Developing countries use capital much less efficiently than rich countries — Indermit Gill

The main problem facing middle-income countries lies not so much in a lack of investment and resources as in the low efficiency with which they are utilized. Economist Indermit Gill made this statement at the International Economic Conference of the Eurasian Stabilization and Development Fund, held on October 29 in Astana.

According to his calculations, the capital endowment of middle-income economies is about 70% of that of wealthy countries. However, output per worker reaches only 21% of the corresponding figure.

The difference between relative capital endowment and labor productivity is about 50 percentage points.

According to Gill, these indicators demonstrate just how significant the gap in the efficient use of economic resources remains.

“Developing countries have less physical, human, and financial capital than developed economies. However, it is precisely the inefficient use of available resources that is one of the main obstacles to further development,” he notes.

However, simply increasing investment does not always lead to a commensurate increase in output. As capital accumulates, its marginal return may decline.

According to Gill, countries seeking to transition to the category of high-income economies must focus on improving productivity and the efficient use of capital, human resources, and technology.

This issue is particularly relevant for countries in the Eurasian region, which have demonstrated high rates of economic growth in recent years but continue to face structural constraints.