Question

Some economists have observed that the standard of living for the poorest third of the world is falling behind the standard for the rest of the world and is not improving very quickly. What are some factors that might influence the economic status of such countries?

Answer 1

Poorest third-world countries are Bangladesh, Sri Lanka, Vietnam, Kenya, etc. These countries have very poor economic status.

Some factors are as below:

No.1) Population factor: most of these countries have huge population growth that reduces per capita income of those countries and leads to poor standard of living. Out of each 100 birth almost 96 are from these countries. In each year they add almost 91 million to the world population.

No.2) Migration factor: workers move rapidly from rural to urban areas in each of these countries. This creates imbalance in labor market, since supply exceeds demand of labors, poor pay, lower productivity of labors, and ultimately poor standard of living.

No.3) Trade factor: Trade between countries may be good for an economy; but this is not happening everywhere. International trade between a developed country and a poor country is not always good. In most of the cases those developed countries have absolute control over the market and poor countries get trade deficits.

No.4) International loans: this is the financial aids taken by those poor countries. Sometimes they bound to take those loans because of natural calamity, in order to meet budget deficit, etc. These loans creates huge interest burden to those countries and make them more poor, leaving poor standard of living altogether.