Beyond Low and Middle Income Countries: What if There Were Five Clusters of Developing Countries?

Abstract

Many have challenged the use of income per capita as the primary proxy for development. This paper continues this tradition with a twist. The paper challenges the continuing use of income per capita to classify developing countries as low income or middle income now that most of the world's poor no longer live in low income countries (LICs) and ambiguity over the usefulness of the middle income country (MIC) classification given the diversity in the group of over 100 MICs. We use a cluster analysis to identify five types of developing countries using a set of indicators covering definitions of development based on the history of thinking about ‘development’ over the last 50 years from four conceptual frames: development as structural transformation; development as human development; development as democratic participation and good governance; and development as sustainability. We find that the cluster analysis produces five types of developing country using data for the period 2005–2010. Our development taxonomy differs notably from the usual income classification of GNI per capita (Atlas method) used to classify LICs and MICs. Notably many countries commonly labelled “emerging economies” are not in the two clusters related to emerging economies because they retain characteristics of poorer countries.

We find that there is no simple “linear” representation of development levels (from low to high development countries). We find that each development cluster has its own and characteristic development issues. There is no group of countries with the best (or worst) indicators in all development dimensions. It thus would be more appropriate to build “complex” development taxonomies on a five-year basis than ranking and grouping countries in terms of per capita incomes, as this will offer a more nuanced image of the diversity of challenges of the developing world and policy responses appropriate to different kinds of countries.