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Development 2 (1. Comparison of Countries & States (To compare persons…
Development 2
1. Comparison of Countries & States
To compare persons, we take one or more important characteristics of the persons and compare them
But which characteristics should be compared?
Should you compare friendliness, spirit of cooperation, creativity or marks?
For comparing countries, their income is one of the most important traits
Countries with higher income are more developed than those with less income
With greater income, people are able to buy what they want and hence it is an important goal
Income of the country can be taken as the total income of all the residents of the country
However for comparison, the total income is not useful as different countries have different population
Hence we compare
average income
which is the total income divided by the its total population.
Average income is also known as
per capita income
3. Average Income often hides disparities
But in country A, the average income of each person is around Rs.10,000
Comparison of two countries A & B with 5 citizens each
The average income of both countries is around Rs.10,000
But in country B, four of the citizens have low income of Rs.500 but one rich person has an income of Rs.48000 that makes the average of the country Rs10,000
Country A has equal distribution of income - the citizens are not too poor or too rich
But in country B, most citizens are poor and only person is very rich
Conclusion: While average income is useful for comparison, it does not tell us distribution of income among the people
2. World Development Reports
World Development Report brought out by the World Bank uses per capita income to compare countries
In 2012, countries with per capita income of US$ 12616 per annum and above were called rich countries
Those with per capita income of US$1035 per annum or less were called low income countries,
India came in the category of low middle income countries as its per capita income in 2012 was US$ 1530 per annum
The rich countries excluding some countries in the Middle East & certain other small countries are generally called rich countries