Rosenstein-Rodan, Nurkse, and Hirschman proposed developmentalist theories after WWII to address how to promote economic development in less developed nations. Rosenstein-Rodan's "big push" theory argued for large-scale, coordinated investments across many industries to trigger self-sustaining growth. Nurkse advocated for "balanced growth" through simultaneous increases in supply and demand across many sectors. Hirschman argued for "unbalanced growth" through priority investments that create productive imbalances and linkages between industries.
The classical growth theory argues that economic growth will decrease or end because of an increasing population and limited resources Classical growth theory economists believed that temporary increases in real GDP per person would cause a population explosion that would consequently decrease real GDP.
The classical growth theory argues that economic growth will decrease or end because of an increasing population and limited resources Classical growth theory economists believed that temporary increases in real GDP per person would cause a population explosion that would consequently decrease real GDP.
Characteristics of underdeveloped economiesGeorgi Mathew
discussing the features of under developed or developing countries with special reference to India. helpful for school and college who try to understand the characteristics of Indian economy from the angle of developing economy.
The classical theory of Economic DevelopmentSharin1234
The Classical theory of economic development is the sum total of all theories of classical economists. The views of Adam Smith, Malthus, and Mill on Economic development form the crux of the classical theory of development. Though they differ on a number of development issues, the essence of the classical approach to development is the same.
Characteristics of underdeveloped economiesGeorgi Mathew
discussing the features of under developed or developing countries with special reference to India. helpful for school and college who try to understand the characteristics of Indian economy from the angle of developing economy.
The classical theory of Economic DevelopmentSharin1234
The Classical theory of economic development is the sum total of all theories of classical economists. The views of Adam Smith, Malthus, and Mill on Economic development form the crux of the classical theory of development. Though they differ on a number of development issues, the essence of the classical approach to development is the same.
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Lime - Push notifications. The big way.Petr Dvorak
How to properly implement mobile push notifications and how to scale them big? What technologies and infrastructure is needed? Check out these slides from #mDevTalk by Avast, Etnetera and Ackee to find out.
The Theory and Practice of Banking: A power point presentationNiki Hannevig
If the purpose of The 1776 Declaration of Independence was to "dissolve the political bands which have connected them with another", what was the purpose of post-Civil War "reconstruction"?
How were 18th Century Whigs and Tories connecting colonists with bankers?
Is there a solution? If so, what is that solution?
Learn more about alienable "Rights"; what they were and how they have been conveyed without full disclosure.
Below are the links for this presentation:
The Theory and Practice of Banking (book format) - https://archive.org/stream/theoryandpracti01maclgoog#page/n501/mode/1up
The Theory and Practice of Banking (PDF format) - https://ia600304.us.archive.org/1/items/theoryandpracti01maclgoog/theoryandpracti01maclgoog.pdf
Why the Confederacy Failed - https://archive.org/details/whyconfederacyfa00rose
Lackawanna Jurist - http://books.google.com/books/download/Lackawanna_Jurist.pdf?id=LK04AAAAIAAJ&hl=en&capid=AFLRE72oH90TsgYw4sAUMH00K4-CFU5CoJvz14k9TzhgG_CPI5mbNtIydhbqkIbq1jUvABvc38VZNfV79nuq2XM_6jc-AU-u-w&continue=http://books.google.com/books/download/Lackawanna_Jurist.pdf%3Fid%3DLK04AAAAIAAJ%26output%3Dpdf%26hl%3Den
Theories and models for Regional planning and developmentKamlesh Kumar
This is a work on the major theories of Regional planning mainly consisting the work of Francois Perroux, Gunnar Myrdal, Albert O. Hirschman, Walter Whitman Rostow and John Friedman.
ECON3501
CARIBBEAN ECONOMIC
DEVELOPMENT
UNIT 4 – ECONOMIC GROWTH
RESOURCE MATERIALS
Levitt, Kari; Witter, Michael (1996). The Critical Tradition of Caribbean Political
Economy: The Legacy of George Beckford. Kingston. Ian Randle Publishers
Beckford; George (2000) Persistent Poverty; Underdevelopment in the Plantation
Economies of the Third World. UWI Press.
Todaro Michael & Smith Stephen; C. (2011) 11th Ed. Economic Development. Pearson
Education & Addison-Wesley
Bhagwati Jagdish (2004). In Defence of Globalization, Oxford University Press
Blackman; Courtney. (2005). The Practice of Economic Management: Caribbean
Perspective Kingston: Ian Randle Publishers
United Nations- UNDP, Human Development Report. World Bank-World
Development Report
2
ECONOMIC GROWTH
Economic growth has two meanings.
Firstly, and most commonly, growth is defined as an increase in the
output that an economy produces over a period of time based on per
capita. That is, an increase in GDP or GNI per capita.
The second meaning of economic growth is an increase in what an
economy can produce if it is using all its scarce resources.
An increase in an economy’s productive potential can be shown by an
outward shift in the economy’s production possibility frontier (PPF).
3
PER CAPITA STATISTICS
Per Capita is used to refer to a unit or each
person within a population.
A country’s economic growth and comparison
of living standards among countries can be
expressed using GDP per capita or GNI per
capita information.
Per capita GDP or GNP is simply a country’s
GDP or GNP divided by its population.
Using per capita statistics is a better measure
of the well-being for the average person.
Bahamas, The
2019 34,863.70
Puerto Rico
2019 32,873.70
Turks and Caicos Islands
2019 31,353.30
St. Kitts and Nevis
2019 19,935.00
Curacao
2019 19,689.10
Barbados
2019 18,148.20
Trinidad and Tobago
2019 17,398.00
Antigua and Barbuda 2019 17,112.80
Uruguay
2019 16,190.10
Panama
2019 15,731.00
Top 10 countries in the Latin America and Caribbean
region for 2019 based on figures from Worldbank.org
4
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ZJ-BS
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ZJ-PR
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ZJ-TC
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ZJ-KN
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ZJ-CW
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ZJ-BB
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ZJ-TT
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ZJ-AG
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ZJ-UY
https://data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=ZJ-PA
THE PRODUCTION POSSIBILITY FRONTIER
(PPF)
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Trade policies in developing countries have been central to the analysis of international development economists over the past decades. The desire for rapid economic growth in developing countries has raised many questions about the relationship between trade and growth. This PPT examines the fact that the policies adopted in many developing countries have often been very different from those emanating from rational allocation models and have provided researchers/ students with a wide scope for analyzing their effects.
Fiduciary or paper money is issued by the Central Bank on the basis of
computation of estimated demand for cash. Monetary policy guides the Central
Bank’s supply of money in order to achieve the objectives of price stability (or low
inflation rate), full employment, and growth in aggregate income.
Chapter 9
Industrial Recruitment
*
In previous classes, we have introduced some US government facts as well as some historical and theoretical background of business-government relations. Starting from this week, we are going to focus on business-government relations in economic development, especially in local context.
Today we will cover chapter 9 = industrial recruitment. We will look a various economic theories, cluster theory, political context of local economic development, and industrial recrtuiment.
Economic growth contributes to an increase in consumption which benefits all sectors of the economic community.
Despite the dynamic in the growth loop, economic growth can not be indefinite (e.g., land is limited).
*
An economy will reach a natural equilibrium if capital can flow without restrictionCapital mobility: capital will flow from high cost areas to low cost areasEquilibrium: overall market and all areas will reach a state of equal statusNo government intervention:
opposing government regulations on the movement of firms
attracting capital with community’s resources (e.g., land, labor, infrastructure, financial incentives, etc.)
*
Location theoryFactors affecting a firm’s location choiceGovernment should enhance the location with government performance, policies, and resourcesEconomic base theoryLocal demands vs. external demands Government should recruit businesses that have a market beyond the local area and encourage export-oriented industries.
Location theory, on the other hand, seeks to explain an area’s competitiveness in terms of firms’ locational orientation—what factors of an area contribute to a firm’s location choice. Location theorists assume that firms, in order to maximize their profits, choose locations that minimize the cost of transporting goods to the market place. Unlike the neoclassical school, location theorists generally assert that government should play a critical role in enhancing the location. A capable, cooperative, and responsive government can potentially better meet business’ needs for land, infrastructure such as transportation and roads, education, and other public services.
Economic base theory analyzes growth from the demand side rather than the supply side. It differentiates the economic activities of an area into two components—those which meet the local demands and those which satisfy the demands outside the community. The former is non-basic, which does not lead to growth, while the latter is basic, which will generate local wealth and jobs.
*
Growth pole theoryA dynamic industry with a competitiveness edge in capital, technology and political influence is a pole of growth.Government should help expand the core industry.Central place theoryCritical role of urban centersGovernment should direct resources to the development of a central place
Growth pole theory rejects neoclassical theorists’ claim that growth “should” flow to less costly regions and argues that in ...
Similar to Developmentalist theories of economic development (20)
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Developmentalist theories of economic development
1. Chapter 5
Developmentalist Theories of
Economic Development
Authors: James M. Cypher and James L. Dietz
By Dhattaluck Boondhammadheerawoot
2. Presentation Paths
• Introduction of developmentalist theories of
economic development
• Brief concept of 3 scholars in developmentalist
theories of economic development
• Summary
• Discussion
3. Introdution: Objectives of this chapter
• Better understand
– Theory of the big push by Paul Rosenstein-Rodan
(the Austrian economist)
• The concept of hidden development potential in less-
developed nations
– Theory of balanced growth by Ragnar Nurkse
(the Finnish economist)
• Export pessimism and the need for domestic
industrialization
– Unbalanced growth by Albert O. Hirschman
(the German-born economist)
4. Introduction
• Developmentalist theories of economic
development has been occurred after the Second
World War with “Marshall Plan”
• Marshall Plan (from its enactment, officially the
European Recovery Program, ERP)
– Marshall Plan was the primary program, 1948–51, of
the United States for rebuilding and creating a
stronger economic foundation for the countries of
Western Europe.
– Marshall Plan was the reconstruction plan, developed
at a meeting of the participating European states and
was established on June 5, 1947 as postwar economic
reconstruction of Europe.
5. Introduction
• Referral to 3 scholars, they formed a loose
school of thought on the issue of economic
development
– Emphasize a less theoretical and more historical
and practical approach to the question of
– How to develop, particularly in relation to the
applicability of neoclassical models, such as the
Solow model (in the last chapter)
– There were differences of emphasis and
interpretation between these theorists.
6. Introduction
• Concept behind of 3 theorists
– They preferred for industrialization as the driving force of
economic growth.
– Industrialization would release a tide of prosperity lifting all
other sectors of the economy.
– Respect for market forces -> Not hesitate to advocate large-
scale, short-term governmental intervention into the
economy.
– In the long term, an economy would achieve its best results
with a competive market interacting with a responsive and
efficient governmental apparatus.
– Role of government in development would be reduced to its
stabilizing function, as in the already-developed nations.
(Markets are perceived as a means to realizing the end of
economic development; they are not an end in themselves.)
8. The Theory of the Big Push
by Paul Rosenstein-Rodan
• Much of his work focused on the increasing returns
from large-scale planned industrialization projects
• Rosenstein-Rodan formulated this theory on the basis
of research he had conducted during the Second
World War.
• Hi-light >> Call attention to the hidden potential for
economic development in less-developed regions
because they possessed the hidden potential for
greater progress; the resources and talents of society
simply needed to be coordinated and released.
9. The Theory of the Big Push
by Paul Rosenstein-Rodan
• Large-scale investments (A “big push”) in several
branches of industry would lead to a favorable
synergistic interaction between these branches and
across sectors.
• In less-developed nations, it would have to come from
a concerted and substantial “push” from government
to create, effectively, and entire industrial structure.
• More investment was needed and in many places at
one time in order to shift the economy away from its
low-level equilibrium trap and toward rapid and
sustainable growth.
10. The Theory of the Big Push
by Paul Rosenstein-Rodan
• Individual entrepreneurs would be not possible to
invest enough to “push” the less-developed
economy forward at its maximum potential rate
<< the profit-and-loss calculations of private
entrepreneurs and resources are limited.
• Social overhead capital is important for the big
push theory >> generate positive external
benefits to society as a whole (public
investment).
11. The Theory of the Big Push
by Paul Rosenstein-Rodan
• Virtuous circle effect
– An expanding manufacturing sector that raises
productivity then stimulates income growth.
– In turn, it leads to increasing demand for the products
of the expanding manufacturing sector.
– Increasing growth in this manufacturing sector could
lead to increasing demand for inputs (produce on a
larger scale)
– Result: Lower the costs of production for the
manufacturing sector which could lead to increasing
demand for the product and growth.
12. Summary of The Theory of the Big Push
• Big push >> investment simultaneously in a number of branches of
industry and emphasis on social overhead as fundamental to the
success of the development project in less-developed nations.
• 4 innovations (Contribution in the area of development
economics)
– Disguised unemployment: Their labor could be tapped to
create the vast public works of social overhead capital without
reducing output in the economy.
– Complementarity and the external economies of distinct
investments >> Large-scale investments could have an impact
on overall economic growth greater than calculations of
individual entrepreneurs alone.
13. Summary of The Theory of the Big Push
– Social overhead capital >> Endogenous growth
methods (Chapter 8)
– Big push results in “technological external
economies” >> Large-scale industrialization could
contribute to a socially beneficial level of labor
training that would have spread effects to other
sectors throughout the economy.
15. The Theory of Balanced Growth
by Ragnar Nurkse
• Hi-light
– Increase in the amount of capital utilized in a wide
range of industries if industrialization has a chance
of being achieved (like Rossenstein-Rodan
emphasized).
– Key for development process in less-developed
nations
• Massive injection of new technology, new
machines, and new production processes spread across
a broad range of industrial sectors.
16. The Theory of Balanced Growth
by Ragnar Nurkse
• Nurkse was branded an “export pessimist”
– He worked on assumption based upon the weak
pattern of prices for traditional primary exports
from the less-developed nations in twentieth
century.
• Export pessimism and the need of domestic
industrialization
– Contrast with doctrine in trade theory >> less-
developed nations should foster economic
progress by increasing their exports of tropical
products and raw material products.
17. The Theory of Balanced Growth
by Ragnar Nurkse
– 2 reasons
1. In future, those demands would be relatively limited
and slow to expand.
• An increase in supply under such conditions would result in a decrease in
the market price.
– The reduction in price could be a magnitude that the total revenue
received (= unit price X quantity of the product sold on the world
market).
– After an increase in supply could be less than the export income.
2. In orthodox trade theory, it was assumed that
– A less-developed nation with the ability to export either tropical
products and/ or raw materials would use the income earned to
import machinery, equipment, and manufactured consumer goods
for domestic consumption.
– High income consumers would spend inordinately on imported
luxury products to “keep up with the Joneses” of the richer nations.
18. Summary of The Theory of Balanced Growth
by Ragnar Nurkse
• In less-developed nations, small incremental increases in capital formation
would not solve the problem because an individual business or a single
industry alone attempted to raise its output and risk of not finding a market
for its product because of the low level of overall average income (similar to
Rosenstein-Rodan).
• Solution: Balance investment program >> Large-scale increases in supply
across a large number of industrial sectors would at the same time, be met by
a large-scale increase in demand created by the same expansion.
– This income would be transposed into a further expansion of demand by other
firms and by workers in those firms buying the increased array of domestic
goods available.
“If supply increases were coordinated with simultaneous demand increases
across the economy.”
– Fiscal policies could have a very positive effect on the prospects for
development without large –scale government involvement in production
decisions or large-scale planning projects.
19. Summary of The Theory of Balanced Growth
by Ragnar Nurkse
– Nurkse advocated forced savings through an increase in
taxes on upper-income recipients.
– The increased investment funds generated could be
allocated to the most promising industrial sectors via
government-operated development banks designed to
identify and promote industrialization in the private
sector or via private sector banks.
• This leads to an increase in the supply of available domestic
output via enhanced capital formation.
• A market for domestically produced goods would be created
because potentially competing imports would be deflected via
tariffs to the purchase of lower-priced domestically produced
goods known as “Import substitution industrialization”
(Chapters 9 and 1 0 )
21. Unbalanced Growth
by Albert O. Hirschman
• Hirschman’s work was to be interpreted as an
attack on the theory of big-push or balanced
growth.
• He supported an “industrialization” and
believed that the key to rapid industrialization
was to be found in large-scale capital
formation in several industries and sectors.
22. Unbalanced Growth
by Albert O. Hirschman
• Hirschman advocated the unbalancing of the
economy, creating disequilibrium situations, for 2
reasons.
– There were resource limits in the less-developed regions
and that this would necessitate prioritizing some areas of
industry over others for the use of limited investment
funds.
• It’s impossible to move invest in all industries at the
same time as was envisioned in the big-push and
balanced growth theories.
– The pressure from unbalancing the economy and in creating
excess capacity in some areas and intensifying shortages in
other areas results in subsequent reactions >> speed the
development process by opening up opportunities for profit
for new entrepreneurs.
23. Unbalanced Growth
by Albert O. Hirschman
• Backward and forward linkages
– They were important in evaluating where to locate the initial
investment.
• Development strategies could be built around the
maximization of the estimated stimulus of promoted
industries in generating domestic backward and forward
linkages.
– Backward linkages: When one industry expands, it requires
inputs from other industries to be able to produce.
– Forward linkages: When an industry sells and transports its
production to other firms and sectors in the economy.
>> The production of one firm in one industry has a multiplicity
of backward and forward linkages with firms in other
industries.
24. Unbalanced Growth
by Albert O. Hirschman
• Changing the social organization of the labor process
– This is to advance for promoting a capital-intensive,
unbalanced industrialization program in less-developed
nations, according to exceedingly lax standards in the
workplace.
– He suggested that introduction of more advanced machine-
paced techniques, it would become easier both to calculate
reasonable work-norms and to evaluate both success and
failure in completing tasks.
• Workers and managers would be created as a complementary effect
of industrialization, with positive and cumulative spin-off effects for
other industries.
• Attitudes toward efficiency and responsibility on the job would also
be transmitted to society at large.
Note: There’s study of the significance of achievement attitudes to deliver output per worker in
Mexico (Focus 5.2).