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In the 1950Ps and 1960Ps, linear-stages-ofgrowth models were popular. These models were replaced in the 1970Ps by structural change models. In the 1980Ps and 1990Ps the neoclassical counterrevolution focused on the beneficial role of free markets, open economies and the privatization of public enterprises.
In the 1950Ps and 1960Ps, linear-stages-ofgrowth models were popular. These models were replaced in the 1970Ps by structural change models. In the 1980Ps and 1990Ps the neoclassical counterrevolution focused on the beneficial role of free markets, open economies and the privatization of public enterprises.
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In the 1950Ps and 1960Ps, linear-stages-ofgrowth models were popular. These models were replaced in the 1970Ps by structural change models. In the 1980Ps and 1990Ps the neoclassical counterrevolution focused on the beneficial role of free markets, open economies and the privatization of public enterprises.
Copyright:
Attribution Non-Commercial (BY-NC)
Verfügbare Formate
Als ODP, PDF, TXT herunterladen oder online auf Scribd lesen
Four Approaches Linear-Stages-of-Growth Models Structural-Change Models International Dependence Revolution Four Approaches
Four major and often competing development
theories, all trying to explain how and why development does or does not occur. Newer models often draw on various aspects of these classical theories.
In the 1950¶s and 1960¶s, linear-stages-of-
growth models were popular. They described the process of development as a series of successive stages. These models were replaced in the 1970¶s by Structural Change and International Dependence models. Structural change models emphasized the internal process of structural changes that a developing country must go through, while international dependence models viewed underdevelopment in terms of international and domestic power relationships, institutional and structural rigidities and the resulting proliferation of dual economies and dual societies both within and among nations of the world. In the 1980¶s and 1990¶s the neoclassical counterrevolution focused on the beneficial role of free markets, open economies and the privatization of public enterprises and suggested that the failure of some economies to develop is a result of too much government intervention and regulation. Linear-Stages-of-Growth Models ± Rostow¶s Stages of Growth ± Harrod-Domar¶s Growth Model
The thinking here was that the
developing countries could learn a lot from the historical growth experience of the now developed countries in transforming their economies from poor agrarian societies to modern industrial giants. Emphasized the role of accelerated capital accumulation. Rostow¶s Stages of Growth Rostow argued that economic development can be described in terms of a series of steps through which all countries must proceed: 1. The Traditional Society 2. The Pre-conditions for take-off into self-sustaining growth 3. The Take-off 4. The Drive to Maturity 5. The Age of High Mass Consumption Advanced nations were considered well beyond the take-off stage while underdeveloped nations were seen as still in the traditional or pre-conditions stages. Emphasized the need for the mobilization of domestic and foreign investment in order to accelerate growth. Rostow¶s model states that countries may need to depend on a few raw material exports to finance the development of manufacturing sectors which are not yet of superior competitiveness in the early stages of take- off. In that way, Rostow¶s model allows for a degree of government control over domestic development not generally accepted by some ardent free trade advocates.
As a basic assumption, Rostow believes that
countries want to modernize as he describes modernization, and that the society will ascent to the materialistic norms of economic growth. Traditional Societies
Traditional societies are marked by their
pre-Newtonian understanding and use of technology. These are societies which have pre-scientific understandings of gadgets, and believe that gods or spirits facilitate the procurement of goods, rather than man and his own ingenuity. The norms of economic growth are completely absent from these societies. Preconditions for Take-off
The preconditions to take-off are, to
Rostow, that the society begins committing itself to education, that it enables a degree of capital mobilization, especially through the establishment of banks and currency, that an entrepreneurial class form, and that the secular concept of manufacturing develops, with only a few sectors developing at this point. This leads to a take off in ten to fifty years. The Take-off
Take-off then occurs when sector led
growth becomes common and society is driven more by economic processes than traditions. At this point, the norms of economic growth are well established. Transition from traditional to modern economy The Drive to Maturity
The drive to maturity refers to the need
for the economy itself to diversify. The sectors of the economy which lead initially begin to level off, while other sectors begin to take off. This diversity leads to greatly reduced rates of poverty and rising standards of living, as the society no longer needs to sacrifice its comfort in order to strengthen certain sectors. Age of High Mass Consumption
The age of high mass consumption refers to the
period of contemporary comfort afforded many western nations, wherein consumers concentrate on durable goods, and hardly remember the subsistence concerns of previous stages.
in the age of high mass consumption, a society
is able to choose between concentrating on military and security issues, on equality and welfare issues, or on developing great luxuries for its upper class. Criticism
Strong bias towards western model of
modernization (free vs. controlled markets, China). Tries to fit economic progress into a linear system Harrod-Domar Growth Model (AK Model)
Following on Rostow¶s theory theAK model
describes the mechanism by which more investment leads to more growth. Pointed to the necessity of net additions to the capital stock
Used to explain an economy's growth rate in
terms of the level of saving and productivity of capital. It suggests there is no natural reason for an economy to have balanced growth. Concepts of Growth Warranted growth - the rate of output growth at which firms believe they have the correct amount of capital and therefore do not increase or decrease investment, given expectations of future demand.
Natural rate of growth - The rate at which the labour
force expands, a larger labour force generally means a larger aggregate output. Actual growth - The actual aggregate output change.
There is no guarantee that an economy will achieve
sufficient output growth to sustain full employment in a context of population growth.
The problem arises when actual growth either exceeds
or fails to meet warranted growth expectations. A vicious cycle can be created where the difference is exaggerated by attempts to meet the actual demand, causing economic instability. Components
± Capital stock (K)
± Output (Y) - GDP ± Capital-Output ratio (k): the dollar amount of capital needed to produce a $1 stream of GDP. K/Y or K/Y
± Savings (S) and the savings ratio (s): the fixed
proportion of national output that is used for new investment. s/k = So S = sY (1) Net investment is the change in the capital stock I = K (2) Remember that k = K/Y or K/Y, so that K = kY (3) Net savings must equal to net investment so that S = I. Combining (1), (2) and (3): sY = kY Y/Y Y/Y is the growth rate of GDP. Increasing the savings rate, increasing the marginal product of capital, or decreasing the depreciation rate will increase the growth rate of output; So the growth rate of GDP is determined jointly by the savings ratio, s, and the national capital-output ratio
So the rate of growth of GDP is positively
related to the economies savings ratio and negatively related to the economies capital-output ratio.
The more economies save and invest, the
faster they can grow but the actual rate of growth is measured by the inverse of the capital-output ratio ± the output-capital ratio. The fact that LDCs savings levels are often not enough to meet the levels suggested by the linear-stages models, the need to fill the ³savings gap´ was used to justify massive transfers of capital and technical assistance from developed countries to LDCs.
More savings and investment is not a sufficient condition
for accelerated rates of economic growth. Many LDCs lack the necessary structural, institutional and attitudinal conditions to convert new capital effectively into higher levels of output. They also lacked the complementary factors of production (e.g. skilled labour and managerial competence).
Also the development strategies proposed by the stages
models failed to take into account the global environment in which developing countries exist ± one in which development strategies can be thwarted by external forces beyond the countries control. Structural Change Models ± Lewis Two-Sector Model ± Patterns-of-Development Approach
These models tend to emphasize the
transformation of domestic economic structures from traditional subsistence agriculture economies to more modern, urbanized and industrially diverse manufacturing and service economies. Lewis Two-Sector Model The economy consists of two sectors ± The traditional agricultural sector is typically characterized by low wages, an abundance of labour, and low productivity through a labour intensive production process.
± the modern manufacturing sector is defined by higher wage
rates than the agricultural sector, higher marginal productivity, and a demand for more workers initially Labour can be withdrawn from the traditional sector without any loss of output
Focus is on labour transfer and output and employment
growth in the modern sector. The rate at which this occurs is determined by the rate of industrial investment and capital accumulation in the modern sector.
Wages in the industrial sector are fixed at a premium
above wages in the traditional sector. It is assumed that rural labour supply is perfectly elastic. Lewis assumed that with the urban wage above the average rural wage, that the modern-sector employers could hire as many surplus rural workers as the wanted without fear of rising wages
The successive reinvestment of profits from the modern
sector would increase the production possibilities of that sector leading to successive increases in the demand for labour. The employment expansion in the industrial sector would continue until all the excess labour from the traditional sector is absorbed. From that point onwards, modern sector wages would rise in order for industrial employers to attract additional workers from the traditional sector.
Improvement in the marginal productivity of labour in the
agricultural sector is assumed to be a low priority as the hypothetical developing nation's investment is going towards the physical capital stock in the manufacturing sector. Over time as this transition continues to take place and investment results in increases in the capital stock, the marginal productivity of workers in the manufacturing will be driven up by capital formation and driven down by additional workers entering the manufacturing sector. Eventually, the wage rates of the agricultural and manufacturing sectors will equalize as workers leave the agriculture for the manufacturing, increasing marginal productivity and wages in the agriculture while driving down productivity and wages in manufacturing.
The end result of this transition process is that the
agricultural wage equals the manufacturing wage, the agricultural marginal product of labour equals the manufacturing marginal product of labour, and no further manufacturing sector enlargement takes place as workers no longer have a monetary incentive to transition.
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