Chapter 3.pptx - Lecture Note Chapter 3 Classic Theories of...

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Lecture Note Chapter 3 Classic Theories of Economic Growth and Development University of Waterloo Department of Economics Econ 207: Economic Growth and Development 1 Spring 2017
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Introduction Our aim in this lecture is to provide a historical overview of the major development theories put forth during the past half century. The theories are presented in historical sequence. The key features of each theory are presented, along with a discussion of it’s major contributions and limitations. It is emphasized that, while the theories are often competing in nature, each offers valuable insights into the development process.
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The Classic Theories of Economic Development The post World War II literature on economic development has been dominated by four major and sometimes competing strands of thought: - The linear-stages of growth theory - Theories and patterns of structural change - The international dependence revolution - The neoclassical counter revolution
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The Classic Theories of Economic Development The first generation of development experts was highly influenced by two world events: - The Great Depression of the 30s (1929-1933) . - The industrialization of the former Soviet Union .
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The Classic Theories of Economic Development 1950-1960: The theories of 1950s and 1960s viewed the process of economic development as a series of successive stages through which all countries must pass. Correct mixture and quantity of saving (S), investment (I)and foreign aid are needed to follow the economic growth process. Development was synonymous with economic growth. The development economists were mostly from developed countries and they rely on two strands of thought- Marshall Plan and the historical transformation of the developed countries.
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The Classic Theories of Economic Development 1970: Two competing schools of thought emerged to replace the linear stages approach: Structural change models: A typical developing nation must undergo a structural change if it wants to succeed in generating and sustaining economic growth. International Dependence Revolution: Underdevelopment must be viewed in terms of international and domestic power relations; institutional and structural economic rigidities and the resulting proliferation of dual economies and dual societies both within and among the nations of the world.
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The Classic Theories of Economic Development 1980: Neoclassical counterrevolution: emphasizes the beneficial role of markets, open economies and the privatization of inefficient public enterprises.
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The classic Theories of Economic Development 1. Development as growth and linear-stages-theory -Harrod-Domar model -Rostow’s stages of growth model 2. Structural-change models -The Lewis model (two sector surplus labor model) -The Chenery model (patterns of development analysis) 3. The international dependence revolution - Neocolonial dependence model -The false paradigm model -The dualistic development thesis 4. The neoclassical free market counterrevolution -Challenging the statist model
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