THE CLASSIFICATION OF ECONOMIES
THE CLASSIFICATION OF ECONOMIES
There is no uniform classification of countries, and even the existing classifi-
cations are changing because of changes in political and economic systems.
Table 2.1 identifies the classifications provided each year in the World Devel-
opment Report.
Countries have traditionally been classified as belonging to the First
World, Second World, or Third World. The First World countries have high-
income economies. The First World includes the industrial world and some
of the high-income oil-producing states. The Second World countries have
centrally planned economies, which are in a state of flux. According to the
World Bank, the Second World countries have low- and middle-income
economies. It is difficult to know how to refer to centrally planned economies
(CPEs), because most of them are in various stages of transition to a market
economy. The World Bank has decided to refer to them as historically
planned economies (HPEs), so the Second World is being phased out and
many countries are being classified as Third World.
The Third World countries, also known as developing countries, also
have low- and middle-income economies. With only a few exceptions, the
low-income countries are found in Asia, Africa, and Latin America. Middle-
income countries are much more widespread geographically, and a majority
of Latin America's population lives in middle-income countries. African na-
tions tend to be more concentrated in the lower-middle-income categories,
and Latin American nations tend to be more concentrated in the upper-mid-
dle-income-categories. A combination of upper-middle-income countries and
high-income countries make up the NICs (newly industrialized countries).
Although the World Bank has not issued a comprehensive list of NICs, the
designation generally includes Argentina, Brazil, China, Hong Kong, Hun-
gary, India, Israel, the Republic of Korea, Mexico, Poland, Portugal, Romania,
Singapore, Taiwan, and Yugoslavia.
There is no uniform classification of countries, and even the existing classifi-
cations are changing because of changes in political and economic systems.
Table 2.1 identifies the classifications provided each year in the World Devel-
opment Report.
Countries have traditionally been classified as belonging to the First
World, Second World, or Third World. The First World countries have high-
income economies. The First World includes the industrial world and some
of the high-income oil-producing states. The Second World countries have
centrally planned economies, which are in a state of flux. According to the
World Bank, the Second World countries have low- and middle-income
economies. It is difficult to know how to refer to centrally planned economies
(CPEs), because most of them are in various stages of transition to a market
economy. The World Bank has decided to refer to them as historically
planned economies (HPEs), so the Second World is being phased out and
many countries are being classified as Third World.
The Third World countries, also known as developing countries, also
have low- and middle-income economies. With only a few exceptions, the
low-income countries are found in Asia, Africa, and Latin America. Middle-
income countries are much more widespread geographically, and a majority
of Latin America's population lives in middle-income countries. African na-
tions tend to be more concentrated in the lower-middle-income categories,
and Latin American nations tend to be more concentrated in the upper-mid-
dle-income-categories. A combination of upper-middle-income countries and
high-income countries make up the NICs (newly industrialized countries).
Although the World Bank has not issued a comprehensive list of NICs, the
designation generally includes Argentina, Brazil, China, Hong Kong, Hun-
gary, India, Israel, the Republic of Korea, Mexico, Poland, Portugal, Romania,
Singapore, Taiwan, and Yugoslavia.
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