Economic Inequality: Differences in Developed and Developing Nations

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Margaret Cunningham

Margaret has taught many Biology and Environmental Science courses and has Master's degrees in Environmental Science and Education.

Expert Contributor
Joseph Shinn

Joe has a PhD in Economics from Temple University and has been teaching college-level courses for 10 years.

Economic inequality refers to the differences in wealth between individuals and populations. Learn about economic inequality and the differences in developed nations and developing nations. Updated: 09/17/2021

What Is Economic Inequality?

When you walk around almost any city or town, you can see different sized houses, different types of cars, and different activities occurring. These differences can be indicators of economic inequality, which is the difference between individuals or populations in terms of their wealth, assets, or income. Although most frequently you see differences in economic levels around your town, economic inequality can also be applied on a larger scale to the nations of the world.

Based on economics, the world has been divided into two types of countries. The two categories are based mainly on per capita income, which is the average income per person. The per capita income is calculated by taking the total national income for a country and dividing it by the number of people that live in the country. For example, if a small country has a total national income of $800,000 and a population of 20 people, then the per capita income is $40,000.

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  • 0:05 What Is Economic Inequality?
  • 1:11 Developed Nations
  • 2:40 Developing Nations
  • 5:13 Lesson Summary
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Developed Nations

The first economic category is developed nations, which can generally be categorized as countries that are more industrialized and have higher per capita income levels. To be considered a developed nation, a country generally has a per capita income around or above $12,000. Also, most developed countries have an average per capita income of approximately $38,000.

As of 2010, the list of developed nations included the United States, Canada, Japan, Republic of Korea, Australia, New Zealand, Scandinavia, Singapore, Taiwan, Israel, countries of Western Europe, and some Arab states. In 2012, the combined populations of these countries accounted for around 1.3 billion people. The populations of developed countries are generally more stable, and it is estimated that they will grow at a steady rate of around 7% over the next 40 years.

In addition to having high per capita income and stable population growth rates, developed nations are also characterized by their use of resources. In developed countries, people consume large amounts of natural resources per person and are estimated to consume almost 88% of the world's resources.

Developing Nations

The second economic category is developing nations, which is a broad term that includes countries that are less industrialized and have lower per capita income levels. Developing nations can be divided further into moderately developed or less developed countries.

Moderately developed countries have an approximate per capita income of between $1,000 and $12,000. The average per capita income for moderately developed countries is around $4,000. As of 2012, the list of moderately developed nations is very long and accounts for around 4.9 billion people. Some of the most recognizable countries that are considered moderately developed include Mexico, China, Indonesia, Jordan, Thailand, Fiji, and Ecuador. In addition to these specific countries, many others from Central America, South America, northern and southern Africa, southeastern Asia, Eastern Europe, the former U.S.S.R., and many Arab states, are all considered moderately developed countries.

Less developed countries are the second type of developing nations. They are characterized by having the lowest income, with a general per capita income of approximately less than $1,000. In many of these countries, the average per capita income is even lower, at around $500. The countries listed as less developed are found in eastern, western, and central Africa, India, and other countries in southern Asia. In 2012, there were around 0.8 billion people who lived in these countries and survived on very little income.

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Additional Activities

Additional Questions

  1. Define economic inequality. If there was zero economic inequality, what could be said about the citizens of that country?
  2. What can be said about a country's citizens as economic inequality grows? Specifically, as inequality grows, how does the poorest person's quality of life compare to the wealthiest person's quality of life change?
  3. What is per capita income? How is it calculated?
  4. Why is per capita income typically considered to be a good way to measure inequality between groups within a country or inequality between countries?
  5. What is a developed nation? In addition to describing the general characteristics of a developed nation, also discuss the general rule about how the amount of per capita income is needed for a country to be considered "developed."
  6. List three examples of developed nations. What are their per capita incomes? For proper comparison, all per capita income values should be presented in the currency of a single country (i.e., in U.S. Dollars).
  7. What is a developing nation? In addition to describing the general characteristics of a developing nation, also discuss the general rule about how the amount of per capita income is needed for a country to be considered "developing."
  8. Is a majority of the population living in developed countries or developing countries?

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