ABSTRACT
Nearly two-fifths of the world’s population live in low-income countries. A little less than half live in middle-income countries, while only a little more than onetenth belong to the high-income group. Different countries have reached different stages in their development process (section 10.1). Least developed countries are frequently considered to be caught in a poverty trap from which they cannot escape (section 10.2). Several factors are at the root of low levels of development and a sluggish development process (section 10.3). Newly industrializing countries represent a specific group of countries, displaying strong dynamics, while newly industrialized countries have already joined the club of developed countries (section 10.4). Nearly all developing countries have improved in absolute terms over the last thirty-five years; many, among them China and India, have reduced their relative distance to the US (section 10.5). The core elements of a growth strategy consist in the accumulation of capital, both physical and human, and of acquiring technological knowledge developed elsewhere in the world (section 10.6). Different trade strategies, including import substitution and export diversification, have been adopted (section 10.7). Multilateral cooperation can support the effort of the individual countries (section 10.8). Whether growth and equity are complementary or conflicting objectives remains an important issue in development strategies (section 10.9). A high external debt burden exposes countries to higher risks of external shocks and impairs development in the long-run and can cause disruptions (section 10.10). Macroeconomic instability poses a further severe economic impediment (section 10.11). Finally, the role of the real exchange rate and of expenditure reduction and expenditure switching as stabilization policies are discussed (section 10.12).
