Appl Ex 10i

Application Exercise 10i

Table 1: Gross national income per capita (ppp) in selected countries, 2021

 Country Continent GNI per capita (\$PPP) Country Continent GNI per capita (\$PPP) Australia Oceania 55290 Lao PDR Asia 8150 Argentina South America 23150 Mexico North America 19540 Bangladesh Asia 6960 Nepal Asia 4280 Benin Africa 3750 Niger Africa 1330 Bhutan Asia 10440 Pakistan Asia 5800 Bolivia South America 8800 Philippines Asia 9450 Brazil South America 15550 Qatar Asia 92080 Burkina Faso Africa 2330 Russian Federation Europe 32000 Cambodia Asia 4430 Rwanda Africa 2440 Cameroon Africa 3990 Sierra Leone Africa 1750 Chile South America 27410 South Africa Africa 14140 China Asia 19170 Sri Lanka Asia 13790 Denmark Europe 66720 Turkey Europe 30020 Dominican Republic North America 19730 United Arab Emirates Asia 66680 Haiti North America 3130 United Kingdom Europe 49420 Indonesia Asia 12560 United States North America 70480

1. Identify the continent where each of the countries listed in Table 1 is located. See third and fifth columns in table above.
2. Complete the following calculations:
3. the average daily income of someone who lives in a country classified as a low-income economy (if that country’s per capita income is the highest possible in that classification)

Average daily income of someone living in a low-income country on \$1085 per year = \$1085/365 = \$2.97 per day

1. the average weekly income of someone who earns per capita income at the upper end of the scale, in a country classified as an upper middle-income country.

Average weekly income of someone living in upper middle-income country on \$13,205 per year = \$13,205/ 52 = \$253.94 per week.

1. Classify each of the countries in Table 1 using the income classifications provided in Table 2. This can be done by creating a list or a new table.

 Country Income classification GNI per capita (\$PPP) Country Income classification GNI per capita (\$PPP) Australia High 55290 Lao PDR Upper middle 8150 Argentina High 23150 Mexico High 19540 Bangladesh Upper middle 6960 Nepal Upper middle 4280 Benin Lower middle 3750 Niger Lower middle 1330 Bhutan Upper middle 10440 Pakistan Upper middle 5800 Bolivia Upper middle 8800 Philippines Upper middle 9450 Brazil High 15550 Qatar High 92080 Burkina Faso Lower middle 2330 Russian Federation High 32000 Cambodia Upper middle 4430 Rwanda Lower middle 2440 Cameroon Lower middle 3990 Sierra Leone Lower middle 1750 Chile High 27410 South Africa High 14140 China High 19170 Sri Lanka High 13790 Denmark High 66720 Turkey High 30020 Dominican Republic High 19730 United Arab Emirates High 66680 Haiti Lower middle 3130 United Kingdom High 49420 Indonesia Upper middle 12560 United States High 70480

1. Reflecting on your response to part c. did any country’s classification surprise you? Were there countries that you would have classified differently based on your knowledge of them?

This will depend on students’ perceptions, but some students may be surprised that countries they know as having relatively ‘low’ levels of living standards are classified as upper middle income. And also, that an (average) income of just over \$1000 per year is considered ‘middle income’ and that a country with an (average) income of just over \$13,000 is considered a ‘high income’ country.

1. Analyse the income levels used to classify countries. Do the values used bear any resemblance to the dollar amounts we use in Australia to classify income levels? For example, would someone living on \$13 206 in Australia be considered to have a ‘high’ income? In your answer you should also refer to the average per capita income in high-income countries.

No, the values do not bear much resemblance to the dollar amounts we use in Australia to classify income levels. Someone living on \$13,206 per annum in Australia would not be considered to have a high income. In fact, their income would be considered below what is required to maintain a very basic standard of living. According to the World Bank data base, despite the lower cut-off for classification to be a High income country being an average annual income per capita of \$13,206, the average GNI per capita of High income countries in 2022 was \$51,087.

1. Calculate the ratio of GNI per capita for the following combinations of countries. For each calculation, briefly explain what the ratio means and comment on the ratio. For example, consider country locations, type of country and its history. Here is an example:

Australia and Argentina             Australia’s GNI pc        55 290     =    2.4:1

Argentina’s GNI pc       23 150

This means that the average Australian income per capita is 2.4 times that of the average income in Argentina. Interestingly, this is the case even though both countries are classified as high-income economies. However, Argentina is also located in a part of the world (South America) that overall has lower average incomes.

The combination of countries is:

1. Australia and Indonesia

Australia’s GNI pc        55 290     =   4.4:1

Indonesia’s GNI pc       12 560

This means that the average Australian income per capita is 4.4 times that of the average income in Indonesia. This is not surprising since Australia is classified as a High-income economy, whereas Indonesia is classified as a High-Middle income economy. Indonesia is also located in a part of the world (Asia – specifically South-east Asia) that overall has lower average incomes.

1. Denmark and Niger

Denmark GNI pc           66 720     =   50.1:1

Niger GNI pc                   1 330

This means that the average Danish income per capita is more than 50 times that of the average income in Niger. It is not surprising that there is a significant difference, however the size of this ratio is possibly shocking. Denmark is classified as a High-income economy, but Niger is classified as a Lower-Middle income economy, and not even as a Low-income country.  Niger is located in West Africa, bordering the Sahara, which is one of the poorest regions of the world on average. It was ranked 182nd out of 184 countries in the 2021 Human Development Index rankings.

• South Africa and Sierra Leone

South Africa GNI pc      14 140     =   8.1:1

Sierra Leone GNI pc       1 750

This means that the average South African income per capita is more than 8 times that of the average income in Sierra Leone. This is despite both countries being located on the African continent. South Africa is classified as a High-income economy, although its average income is toward the bottom of the average incomes of High-income countries. It is located in southern Africa, and is a large country with significant natural resources, that, following the end of apartheid until recently, had a functional democracy. Sierra Leone, on the other hand, is classified as a Lower-Middle income economy, and not even as a Low-income country.  Sierra Leone is located on the southwest coast of West Africa, which is one of the poorest regions of the world on average. It has experienced multiple natural and human  disasters (including a protracted civil war and an Ebola epidemic).

1. Brazil and Bolivia

Brazil GNI pc                 15 550     =   1.7:1

Bolivia GNI pc                 8 800

This means that the average Brazilian income per capita is more than 1.7 times that of the average income in Bolivia. Both countries are located in South America, and the countries share an extensive border. Brazil is classified as a High-income economy, although its average income is toward the bottom of the average incomes of High-income countries. Bolivia is classified as an Upper -Middle income country.  Brazil has a richer resource endowment than Bolivia – as Brazil has a large coastline and the extensive Amazon rainforest. Bolivia is a landlocked country, with much of its land in the very high Andean region, which is less fertile than much of Brazil’s land area. Bolivia is relatively poor compared to other South American countries.

1. China and Cambodia

China GNI pc                 19 170     =   4.3:1

Cambodia GNI pc           4 430

This means that the average Chinese income per capita is more than 4 times that of the average income in Cambodia. Both countries are located in Asia. China is classified as a High-income economy and has experienced a significant increase in average incomes over the last 40 years as the economy opened up to international trade, and China became known as ‘the world’s factory’. Cambodia is classified as an Upper-middle income country, although it is towards the bottom of the scale for this classification. China is a much larger country than Cambodia, with a vast resource endowment (natural and human), and it has maintained a stable political system (a one-party dictatorship) since the late 1940s. Cambodia has suffered significant political instability since the 1960s, including a civil war, involvement in the Vietnam War, and then a genocide. It remains politically unstable, despite officially being a democracy. It remains one of the poorest countries in Asia.