1

Chapter 3

Classic Theories of Economic Development

2

Development as Growth and the Linear-Stages Theories Rostow’s stages of growth The Harrod-Domar growth model Obstacles and constraints Some criticisms of the stages model

3

sYS

KI

(3.1)

(3.2)

YkK (3.3)

IS (3.4)

The Harrod-Domar Model

4

The Harrod-Domar Model

IKYksYS (3.5)

YksY (3.6)

k

s

Y

Y

(3.7)

5

Structural-Change Models

The Lewis theory

6

Figure 3.1

7

Figure 3.2

8

Structural-Change Models

The Lewis theory Structural change and patterns of

development Conclusions and implications

9

The International-Dependence Revolution The neoclassical dependence model The false-paradigm model The dualistic-development thesis Conclusions and implications

10

The Neoclassical Counterrevolution Challenging the statist model

Free market approach Public choice approach Market-friendly approach

Traditional neoclassical growth theory Conclusions and implications

11

Theories of Development: Reconciling the Differences Development economics has no universally

accepted paradigm Insights and understandings are continually

evolving Each theory has some strengths and some

weaknesses

12

Concepts for Review

Autarky Average product Capital-labor ratio Capital-output ratio Capital stock Center Closed economy Comprador groups

Dependence Dominance Dualism Endogenous growth False-paradigm model Free market Free-market analysis

13

Concepts for Review (cont’d)

Harrod-Domar growth model

Lewis two-sector model Marginal product Market-friendly

approach Necessary condition

Neoclassical counterrevolution

Neocolonial dependence model

New institutionalism New political economy

approach Open economy

14

Concepts for Review (cont’d)

Patterns-of-development analysis

Periphery Production function Public choice theory Savings ratio Self-sustaining growth

Solow neoclassical growth model

Stages-of-growth model of development

Structural-change theory

Structural transformation

Sufficient condition

15

Concepts for Review (cont’d)

Surplus labor Traditional neoclassical

growth theory Underdevelopment

16

Figure A3.1

17

Figure A3.2