What Is a Developing Country?

Developing Countries Explained

Definition

Developing countries have a low gross domestic product (GDP) per person. They tend to rely on agriculture as their prime industry. They have not quite reached economic maturity.

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Definition and Examples of Developing Countries

A developing country is one with comparatively low economic output. There has been a lot of debate as to where to draw the line between a developed country and a developing one, which can be seen by the lack of one single meaning for the term.

The United Nations has some rules for distinguishing between developed and developing countries. The World Bank has stopped using these terms in favor of others, such as "low-income" or "lower-middle-income" economies, based on gross national income (GNI) per person.

  • Alternate name: Low-income economy
  • Alternate definition: Countries with a per-person income of less than $1,045 in 2020 are considered low-income. The International Monetary Fund's (IMF) definition is based on per-person income, export diversification, and the degree of union with the global financial system.

Note

The IMF published a research report on the topic of development classification in 2011. It outlined its methods for classifying a country's level of development.

Countries that are deemed more developed are referred to as developed countries, while those that are less developed are known as less economically developed countries (LEDCs) or frontier markets.

Investors often sort countries around the world based on their level of economic development. Several levels exist, and investors use many economic and social criteria to calculate those levels. These range from per capita income and life expectancy to literacy rates. Developing countries, least developed countries (LDCs), and emerging markets have lower ratings.

While lists of which countries qualify as "developing" may change depending on who is creating them, the following is a list of some of the countries included on the United Nations' list of least developed countries:

  • Angola
  • Bangladesh
  • Benin
  • Bhutan
  • Cambodia
  • Chad
  • Ethiopia
  • Haiti
  • Kiribati
  • Liberia
  • Myanmar
  • Solomon Islands
  • Timor-Leste
  • Yemen

How Developing Countries Work

In the 1960s, classifying countries became common as a way to better understand the outcomes of countries in each group. Sorting countries into these groups allows for easier policy discussions on moving resources to the countries with impoverished populations.

Organizations use different measures to determine how countries are classified. One such grouping is Brazil, Russia, India, China, and South Africa (BRICS), which are often thought to be rapidly developing countries.

Another grouping is newly industrialized countries (NICs), which are countries that are having rapid economic growth based on exports. China, Brazil, India, and South Africa are widely considered to be NICs. Indonesia, Malaysia, Mexico, Philippines, Thailand, and Turkey are also often considered newly industrialized countries.

Exactly why some countries are considered developing isn't just a matter of their current economic state, but extends back to their pre- and post-colonial histories. For example, many countries in Africa are considered "developing." Some historians have argued that colonization hampered the development of those nations and led to the economic issues they face today.

Note

The use of terms like "developing" and "developed" (and predecessors "first-world," "second-world," and "third-world") is controversial. The terms assume a hierarchy among countries, and may give the impression that developing nations are bad and developed nations are good. Furthermore, in the context of the history of some "developed" countries, their economic strength was built on the colonization of countries now deemed "developing."

Developing Country vs. Emerging Market

Developing Country Emerging Market
Less industrialized Becomes more engaged with global markets
Often agricultural Transitioning to modern industrialized economy
Lower per capita income Higher standard of living

An emerging market is a developing country that is investing in its productive capacity.

The primary difference between these countries is the increased presence of industrialization. Unlike countries that rely on agriculture as their prime industry, emerging markets are making strides in technology, infrastructure, and manufacturing, leading to increased income and growth.

Key Takeaways

  • Developing countries have economies with a low GDP per person and rely on agriculture as their main industry.
  • There is no single definition of a developing country.
  • The terms "developed" and "developing" are controversial. The terms may give the impression that there is a ranking of countries, with some being "good" and others being "bad."
  • Emerging countries are those making strong strides in technology and manufacturing.
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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. United Nations Conference on Trade and Development. "Classifications." Accessed Dec. 14, 2021.

  2. World Economic Situation and Prospects. "Country Classification," Page 144. Accessed Dec. 14, 2021.

  3. International Monetary Fund. "World Economic Outlook (WEO) - Q. How Does the WEO Categorize Advanced Versus Emerging Market and Developing Economies?" Accessed Dec. 14, 2021.

  4. International Monetary Fund. "Classifications of Countries Based on Their Level of Development: How It Is Done and How It Could Be Done," Pages 16–18. Accessed Dec. 14, 2021.

  5. International Monetary Fund. "Classifications of Countries Based on Their Level of Development: How It Is Done and How It Could Be Done," Pages 5–7. Accessed Dec. 14, 2021.

  6. United Nations. "List of Least Developed Countries." Accessed Dec. 14, 2021.

  7. VoxEU CEPR. "Colonialism and Development in Africa." Accessed Dec. 14. 2021.

  8. United Nations. "Standard Country or Area Codes for Statistical Use (M49)," Select "Developing Regions." Accessed Dec. 14, 2021.

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