Indogenous and exogenous_growth_approach

1. Third Chapter
Approaches to Growth

2. The Endogenous Growth Theory
• The endogenous growth theory is the concept that economic growth is
due to factors that are internal to the economy and not because of
external ones. The theory is built on the idea that improvements in
innovation, knowledge, and human capital lead to increased productivity,
positively affecting the economic outlook.
• A long run growth determined by the internal forces, particularly those
forces governing the opportunities and incentives to create technological
knowledge.
• Much importance on the ‘productivity increase’

3. • Endogenous growth with technological development
• Endogenous growth with capital formation

4. Exogenous Growth Theory
Growth affected by the factors not contained in the model.
Change in population growth, saving rate and climate factors can
affect economic growth.
There is a debate on the importance of endogenous and
exogenous factors on economic growth.
Which factors have more importance on economy?

5. Top down approach
top-down approaches are considered as development planned
by experts at the top, who also lead the process.
Advantages
• Clear and well organized process
• Less confusion
• Less misunderstandings (As all directions flow in one
direction).

6. Continued
Disadvantages
• The success of development programmes largely depends on
the acceptance by the local people and their willingness to
participate in them.
• provide little opportunity for people's participation in the
total development efforts, who are thus marginalized.
• Top-down planners look for solutions rather than focus on
specific problems of the poor.
• They keep trying to achieve the same objectives using the
same plan year after year, even though they failed several
times.

7. Bottom Up Approach
It aims to encourage a process of local participation in every
aspect of development policy.
Objectives:
• To involve local community
• To draw out ideas and generate initiatives
• To build consensus
• To delegate decision making power
The bottom up approach requires developers to support the
following values
• To respect ideas and people
• To recognise the ideas and needs of the people
• To introduce transparency

8. Bottom Up
Advantages
• Bottom up approach is much more responsive for diverge
territorial needs.
• Emphasize the participation of local community in
development policy
• Can select their own goals and the means of achieving them.
• ensure community ownership, and commitment and
accountability to the development project as it seeks
development from below
• Bottom-up approaches ensure that the projects are cost
effective, sustainable and replicable

9. Disadvantages
• development projects with bottom-up approaches are
dominated by the elite.
• Cannot ensure success in case of big project.
• Harder to arrive at a decision.

10. • Two different development approaches have been analyzed,
but they are not a panacea for the solution of poverty. Both of
them have strengths and shortcomings. Top-down approaches
are not always synonymous with failure, nor are bottom-up
approaches always successful. Top-down efforts of
development failed to bring changes in the lives of poor
compared to the time and money spent over the decades.
While, on the other hand, bottom-up institutions like NGOs
and civil society organisations are not successful in all parts of
the world.

11. Continued
National consensus, strategic direction, facilitation, coordination,
providing framework and tools for local initiatives, mobilising
natural resources and capacity building can be achieved by
the top-down approaches
while bottom-up approaches are crucial for specifying poverty,
ensuring ownership and commitment, mobilising local assets
and knowledge, and promoting local innovation in order to
achieve holistic development.

12. Basic Need approach to Development
Gives priority to meet the basic needs of all people.
(Ensuring food, water and other material needs such as shelter,
clothing for all, covers fulfillment of the standard of nutrition,
universal provision of health and education and other non-material
needs such as employment, participation and other political rights.)
It is not a sophisticated idea rather the idea for development which
indicates the reduction of deprivation.
Streeten (1979) emphasizes six types of needs in the form of food and
nutrition, basic educational services, basic health services,
sanitation, water supply, and housing.
Indeed, Streeten (1979) includes a full list of ‘non-material needs’ such
as ‘self-determination, self-reliance, political freedom and security,
participation in decision making, national and cultural identity, and
a sense of purpose in life and work

13. Continued
• The basic need approach to development is more concerned
with the elimination of poverty and reduction of inequality.
• It focuses on the communities needs, deficiencies and
problems.
• This is not only concerned with the physical survivals, but also
to access to services, employment and decision making and
providing a real basis for participation.
• According to this approach if people get food with quality
nutrition, education and health service, and other civic
amenities like water supply, water sewerage etc there will be
a position that will represent economic development.

14. Participatory Approach to Development
• Participation in decision making and implementation.
• Engaging local people in development projects.
• Participation has been regarded as “generally devoting the
involvement of a significant number of persons in situations
or actions which enhance their well being” (Cohen and Up
Hoff, 1980).
• “in the context of development, participation refers to an
active process whereby beneficiaries influence the direction
and execution of development projects rather than merely
receive a share of project benefits” (Paul, 1987).
• participation is the process in which individuals and families
assume responsibilities for their own development.

15. Continued
• World Bank defines participation in development as a process
of equitable and active involvement of all stakeholders in the
formulation of development policies and strategies and in the
analysis, planning, implementation, monitoring and
evaluation of development activities.
Participation must be ensured in all of the cases of the following
stages:-
• Participation in identifying the needs.
• Participation in programme design like programme objectives,
benefits and costs, location, etc.
• Participation in implementation
• Participation in sharing.

16. Continued
Participation is the key to sustainable development initiatives,
since it leads to
• Building on existing potentials and capacities
• A greater sense of ownership on the part of the stakeholders.
• Increased commitment to the objectives and outcomes
• Longer term social sustainability
• Increased self-help capacities
• Stronger and more democratic institutions and partnerships.

17. Green Growth
• Green growth is related with environmentally sustainable
growth.
• Green growth is a strategy of investing in natural capital, thus
making “green” a driver of economic growth that is
ecologically sustainable. Green growth can also be used as an
efficient strategy to support the implementation of the 2030
Agenda for Sustainable Development.
• Green growth, or environmentally sustainable economic
growth as defined by the Ministerial Declaration at MCED 5, is
a strategy of sustaining economic growth and job creation
necessary to reduce poverty in the face of worsening resource
constraints and climate crisis.

18. Continued
• Green growth is closely related with the term of green
economy, low carbon and sustainable development.
• Achieving Green growth means promoting economic growth
not harming the natural capital on which our lives depends. It
aims to respect bio-diversity, environment and our working
condition. It also focuses on the reduction of green house gas
emissions.
• The green growth approach focuses to harmonize economic
growth with environmental sustainability, while improving the
eco-efficiency of economic growth and enhancing the
synergies between environment and economy

19. Continued
• According to the OECD, Green Growth means fostering
economic growth and development, while ensuring that
natural assets continue to provide the resources and
environmental services on which our well-being relies.
• The green growth includes the benefits of increasing the
efficiency of resource usage, reduction of waste and energy
consumption, poverty reduction and employment generation,
allocating resources to its highest usage.
• Green growth involves maximizing synergies between
environmental, social, and economic development outcomes
and managing the costs, trade-offs and uncertainties.

20. Blue Economy
• According to the World Bank, the blue economy is the
"sustainable use of ocean resources for economic growth,
improved livelihoods, and jobs while preserving the health of
ocean ecosystem.“
• European Commission defines it as "All economic activities
related to oceans, seas and coasts. It covers a wide range of
interlinked established and emerging sectors.“
• Conservation International adds that "blue economy also
includes economic benefits that may not be marketed, such as
carbon storage, coastal protection, biodiversity.“

21. Continued
• The Center for the Blue Economy says "it is now a widely used
term around the world with three related but distinct
meanings- the overall contribution of the oceans to
economies, the need to address the environmental and
ecological sustainability of the oceans, and the ocean
economy as a growth opportunity for both developed and
developing countries."

22. Continued
The UN specifies Blue Economy as a range of economic activities
related to oceans, seas and coastal areas, and whether these
activities are sustainable and socially equitable.
An important key point of Blue Economy is sustainable fishing,
ocean health, wildlife, and stopping pollution.
The UN states that the Blue Economy should “promote economic
growth, social inclusion, and the preservation or improvement
of livelihoods while at the same time ensuring environmental
sustainability of the oceans and coastal areas”.

23. Why are we concerned with Blue Economy
• The OECD describes the ocean as the next great economic frontier
as it holds potential for wealth and economic growth, employment
and innovation.
• The economy includes existing businesses such as fisheries, coastal
tourism and shipping, and also focuses on the development of new
emerging sectors.
• Blue Economy has the power to obtain better governance of marine
ecosystems, lower emissions and be a player in fighting climate
change.
• Oceans are popular sites for renewable energy. Alternative energy
sources such as wind energy, hydropower and tidal energy are
fitting for marine environments

24. • The blue economy represents enormous potential for
sustainable economic activity and job creation.
• The blue economy is a specific part of the green economy that
focuses on the sustainable use of oceanic resources.
• The blue economy aims for improvement of human wellbeing
and social equity, while significantly reducing environmental
risks and ecological scarcities.

25. Policies for Blue Economy
• Collaboration between countries to exchange successful
strategies, information, knowledge and best practices;
• Facilitating the deployment of new technologies and
innovations to create and drive environmentally-compatible
industries.
• Developing the economic empowerment and resilience of
communities living around oceans, seas, lakes and rivers.
• building economic instruments to leverage environmental
protection.

26. challenges of the Blue Economy
• To understand and better manage the many aspects of
oceanic sustainability, ranging from sustainable fisheries to
ecosystem health to preventing pollution.
• Secondly, the blue economy challenges us to realize that the
sustainable management of ocean resources will require
collaboration across borders and sectors through a variety of
partnerships.
• Lack of strong marine policy, weak ocean governance, and
unsustainable use of ocean resource.

27. Green Economy
A green economy is defined as low carbon, resource efficient,
ecology and environment friendly economic system that
focuses on economic growth without harming the
environment.
In a green economy, growth in employment and income are
driven by public and private investment into such economic
activities, infrastructure and assets that allow reduced carbon
emissions and pollution, enhanced energy and resource
efficiency, and prevention of the loss of biodiversity and
ecosystem services.

28. Continued
In order to move to a green economy, the following measures must be
taken:-
• Reviewing government policies and redesign them to stimulate
shifts in production, consumption and investment patterns.
• Paying attention to rural development with the aim of alleviating
poverty in the countryside with increasing resources.
• Paying attention to the water sector, controlling its use and
rationalizing it, and preventing its pollution.
• Working on sustainable investments in the field of energy and
measures to raise energy efficiency.

29. Continued
• Establishing low-carbon strategies for industrial development
and adopting more efficient production technologies in new
factories.
• Adopting land classification systems and mixed-use
development and adopting environmental standards in
construction.
• Addressing the problem of municipal solid waste and
investing it in a beneficial and environmentally friendly way.

30. Objectives
• Reduction of energy consumption
• Reduction of greenhouse gas emissions and the amount of
waste generated during the entire lifecycle of a product.
• Reduction of the consumption of natural resources with
increasing the efficiency of their use.
• Ensuring the conservation of biodiversity.
• Reduction of environmental risks and scarcity of resources.
• Reduction of carbon emissions and pollution, while enhancing
the efficiency of resource and energy use.

31. Benefits of Green Economy
• Generating of good quality of life by decreasing
environmental risks and ecological scarcity.
• Reduction of production and costs resulting in a more
responsible use of raw materials and an increase of efficient
energy consumption.
• reduction of waste through recycling and reuse of products
that have reached the end of their life cycle.
• Improvement in human well-being through decreasing
environmental risks.
• It helps to fight against climate change.
• Improves the ecosystem.
• Leads towards sustainable development.
• Poverty reduction and increase in equity.

32. Challenges:
• Lack of sound planning in the field of development policies.
• The spread of unemployment among many segments
• Poverty
• Global warming
• An expensive option
• Finance and technology crisis.

33. Regional Developemnt
According to OECD, regional development is a broad term but
can be seen as a general effort to enhance well-being and
living standards in all region types, from cities to rural areas,
and improve their contribution to national performance and
more inclusive, resilient societies.
Regional development is thus not only measured in incomes, the
number of jobs, and demographic trends in a certain area, but
it can also point to the more general dynamics such as
innovation and creativity in the region in focus.
In the Keynesian welfare state, regional development was
associated with regional policies aiming to overcome uneven
development between different regions of the territorial
state.

34. Continued
It indicates removing disparities in case of the development of
different regions in a country.
Regional development is the agenda of regional policies in order
to deal with ‘regional problem’.
Regional development is seen as a process of innovation and
entrepreneurship aiming at growth of a region that will later
contribute to the solution of regional problem.
Regional development is linked with addressing the problems
and issues of a region through undertaking development
policies that is carried out towards the region of a state.
Regional development encourages economically disadvantaged
communities to improve their economic, social, cultural and
environmental well being.

35. Objective of regional development:-
• To improve the development of endangered regions.
• To encourage employment (through retraining and combating
structural unemployment)
• To ensure long term development.
• To ensure the well-being and life quality of people.
• To ensure development for all by reducing regional disparities
and inequalities.
• Helping regions and helping people(Ensuring development for
all communities)
• Social stability

36. • Keynesian models (J. Keynes, J. Hicks, W. Rostow, R. Harrod, E. Domar)
To ensure high growth rates based on high growth rates of investment,
deep structural changes in the economy at the expense of external and
internal sources of development
Neoclassical theory (W. Lewis, G. FayG. Ranis, A. Hirschman, E.
Heckscher,B. Olin)
Carry out transition to a modern economy by increasing the
competitiveness of domestic products on the foreign market, the
comparative advantages of the country in international trade, to ensure
high growth rates of per capita income of the population by increasing
employment, improving the quality of human resources and human
capital accumulation
Institutionalist theory (M. Weber. A. Toynbee, K. Wittfogel, G. Myrdal, K.
Polanyi, R. Coase)
Improve the basic needs of all members of society at the expense of
investment in human capital, poverty eradication, legal availability, reduce
inequalities, increase employment. Reduce transaction costs of regional
development. Develop internal and external communication in the region

37. • Evolutionary theory (A. Alchian, R. Nelson, S. Winter, S. Y. Glazev, V. L.
Makarov, V. Majewski, A. Nove, J. Stiglitz)
To increase the productivity of production through the periodic change of
technologies, products, organizations and institutions, to carry out a
process of natural selection, competition, implementing innovations
based on the interaction of external and internal factors, as well as under
the influence of control actions and goal setting
Behavioral theory (G. Simon, R. Heiner, R. Suerte, D. March)
Exercise selection and convergence of coalition goals of the organization in
terms of bounded rationality of participants, the presence of multiple
objectives, incomplete information, or excessive in its volume
Theory of strategic management (H. Mintzberg, M. Porter, B. Alstrend, J.
Lempel)
To ensure a steady state (i.e., configuration) of the region in the external
environment and its transformation into a new state on the basis of the
changes of the organization itself, and of its external environment. To
promote the development of external relations and self-organization of
the region. Create a competitive advantages of the region on the basis of
strategic assets as factors of sustainable development

38. Features of regional development in Developing economies:-
• Regional imbalances
• Importance on higher economic growth rate
• Existence of inconsistency in sectoral-regional policies
• Economic and social differences and income differences
between different regions
• Ignoring the capabilities and bottlenecks of regional
development.
• Improper spatial (geographical) distribution of investments
(especially by the private sector)
• Centralization of developmental functions in central urban
areas and peripheralization of other areas

39. Green Revolution and Agricultural Modernization
The Green Revolution that is specially known as Agricultural Revolution
caused by the transfer of technology in the field of agriculture that
leads to high yields and productivity.
Increase in the production of food grains by incorporating high yield
varities associated with large amount of fertilizer and pesticides to
ensure high yields.
Factors that causes green revolution includes modern irrigation
system, technological development in agriculture, high yielding
varieties, multiple cropping, provision of agricultural credit,
development in research in agriculture, development in agriculture,
land reform, farmers education and training, advanced machinery
in agriculture, use of fertilizer and pesticide, increase of marketing
facilities, government support and subsidy etc.

40. Effect of Green Revolution
Positive
•Poverty reduction
•Increase in food production
and decrease in real food
price
•Increase in crop productivity
•Crop genetic improvements
•Return to crop improvement
research investment
•Handling feeding challenge
of increased population
Negative
•Pests and pesticides
•Environment and bio-
diversity
•Excessive pressure on
water.
•Impacts on soil.
•Extinction of different
verities of crops
•Impact on farmers health
•Change in consumption
pattern

41. Local Economic Development
According to International Labor Organization, Local Economic
development is promoting participation and local dialogue,
connecting people and their resources for better employment
and a higher quality of life for both men and women.
It is not only limited to economic growth.
According to the OECD, the purpose of local development is
building the capacity of a defined area to improve the growth
and living standard of its habitants.