Classic_Theories_of_Developement

Classic_Theories_of_Developement - Click to edit Master...

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Unformatted text preview: Click to edit Master subtitle style 9/28/11 Copyright 2009 Lecture Note - Classic Theories of Economic Growth and Development University of Waterloo Department of Economics Fall 2011 9/28/11 Copyright 2009 Introduction Our aim 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 its major contributions and limitations. It is emphasized that, while the theories are often competing in nature, each offers 9/28/11 Copyright 2009 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 9/28/11 Copyright 2009 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. 9/28/11 Copyright 2009 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 strategies through which each countries must pass. Correct mixture and quantity of saving, investment and foreign aid are needed to follow the economic growth process. 9/28/11 Copyright 2009 The Classic Theories of Economic Development 1970: Two competing schools of thought emerged: Structural change models: A typical developing nation must undergo a structural change if it wants to succeed in generating and sustaining economic growth. 9/28/11 Copyright 2009 The Classic Theories of Economic Development 1980: Neoclassical counterrevolution: emphasizes the beneficial role of markets, open economies and the privatization of inefficient public enterprises. 9/28/11 Copyright 2009 The classic Theories of Economic Development 1. Development as growth and linear-stages- theory-Harrod-Domar model-Rostows stages of growth model 2. Structural-change models-The Lewis model (two sector surplus labor model)-The Chenery model (patterns of 9/28/11 Copyright 2009 Development as Growth and Linear-Stages Theories Share the central role of savings and capital formation as their basic theme (capital fundamentalism). Capital was regarded as the binding constraint for the economy. The strategies for any take off is to mobilize the domestic and foreign saving in order to generate sufficient investment to accelerate economic growth....
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