Developed Economy

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What is a 'Developed Economy'

A developed economy refers to a country with a relatively high level of economic growth and security. Common criteria for evaluating a country's degree of development are per capita income or gross domestic product (GDP), level of industrialization, general standard of living, and the amount of widespread 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 included in evaluating an economy or country's degree of development.

BREAKING DOWN 'Developed Economy'

The most well-known current examples of developed countries 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 nondeveloped is per capita GDP, though no set minimum exists. Some economists feel $12,000 to $15,000 is sufficient for developed status, while others do not consider a country developed unless its per capita GDP is above $25,000 or $30,000. For reference, the United States' per capita GDP in 2015 was $55,800.

Particularly for countries in the gray area, economists turn to other factors to determine development status. Standard of living measures such as infant mortality rate and life expectancy are useful, though again, no hard-and-fast minimums exist. That said, 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.

Moreover, a high per capita GDP alone does not confer developed economy status without other factors present. For example, Qatar, which boasts the world's highest per capita GDP as of 2015, is still classified as developing by the United Nations (UN). Its lack of developed economy status stems from its extreme income inequality, lack of infrastructure and limited educational opportunities for nonaffluent citizens.

The Human Development Index

The HDI looks at three standard 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. As of 2014, Norway boasted the world's highest HDI at 0.944. The United States was eighth at 0.915.

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) points out 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."