The largest component of national income in developing countries consist of
Answer Details
In developing countries, the largest component of national income typically consists of wages and salaries. This means that the income earned by individuals from their employment or labor work forms a significant part of the national income. Several reasons contribute to this:
Labor-Intensive Economy: Developing countries often have labor-intensive sectors such as agriculture, manufacturing, and services, which employ a large number of people. These sectors need a substantial workforce, leading to the major share of national income coming from wages and salaries.
Lower Levels of Capital: Capital refers to tools, equipment, and machinery used in production. Developing countries may have lower levels of capital investment, focusing more on labor to boost production, which again increases the share of wages and salaries in national income.
Demographics: Developing countries often have younger populations with a high dependency on labor for earning income. This means most people derive their livelihood through working jobs rather than owning businesses or properties, leading to wages and salaries dominating national income.
In contrast, components like rent and profit tend to form a smaller component of national income in developing economies. While these components are important, they are usually not as predominant as wages and salaries due to the lesser commercialization and capital-intensive industries compared to developed countries.