Developed Economy

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What is a 'Developed Economy'?

A developed economy is typically characteristic of a developed country with a relatively high level of economic growth and security. Common criteria for evaluating a country's level of development are income per capita or per capita gross domestic product (GDP), the level of industrialization, the general standard of living and the amount of technological infrastructure. Noneconomic factors, such as the human development index (HDI), which quantifies a country's levels of education, literacy and health into a single figure, can also be used to evaluate an economy or the degree of development.

BREAKING DOWN 'Developed Economy'

Examples of countries with developed economies include the United States, Canada and most of western Europe including the United Kingdom and France.

Developed Economy Criteria

The most common metric used to determine if an economy is developed or developing is per capita GDP, although no strict level exists for an economy to be considered either developing or developed. Some economists consider $12,000 to $15,000 per capita GDP to be sufficient for developed status while others do not consider a country developed unless its per capita GDP is above $25,000 or $30,000. The United States' per capita GDP in 2016 was $57,500.

For countries that are difficult to categorize, economists turn to other factors to determine development status. Standards of living measures such as the infant mortality rate and life expectancy are useful although there are no set boundaries for these measures either. However, most developed economies suffer fewer than 10 infant deaths per 1,000 live births, and their citizens live to be 75 or older on average.

A high per capita GDP alone does not confer developed economy status without other factors. For example, Qatar had the world's highest per capita GDP in 2016 at $130,000 but is still considered a developing economy by the United Nations (UN) because the nation has extreme income inequality, a lack of infrastructure and limited educational opportunities for nonaffluent citizens.

The Human Development Index

The HDI looks at three standards of living criteria — literacy rates, access to education and access to health care — and quantifies this data into a standardized figure between 0 and 1. Most developed countries have HDI figures above 0.8. In 2015, Norway had the world's highest HDI at 0.898. The United States ranked 19th at 0.796.

Nondeveloped Economies

Terms such as "emerging countries," "third-world countries" and "developing countries" are commonly used to refer to countries that do not enjoy the same level of economic security, industrialization and growth as developed countries. The United Nations Conference on Trade and Development (UNCTAD) notes that the world's least developed countries (LDCs) are "deemed highly disadvantaged in their development process — many of them for geographical reasons — and (face) more than other countries the risk of failing to come out of poverty."