Peru's Economic Development and Average Income vs. OECD Countries

Economic Development of Peru
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Economic Development of Peru
Economic development is a complex phenomenon determined by different factors. It is a process whereby low-income economies constantly transform into industrial economies due to modernization (Guan, 2018). Economic development is unique from growth since it involves quantitative and qualitative improvement. It is based on economic development theory which focuses on the evolution of a poor and primitive economy into relatively prosperous and sophisticated. Peru is one of the low economy countries listed by the World Bank and has incredibly experienced rapid economic development in the last six decades. It is located in Western South America and boarded with Colombia, Chile, Bolivia, and Ecuador. It is classified as a megadiverse country composed of different habitats with a population of 33 million (BCRP, 2021). Based on its size, it is the 19th largest in the world. The paper analyzes the economic development of Peru in the last six decades, the development gap, and obstacles promoting the gap.
Economic Development over the Past 60 Years
Poverty and Inequality
Poverty and inequality are two major determinants for economic development since a growing economy should eliminate the two elements. Peru has heavily reduced poverty in the last 60 years, resulting from effective fiscal policies and positive economic indicators. In the 1960s, Peru's economy was accompanied by a high poverty level, which declined due to its dynamic by over 50%, with more than seven million Peruvians with new jobs (BCRP, 2021). However, the inequality gap has incredibly increased over the period. Currently, there is a gap between 53% and 17% inequality rate, which is a big challenge to the country. Based on the economic theory, an increase in inequality have no impact on development since the higher wages, the higher the inequality level (Guan, 2018). Therefore, regardless of the increased inequalities, its decline in poverty has enhanced its economic development.
Demographics
Peru's economic development is also based on demographics. Higher population growth is an element of economic development. Based on the Malthusian curve, higher income and food production lead to higher population growth (Guan, 2018). Over the past 60 years, Peru has heavily experienced increased population growth. In 1961, the population of Peru was 7.6 million; however, due to rapid development, the number has increased to 33 million (BCRP, 2021). The figure represents a 23% population increase in the past 60 years. Over time, the demographic change is due to development in different sectors such as agriculture, which leads to higher population growth. The higher population growth is above the global projection of 1.2 million after 20 years, as shown in figure 1. Therefore, it means that Peru has highly recorded more population growth above the expected standards.
Figure 1: Malthusian Curve
Source: (Guan, 2018)
Average Living Standards
The average living standards show the employment rate, which correlates with labor productivity. A country with higher labor productivity is likely to experience higher economic development. Over the past 60 years, Pe...