GDP per capita is the most important factor that determines if a country is classified as developed, developing, or least-developed.
While GDP per capita is an important factor in determining a country's level of development, it is not the sole determinant. However, it is commonly used as a key indicator to classify countries into different categories such as developed, developing, or least-developed. To understand why GDP per capita is considered important, it is essential to know what it represents.
GDP (Gross Domestic Product) is the total value of goods and services produced within a country's borders in a given period. It measures the economic output of a country. Per capita, simply means dividing the total GDP by the population of the country, providing an average value of GDP for each person.
Here is how GDP per capita can be used to classify countries:
1. Developed Countries: Generally, countries with a high GDP per capita are classified as developed. These countries have a well-established infrastructure, advanced technology, high standard of living, and strong industrial and service sectors. They often have a wide range of economic opportunities, political stability, and high levels of human development. The World Bank and the United Nations have specific thresholds for minimum GDP per capita to classify a country as developed.
2. Developing Countries: Developing countries usually have a lower GDP per capita compared to developed countries. They are characterized by rapid economic growth, improving infrastructure, and transitioning from primarily agrarian to industrial and service-based economies. These countries face challenges such as poverty, inequality, and inadequate access to education and healthcare. Many developing countries strive to increase their GDP per capita to achieve higher standards of living.
3. Least-Developed Countries: At the bottom end of the development spectrum are the least-developed countries (LDCs). These countries have the lowest GDP per capita, high levels of poverty, and limited access to vital resources and services. They often lack infrastructure, face political instability, and struggle with social and economic challenges. The United Nations designates countries as least-developed based on multiple criteria, including GDP per capita, human development index, and economic vulnerability.
It is important to note that while GDP per capita is a widely used measure, it has limitations and should be considered along with other indicators such as human development index, income inequality, education levels, healthcare access, and other social factors to get a comprehensive understanding of a country's development level.