NRI Papers
No. 184 May 1, 2013
  What Are Emerging Economies?  
Takeshi MORI

The term "emerging economy" has a relatively short history, such that there is, as yet, no clear definition, and tends to be applied to every economy other than advanced economies. Given this situation, the author developed a framework that would allow people to define emerging economies simply and objectively.

Specifically, the world's countries are classified into eight economic stages by using the three indicators of (1) GDP (gross domestic product) growth rate, (2) per capita GDP and (3) the size of GDP. From among these stages, countries in which "the GDP growth rate is higher than the global average, but in which the per capita GDP is lower than the global average" are defined as those in the stage of emerging economies.

As a result of analyzing the economic data for the last 140 years at the most for about 130 countries, it was found that there are migration paths that connect eight stages. These eight stages and the migration paths between them are together referred to as the "eight-stage model."

Over the last 140 years, Japan is the only country that has gone from being a low-growth developing economy, has passed through the emerging economy stage, to become a mature advanced economy. However, unlike a "yokozuna" (the highest rank) in sumo wrestling in Japan, the title of "advanced economy" is not one that cannot be taken away, as it is possible for an advanced economy to degrade into a low-growth developing economy.

During the last 140 years, there have been very few instances of countries moving from the "emerging economy" stage to the "advanced economy" stage because there are "traps" that prevent transition into an advanced economy. A typical example of such traps would be the trap of income inequality. The rare exception is Japan's success in quickly clearing this obstacle. Japan's success is considered attributable to the drastic farm land reform and the reform of the educational systems, both of which the country undertook after World War II.

Contents
I Transition of the Meaning of Emerging Economies
II Classification of the World's Countries into Eight Stages and the Position of Emerging Economies
III Historical Perspective of the Paths Taken by Countries in Economic Development and Case Studies
IV "Traps" that Hinder Transition from Emerging to Advanced Economy
V Forecasting Stage Transition for Present-Day Emerging Economies
VI Suggestions for Japanese Companies

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