Knowledge @ Wharton China recently ran an interesting article that asked “when are emerging markets no longer ’emerging’?”. According to the article, dozens of countries, many of which show signs of a strong and growing middle-class population, fall under the label even though they are evolving at their own pace and with their own twists on economic development.

The term, reported to be coined by Antoine W. van Agtmael during a conference in 1981, was initially meant to be a more uplifting definition of ‘third world’ markets that were up-and-coming and good investment opportunities for multi-nationals – and although it initially applied to stock markets in countries with a cutoff of $10,000 in income per capita, the specific numerical references soon faded and now the term is synonymous with ’emerging economies’ and no longer relies on income or other statistical measures.

According to Philip Nichols, Wharton Professor of Legal Studies and Business Ethics, a numbers-based definition is less meaningful than an understanding of the way in which business is done in a country. He defines emerging economies as places that are changing form an informal system based on relationships to a more formal system with transparent rules that apply equally to all market participants.

These economies, according to Witold Henisz, Wharton Professor of Management, are revising their approach to the global economy as resource-rich nations gain clout with today’s booming commodity markets. They are still willing to integrate with international markets and allow foreigners to help build their economic infrastructure, but are demanding a greater share of the benefits.

But what I would like to know is when is a country no longer considered to emerging? It seems some countries like India, China, and South Korea in particular, where per capita income is over $20,000 (well above most countries in South Asia, East Asia, and Latin America), have been “emerging forever”. Given that we are now experiencing a huge shift in the global economy, where many emerging markets are starting to become middle class and where there will soon be One Billion additional global consumers in emerging markets in ten years, this is becoming an important question. (Especially since it is estimated that the economies of these countries will surpass the combined economies of the developed countries in 25 years.) It’s a very good question – and one that some of our best economic minds should be working on.

At this point, it’s clear that China and India are still emerging. When you consider the dismal shape of infrastructure in India and the fact that, in China, household income is 10 times higher in urban coastal cities (like Shanghai) than in rural inland provinces, it’s clear these countries each have a good decade to go at the minimum. But it seems to me that countries like South Korea are almost there.

Consider the purchasing power parity index as reported by the World Bank for 2006. Canada, an established developed country that falls 20th on the list, has a PPP of 34,610. South Korea has a PPP of 23,800. In both countries, if you earned this income level, it appears that you’d pay approximately 15% federal tax. In Canada, you’d have an additional provincial (state) tax of 10%. Thus, after taxes, a Canadian who made 34,610 would likely get to keep about 25,960. A South Korean who made the equivalent of 23,800 in Won would likely get to keep about 20,230. Emerged? I don’t know – but this calculation seems to indicate that if it’s not, it’s almost there.

And when you consider that some companies are now looking at places like Madagascar, as reported by Ashton Udall over on the Product Global blog, to continue to keep their production costs low, it’s clear that some companies are starting to see certain ’emerging’ markets as having ’emerged’ as they are no longer achieving the labor and production savings they have come to expect from ’emerging’ markets with their ‘low cost country sourcing’ strategy.

Any other bloggers want to chime in with their thoughts?