It deals with the fundamental questions of development and underdevelopment. it tries to show the percapita income variations of countries across time and space

1. 1
Sebastopol College
Post Graduate Program
Development Theory and Policy (PPM 511)
Target: Project Planning and Management
students (Weekend)
By: Yismaw Ayelign (PhD)
June 25, 2022

2. Course Description
 The Course deals with:
 the basic understanding of the concepts and theories
of development,
 processes of development planning & strategies and
 performance of development programs.
2

3. It focuses on:
 the various theories, approaches and practical
examples in development planning and policy.
growth theories, models and approaches, development
policies, programs and
projects pertinent to developing country contexts.
3

4. 4
Objective
s of the
Course
Equip students with detailed
theoretical and applied
knowledge of development
theory and policy
Enhance
students’
knowledge that
enables them
to analyse
theoretical and
applied
development
planning
models and
policy issues.
Familiarize
students with
dynamic
growth and
development
models
relevant for
policy in the
Ethiopian
context

5. Course Contents
1. Economic development: Concept,
approaches and Measurement
1.1. Conceptualization of economic growth and
development
1.2. Traditional and modern economic measures
1.3. Basic indicators and holistic measures of
development
1.4. Objectives of development 5

6. 2. Characteristics of Developing World
2.1. Defining the Developing World and structural features
2.2. Basic Indicators of Development and Holistic Measures of
Living Levels
2.3. Dominance and Structure of Informal Market and
Vulnerability to various shocks
2.4. Dualism of Financial and Labour Market
2.5. Agrarian Based Economics and Transforming African
Economics
6

7. 3. Theories of Economic Growth and
Development
3.1. Classic Theories of Economic Growth and Development
3.2. Growth Models (Endogenous vs Exogenous Model;
Balanced vs Unbalanced, and Inward Vs Outward Looking
Growth Models)
3.3. Contemporary Models of Development and
Underdevelopment
3.4. Empirical Applications of Development Models to
African and Ethiopian Economy: Examinations 7

8. 4. Economic Growth, Poverty, and Inequality
4.1. Conceptualization of Income Distribution and
Development
4.2 Measuring inequality
4.3 Poverty, Inequality, and Social Welfare
4.4 Characteristics of high-poverty groups
4.5 Policy Options on Income Inequality and Poverty
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9. 5. Factors of Development: More Focus on
Population Theory
5.1. Natural resource endowment
5.2. Population growth and labour market
5.3. Capital formation and foreign investment
5.4. Population Growth and Development: Causes,
Consequences, and Controversies
5.5. Technological progress, Efficiency: Total Factor
Productivity 9

10. Mode of Delivery
lectures,
collaborative learning activities and
independent study.
Method of Assessment:both a continuous assessment
and exams as follows:
 Midterm Exam 15%
 Projects and Presentation 20%
 Journal Review and Presentation 15%
 Final Exam 50%
10

11. References
 Todaro, M. P., Smith, S.C. (2015). Economic
Development (12th Ed.). Pearson, Addison Wesley.
 Jhingan, M. L. (2011). The economics of development
and planning (40th Ed.). Vrinda Publications.
 Thirlwall, A. P., & Pacheco-López, P.
(2017). Economics of development: theory and
evidence (10th Ed.). Bloomsbury Academic.
11

12.  Ray, Debraj. (1998). Development Economics. Princeton,
NJ: Princeton University Press.
 Jha, S. N. And Mathur, P.C. (1999). Decentralization and
Local Politics. New Delhi: Sage Publications
12

13. Chapter One:
Economic development: Concept, approaches
and Measurement
Fundamental questions of development economics
Why do living conditions differ so drastically for people
across countries and regions, with some so poor and
others so rich as well as over time?
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14.  Why are there such disparities not only in income and
wealth, but also in:
 health,
nutrition,
education,
freedom of choice,
women’s autonomy,
environmental quality, access to markets, security, and
political voice? 14

15.  Why is output per worker many times higher in some
countries than others? Causes of labor productivity
differentials
 Why are populations growing rapidly in some
countries, while on the verge of shrinking in others?
 Why are public services so inefficient, insufficient,
and corrupt in some countries and so effective in
others?
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16.  Why have some formerly poor countries made so
much progress, and others so comparatively little?
Economic Development vs. Economic Growth
 Economic growth refers to a rise in real national
income per capita, i.e.
 a rise in the inflation-adjusted, per person, value of
goods and services produced by an economy.
 This is a relatively objective measure of economic
capacity.
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17.  It is widely recognized and can be computed with
varying degrees of accuracy for most economies.
 The definition of Development encompasses:
increases in the material well-being of individuals
improvements in basic health and education.
changes in the structure of production (from
agriculture toward manufacturing and productive
modern services),
Income distribution
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18. improvement in the environment, greater economic
equality, or an increase in political freedom.
Thus, economic development is a multidimensional
concept, one not readily captured by any single
measure/variable.
NB: economic growth is a means to development but it
is not an end by itself,
i.e. a mere growth is not considered as development
unless it is translated in to other qualitative dimensions
described in the previous slide 18

19.  Not only the level of per capita income but how that
income is
 produced,
 spent, and
 distributed within and
between countries determines development
outcomes.
19

20. Contemporary definition of Development
 The process of improving the quality of all human
lives and capabilities by raising people’s levels of
living, self-esteem, and freedom.
 Problem of economic development refers to problem
of accounting for the observed pattern, across
countries and over time,
in levels and
rates of growth of per capita income.
20

21.  To understand the magnitude of the global challenge
of development,
 it is essential to be able to track what has happened to
an economy over time and make comparisons between
countries.
21

22. 1. Stylised Facts about Global Income Inequality
Country
Per capita GDP in
Population
(millions)
Manufacturing
share of GDP
1981 2020 1981 2019 1981 2020
Ethiopia 303.45 826.95 36 112 4.4 5.3
Kenya 1086.64 1475.19 10.58 7.61
Rwanda 439.17 834.39 15.74 9.00
India 401.48 1797.76 16.77 13.1
New Zealand
24405.92 39870.2 26.04 9.99 (2018)

23. Country Per capita GDP in Population
(millions)
Manufacturing
share of GDP (%)
1981 2020 1981 2020 1981 2020
South Korea
4282.34 31264.94 21.83 24.81
Malaysia 3159.54 10616.85 21.30 22.28
Indonesia 1130.87 3756.91
13.43
(1983) 19.88
China 447.12 10,430.73 26.18
Japan

24. Country Per capita GDP in Population
(millions)
Manufacturing
share of GDP in
1981 2020 1981 2020 1981 2020
Netherlands
25969.77 46327.68 15.85 10.77
Israel
27024.51
(1995) 36563.94
DRC
1019.47 500.57
8.84
(1996)
18.99
Ghana
869.83 1940.68 5.97 10.47
Singapore 58056.8 20.54
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25. Traditional measures of development)
 development has traditionally meant achieving
sustained rates of growth of income per capita to
enable a nation to expand its output at a rate faster
than the growth rate of its population.
changes in national income: two basic measures viz:
i) Gross national product (GNP) is the sum of the
value of finished goods and services produced by a
citizens of a nation during a given time period.
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26. Here, the issue is who has produced it. e.g.
 Gross domestic product (GDP) counts all output
produced within the borders of a country, including
output produced by resident foreigners, but excludes
the value of production by citizens living abroad. The
issue is where it is produced
e.g.
 GNP or GDP divided by total population provides a
measure of per capita income.
26

27. Economic growth refers to changes in per capita
income over time. E.g.
real GDP and real GDP per capita
i.e. per capita gross domestic product adjusted for
domestic price inflation.
Nominal versus Real GDP
Nominal GDP is the value of all final goods and
services produced in a given year when valued at the
prices of that year.
27

28. Hence, GDP that is not adjusted for inflation is
called Nominal GDP.
Any change that can happen in the country‘s
GDP is due to changes in price, quantity or both.
• Real GDP is the value of final goods and services
produced in a given year when valued at the prices
of a reference base year. (adjusted for inflation).
Any change that can happen in the country‘s
GDP is due to changes in quantity only.

29. Year Product Quantity Unit price ($)
2020 (base year) X 20 5
Y 8 50
2021
X 25 20
Y 10 100
Example: Consider an economy producing two goods, X and Y.
In 2021: The outputs of 2021 valued at the prices of 2020(the base year).
Nominal GDP= (25 x 20) + (10 x 100) = $1500
Real GDP = (25 x 5) + (10 x 50) = $625
In 2020:
Nominal G DP = (20 x 5) + (8 x 50) = $500
Real GDP = (20 x 5) + (8 x 50) = $500
Note that both the real and nom inal GDP
values are exactly the same in the base year.

30.  Modern Measures of Development
As development is multidimensional, it is to be
measured from different perspectives
30

31.  Sustainable Development Goals
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32. 32

33. Objectives of Development
 We may conclude that development is both a physical
reality and a state of mind in which society has, through
some combination of social, economic, and
institutional processes, secured the means for obtaining
a better life.
 Whatever the specific components of this better life,
development in all societies must have at least the
following three objectives:
33

34. i) To increase the availability and widen the
distribution of basic life-sustaining goods
such as food, shelter, health, and protection
ii) To raise levels of living, including, in addition to
higher incomes, the provision of more jobs, better
education, and greater attention to cultural and human
values, all of which will serve not only to enhance
material wellbeing but also to generate greater
individual and national self-esteem
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35. iii) To expand the range of economic and
social choices available to individuals and nations by
freeing them from servitude and dependence, not only
in relation to other people and nation-states, but also to
the forces of ignorance and human misery
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