e-Consult | Notes

classification of economies in terms of their level of national income

Economic Development: Classification by National Income Level

This section explores how countries are classified based on their level of national income, a key indicator of economic development. The World Bank utilizes a widely recognized classification system based on Gross National Income (GNI) per capita.

Classification System

The World Bank categorizes economies into five groups based on their GNI per capita in the previous year:

Low Income
Lower Middle Income
Upper Middle Income
High Income
Very High Income

Detailed Classification by Income Level

Income Level	GNI per capita (2023)	Characteristics	Examples (2023)
Low Income	$2,116 or less	Limited infrastructure Weak institutions High poverty rates Vulnerable to economic shocks	Afghanistan Burundi Central African Republic Democratic Republic of the Congo Ethiopia Liberia Mali Niger Somalia South Sudan Yemen
Lower Middle Income	$2,117 - $4,465	Developing infrastructure Improving institutions Declining poverty rates Increasing economic diversification	Bangladesh Benin Cambodia Egypt Ghana Kenya Laos Nigeria Pakistan Philippines Vietnam
Upper Middle Income	$4,466 - $13,845	Significant infrastructure development Strengthening institutions Further reduction in poverty Growing middle class Increased investment	Algeria Argentina Bolivia Brazil Chile Colombia Croatia Ecuador Indonesia Malaysia Mexico Morocco Peru Poland Romania South Africa Turkey United Arab Emirates
High Income	$13,846 or more	Highly developed infrastructure Strong institutions Low poverty rates Advanced economies High levels of innovation	Australia Austria Belgium Canada Czech Republic Denmark Finland France Germany Greece Ireland Italy Japan Netherlands Norway Portugal Spain Sweden Switzerland United Kingdom United States
Very High Income	$138,500 or more	Most advanced economies High levels of technological development Very low poverty rates Significant global influence	Luxembourg Singapore

Limitations of GNI per capita

While GNI per capita is a useful indicator, it has limitations:

Does not reflect income distribution: A high GNI per capita can mask significant income inequality.
Ignores non-market activities: Household production and unpaid work are not fully captured.
Difficulties in comparing across countries: Purchasing Power Parity (PPP) is used to adjust for differences in the cost of living, but this is not always perfect.
Does not fully capture development: Other factors like health, education, and environmental sustainability are not directly reflected.

Suggested diagram: A bar chart showing GNI per capita for each income level, illustrating the distribution of countries across the different categories.