<< Chapter < Page Chapter >> Page >

    Example:

  • The U.S., Canada and Australia faced very favorable initial conditions in 18th and 19th century. There was an abundance of land, fairly temperate climates, and good endowments of natural resources. But the initial conditions facing most (not all) poor countries were much less favorable and many had to cope with the damages left by centuries of colonialism, in Africa and Latin America. In the great majority of cases, colonialism was especially damaging to institutions, to soils, to system of governance etc.

So, it is evident that “one size never fits all” , even as between poorer countries as a group, there are just too many differences in initial conditions and subsequent conditions. However, early 20 th century models of economic growth were based on the idea that one size fits all

Let us also consider generalizations about development. The first important generalization. It is very difficult to make defensible generalization about economic development. We are, after all, talking about 160/170 odd nations that are conventionally called emerging, or less developed and 40 countries that are called nearly developed .

In fact, there are as many differences between individual developing countries as there are differences between developing countries and developed ones. This is not surprising given vast difference between developing countries. These include differences in:

  • Cultures
  • Natural resource endowment
  • Climate ( 500 years ago tropical regions were richer then in Northern climates)
  • Colonial Past ( Much of sub-Sahara Africa’s lower per capita GDP stem from its colonial heritage )
  • Ideological Differences
  • Leadership Differences

Growth models- old and new

Let us examine some 20th century models in Growth and Development. Not 30 years ago most courses on economic and development spent at least a month focused on models purporting to capture the essence of growth and development.

In this book we will spend only a few hours on them, mostly as a place-marker in the history of economic thought.

First was the Harrod-Domar Model a widely taught (circa 1950-55) model (see Chapter 4, textbook). Harrod-Domar This model was developed by Roy Harrod and Evsey Domar in the 1950s. The model is single-mindedly focused on investment in physical capital (the concept of human capital was not formal until the sixties). was concerned exclusively with rule of Physical capital accumulation in economic growth. This is an extremely simple model, formulated by desk-bound professors and taught by desk-bound professors to other desk-bound economists.

This model led to shallow thinking and more importantly, to some misapplied policies. The author remembers clearly the Vice President of the World Bank, Hollis Chenery, in 1975 lecturing to the Indonesian Ministers of Finance and Planning on the singular importance of Physical capital accumulation.

As one result of the dominance of this approach, there was a widespread tendency to think of the structure of the Harrod-Domar model as a reflection of the real world. Many then viewed parameters of Harrod-Domar as actually pertaining to world experience. A list of disastrous policies by aid donors and recipient governments attributed to thinking fostered by misuse of variants of the Harrod-Domar model, presented below: A more detailed presentation of the Harrod-Domar model may be found in Dwight Perkins, Stephen Radelet and David Lindauer , Economics of Development, (6th edition 2006, Chapter 11).

Questions & Answers

what is balance of payment
Tih Reply
I don't know
Somkenechukwu
balance of payment is the sum total of a country receipt for her exports and the total payments made for her imports.
dajan
discuss collusion of An oligopoly
Fikile Reply
ɧơɯ Ćąŋ ɖɛmąŋɖ Ćɧąŋɠɛ ŧơ want
henry Reply
what is money
Ngea Reply
money is everything
Pranav
a regulatory object between producer and consumer of monetary system
Vipul
money is anything generally accepted for the payment of goods and services and for the settlement of debt
Angel
a regulatory object of good and services between producer and consumer ( all these comes under monetary system)
Vipul
what is price surveillance?
Berry Reply
what is favourable balance of trade
Ngea
what is demand
Oluchi Reply
what are two classical macroeconomics and what're their theories say about their equations?
AMARA Reply
what is the formula for calculating elasticity
aza Reply
mpp÷APP
Umar
what is elasticity of demand?
Rita Reply
hello
Osanday
hi
SHERO
flexibility of demand in terms of price , income and tax ratio .
Vipul
Causes of economic growth
pierre Reply
What is elasticity of demand
pierre
What are the causes of economic growth
pierre
economic growth, establishment of industry, encourage of investor's, farm productivities, creation of institutions, construction of good road etc
Oyewale
elasticity of demand can be said to be the responsiveness of demand to a change in prices
fateemah
impact of collusion in the economy referring to inefficiencies illustrated by means of graph
nondumiso Reply
The Factor price will determine the choice of techniques to produce.Expantiate
dajan
what is elasticity of demand?
Etta Reply
state and explain two types of demand
Etta
Institution involved in money market
Gande Reply
what is Economics
Kwame Reply
Economic is the study of scarcity
Kolade
Economics is the study of a lot of things. It is split up into two areas of study, Microeconomics and Macroeconomics. Microeconomics is the study of an individual's choices in the economy and Macroeconomics is the study of the economy as a whole.
The
Economics is a science that studies human scarcity
Agnes
What is Equilibrium price?
Agnes
Equilibrium is the market clearing price. The point at which quantity demanded equals quantity supplied. The point at which the supply and demand curves intersect.
The
Equilibrium price*
The
Refers to the study of how producers use limited resources to satisfy human unlimited wants
Gatoya
why is economics important
Derrick Reply
why economics important
feleke
name four ways to encourage the development of trade amongs country
Miracle
Difference between extinct and extici spicies
Amanpreet Reply
Got questions? Join the online conversation and get instant answers!
Jobilize.com Reply

Get the best Algebra and trigonometry course in your pocket!





Source:  OpenStax, Economic development for the 21st century. OpenStax CNX. Jun 05, 2015 Download for free at http://legacy.cnx.org/content/col11747/1.12
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Economic development for the 21st century' conversation and receive update notifications?

Ask