiency of infrastructure expenditures, it reduces transaction costs and it
generates positive externalities. Upper middle-income countries often have a larger
share of their population in their largest city than do high income countries, perhaps
because the latter have infrastructure and commercial bases which facilitate
simultaneous growth in several major urban areas.20
An important consideration is the degree to which urban growth outstrips the
capacity of developing countries to cope with the needs of their growing urban areas.
One example is the share of the urban population which has access to improved
sanitation facilities. As shown on Figure 2, the rate of urbanization often exceeds
the construction of adequate sanitation in the middle ranges of development. In lowincome countries, the share of the population in urban areas and the share with
adequate sanitation are about the same. As income levels increase for developing
countries, however, the gap between the size of the urban population and the share
of the population with access to adequate sanitation increases. It is particularly
pronounced for upper middle-income countries. The gap disappears for high-income
countries.21 This suggests that the pressures of urbanization tend to outstrip the
resources available in developing countries to cope with basic urban needs. Though
adequate data are not available, it would appear that similar relationships also exist
for public access to adequate housing and for transport congestion and pollution in
countries experiencing rapid urban growth.
