Developing countries tend to rely very heavily on primary goods, especially farming. The problem with a rural, agricultural economy is that there is low labour productivity and this leads to low income levels. Many LEDCs also suffer from uneven bargaining power during their trade in primary goods as they often lack knowledge of what the right price should be, and therefore are often exploit by buyers that negotiate prices, limiting economic development in developing countries.
Although the LEDCs rely heavily on farming, their agricultural productivity is not high compared to that of the MEDCs as they lack technology and chemicals that increases productivity, and so this again limit their economic development. One might argue that in order to solve the problem of the low labour productivity of developing countries that rely of primary products, machinery can be introduced to help increase productivity. This however might increase labour surplus, causing the problem of unemployment. A better policy would be to raise the productivity of labour by introducing intensive farming.
This will likely help crops to increase their yields in LEDCs while not causing labour surplus, helping LEDCs to increase their economic development. Another factor which might limit economic development in developing countries is protectionism caused by trading blocs within the developed countries. Although trading blocs such as a Preferential trading area or the Economic and Monetary Union like the EU aim to promote trade by eliminating tariffs and quotas between the participating countries, they also set up high trading barriers for countries that are not in the bloc.
The Term Paper on Developing Countries Productivity Economic Competitiveness
... for a country in a more mature stage of economic development. Quality of people.A skilled labour force with a positive attitude increases a country's productivity and ... competitiveness. Education, the technical ability of labour, the ...
Most of the time, LEDCs are not in the trading blocs and they will face protectionism from the developing countries, limiting trade between the LEDCs and MEDCs, limiting economic development. Although trading blocs within MEDCs might restrict trade of the LEDCs, the WTO can act as a forum for countries to negotiate the elimination of trade barriers. If the WTO successfully convinced the MEDCs to lower trade barriers with developing countries, the goods produced by the LEDCs will be more competitive and will be able to bring in more income to the developing countries, increasing economic development. Poor education and training again will affect the economic development of developing countries. When the labour in developing countries have low levels of training, they will be restricted to low-skilled jobs such as farming that will not help the economy. Also, even if machineries are introduced to the LEDCs, the labour will not have enough knowledge to make good use of the machinery, and therefore economic development will be limited.
