Introduction to Development Economics

BOOK COVER......Page 1
HALF-TITLE......Page 2
TITLE......Page 3
COPYRIGHT......Page 4
CONTENTS......Page 5
PREFACE TO THE THIRD EDITION......Page 11
PREFACE TO THE SECOND EDITION......Page 12
PREFACE TO THE FIRST EDITION......Page 13
ACKNOWLEDGEMENTS......Page 15
Low per capita real income......Page 17
Unemployment, under-employment and disguised unemployment and low productivity......Page 41
Predominance of agriculture in the national economy......Page 42
Foreign trade......Page 43
Land......Page 44
Capital market......Page 45
Is per capita real income a valid index for measuring development of the LDCs?......Page 46
1.6  HUMAN DEVELOPMENT INDEX......Page 49
APPENDIX 1A  MEASUREMENT OF INCOME INEQUALITY......Page 51
APPENDIX 1B  A NOTE ON PRODUCTION FUNCTIONS......Page 52
The constant elasticity of substitution production function......Page 54
2.2  CLASSICAL SCENARIO......Page 58
The limitations of the classical model......Page 59
2.3  THE KEYNESIAN THEORY AND LESS-DEVELOPED COUNTRIES......Page 60
2.4  THE HARROD-DOMAR MODEL AND ITS APPLICATIONS......Page 62
2.5  THE NEOCLASSICAL THEORY AND LESS-DEVELOPED COUNTRIES......Page 63
Application of the neoclassical theory to LDCs......Page 66
2.6  MARX’S THEORY AND LESS-DEVELOPED COUNTRIES......Page 67
Neo-Marxist theory of underdevelopment......Page 69
Evaluation of the neo-Marxist theory of underdevelopment......Page 70
2.7  THE KALDOR-MIRRLEES MODEL......Page 71
2.8  THE NEOCLASSICAL GROWTH ACCOUNTING FORMULA AND THE NEW ENDOGENOUS GROWTH THEORY......Page 73
‘Endogenous growth theories’ and LDCs......Page 74
APPENDIX 2  THE BASIC EQUATIONS OF THE NEOCLASSICAL ECONOMIC GROWTH MODEL......Page 77
Lewis’s model with ‘unlimited’ supply of labour......Page 81
Surplus labour and the growth of the economy......Page 82
Criticism of Lewis’s model......Page 83
Empirical tests of Lewis’s model......Page 84
3.3  THE FEI-RANIS MODEL......Page 85
Evaluation of the FR model......Page 87
3.4  THE JORGENSON MODEL......Page 89
Evaluation of the Jorgenson model......Page 90
3.6  THE KELLY ET AL. MODEL......Page 91
3.7  DUAL ECONOMY MODELS: A CRITIQUE......Page 92
APPENDIX 3......Page 94
4.1  THE NEED FOR INVESTMENT CRITERIA IN LESS-DEVELOPED COUNTRIES......Page 97
4.2  THE CAPITAL TURNOVER CRITERION......Page 98
4.4  THE MAXIMIZATION OF THE RATE OF CREATION OF INVESTIBLE SURPLUS PRINCIPLE......Page 99
Evaluation of the MRIS criterion......Page 100
4.5  THE REINVESTIBLE SURPLUS CRITERION......Page 101
Evaluation of the reinvestible surplus criterion......Page 103
4.6  BALANCED AND UNBALANCED GROWTH......Page 106
An evaluation of unbalanced growth theory......Page 107
A reconciliation between BG and UBG theories......Page 108
APPENDIX 4  THE DICHOTOMY BETWEEN SAVINGS AND OUTPUT MAXIMIZATION AND ITS SOLUTION......Page 109
5.2  THE NATURE OF MONEY MARKETS IN LESS-DEVELOPED COUNTRIES......Page 111
5.3  MONEY AND ECONOMIC GROWTH......Page 112
5.4  INFLATION AND ECONOMIC GROWTH......Page 113
Mundell’s model of inflation and growth......Page 114
5.6  FISCAL POLICY AND GROWTH......Page 118
Fiscal policy in an open economy......Page 119
Peacock and Shaw model......Page 120
5.7  DEFICIT FINANCING AND LESS-DEVELOPED COUNTRIES......Page 121
Direct taxes in LDCs......Page 123
Indirect taxes in LDCs......Page 125
The case for and against VAT in the LDCs......Page 127
5.9  TAXATION AND DOMESTIC RESOURCE MOBILIZATION IN LESS-DEVELOPED COUNTRIES: THE RECENT EVIDENCE......Page 128
5.10  TAX REFORMS IN LESS-DEVELOPED COUNTRIES IN THE 1980S......Page 129
6.2  THE CONCEPT OF FOREIGN RESOURCES......Page 131
6.3  CRITERIA FOR DISTRIBUTION OF FOREIGN RESOURCES......Page 132
6.4  DIFFERENT TYPES OF FOREIGN RESOURCE: TIED AND UNTIED; BILATERAL AND MULTILATERAL; PROJECT AND PROGRAMME......Page 135
6.6  BILATERAL AND MULTILATERAL FINANCING......Page 136
6.7  DUAL-GAP ANALYSIS AND ITS EVALUATION......Page 137
Evaluation of the dual-gap model......Page 139
6.8  GAINS AND LOSSES OF INVESTMENT BY THE MULTINATIONAL CORPORATIONS IN LESS-DEVELOPED COUNTRIES: SOME THEORETICAL ISSUES......Page 141
6.9  PRIVATE FOREIGN INVESTMENT AND THE TRANSFER OF TECHNOLOGY TO LESS-DEVELOPED COUNTRIES......Page 145
Transfer of technology and alternatives for LDCs......Page 146
Types of transfer of technology......Page 147
Benefits and costs of transfer of technology to the MNCs......Page 148
Some policies to deal with the problems of transfer of technology and MNCs......Page 150
The principle of distribution of the SDRs......Page 152
Arguments in favour of the ‘link’......Page 153
Arguments against the ‘link’......Page 154
Empirical evidence about the allocation, use and resource transfer of SDRs......Page 155
6.11  FOREIGN AID AND ECONOMIC GROWTH......Page 157
7.1  POPULATION AND ECONOMIC DEVELOPMENT......Page 201
7.2  POPULATION EXPLOSION IN LESS-DEVELOPED COUNTRIES AND THE THEORY OF DEMOGRAPHIC TRANSITION......Page 203
7.3  LOW-LEVEL EQUILIBRIUM TRAP......Page 204
Fertility and mortality......Page 205
Fertility and education: importance of female education......Page 206
Fertility and income......Page 208
7.5  POVERTY AND INCOME DISTRIBUTION......Page 209
7.6  INCOME INEQUALITY......Page 210
Growth, inequality and poverty......Page 214
7.8  REDISTRIBUTION WITH GROWTH......Page 218
7.9  THE EMPLOYMENT PROBLEM......Page 219
7.10  THE TODARO MODEL......Page 221
Harris-Todaro model (1970)......Page 223
Fields’ model (1975)......Page 224
7.11  MIGRATION THEORY AND EVIDENCE: AN ASSESSMENT......Page 225
7.12  STARK’S MODEL......Page 227
7.13  EMPLOYMENT POLICY......Page 228
APPENDIX 7A  THE DEFINITION OF A POVERTY LINE......Page 229
APPENDIX 7B  SCHULTZ’S MODEL OF THE HOUSEHOLD PRODUCTION APPROACH TO FERTILITY......Page 231
8.2  THE ROLE OF AGRICULTURE IN ECONOMIC DEVELOPMENT......Page 234
8.3  THE CONCEPT OF ‘MARKETED SURPLUS’......Page 235
Marketed surplus and terms of trade......Page 236
8.4  A MODEL TO MOBILIZE AGRICULTURAL SURPLUS......Page 239
Empirical estimates......Page 241
8.5  ACREAGE RESPONSE TO PRICES......Page 242
8.6  MARKETED SURPLUS, SIZE-HOLDINGS AND OUTPUT......Page 246
8.7  LIMITATIONS OF PRICE POLICY AND SOME ALTERNATIVES......Page 248
NOTES......Page 249
9.2  THE NATURE OF THE GREEN REVOLUTION......Page 250
9.3  CAUSES OF THE GREEN REVOLUTION......Page 254
9.5  EFFECTS OF THE GREEN REVOLUTION ON RELATIVE FACTOR SHARES......Page 258
Role of public policy......Page 261
9.7  THE BASIC NEEDS APPROACH......Page 263
9.8  GROWTH THEORY AND BASIC NEEDS......Page 264
Causes of famine......Page 267
10.2  THE ROLE OF TARIFFS IN ECONOMIC DEVELOPMENT......Page 272
10.3  THE OPTIMUM TARIFF ARGUMENT......Page 273
10.4  THE INFANT INDUSTRY ARGUMENT......Page 275
10.5  DISTORTIONS IN THE FACTOR MARKETS......Page 277
10.6  THE BALANCE OF PAYMENTS ARGUMENT......Page 278
10.8  ‘NOMINAL’ AND ‘EFFECTIVE’ RATES OF PROTECTION......Page 279
Non-traded goods......Page 282
10.9  THE ‘COST’ OF PROTECTION......Page 284
10.10  ECONOMIC GROWTH AND TRADE......Page 286
10.11  TERMS OF TRADE BETWEEN DEVELOPED COUNTRIES AND LESS-DEVELOPED COUNTRIES......Page 287
The Prebisch thesis......Page 288
10.12  EXPORT INSTABILITY AND ECONOMIC GROWTH IN LESS-DEVELOPED COUNTRIES......Page 289
10.13  THE ROLE OF THE UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT AND SOME TRADE POLICIES TO HELP LESS-DEVELOPED COUNTRIES......Page 290
10.14  NON-TARIFF BARRIERS, GENERALIZED SYSTEM OF PREFERENCES AND TRADING BLOCKS......Page 292
10.15  REGIONAL CO-OPERATION AMONG LESS-DEVELOPED COUNTRIES......Page 293
10.16  TRADE LIBERALIZATION AND INDUSTRIALIZATION......Page 294
The theory of export-led growth......Page 296
10.17  THE NORTH-SOUTH MODELS AND INTRA-INDUSTRY TRADE......Page 299
NOTES......Page 300
Index of divergences from the exponential least squares line (ELSI,)......Page 301
Transitory income index of Knudsen and Parnes (1975) (TKPI)......Page 302
11.2  TYPES OF PLANNING......Page 303
11.4  THE CASE FOR AND AGAINST PLANNING......Page 304
Aggregate models: the Harrod-Domar model......Page 306
11.6  APPLICATION OF THE HARROD-DOMAR MODEL IN DEVELOPMENT PLANNING: INDIA’S FIRST FIVE YEAR PLAN......Page 307
11.7  A TWO-SECTOR HARROD-DOMAR MODEL FOR PLANNING: THE KENYAN CASE......Page 308
11.8  FELDMAN-MAHALANOBIS SECTORAL PLANNING AND THE INDIAN SECOND FIVE YEAR PLAN......Page 309
Evaluation of the FM model......Page 310
11.9  MACROECONOMETRIC MODELS IN DEVELOPMENT PLANNING......Page 311
11.10  INPUT-OUTPUT ANALYSIS IN DEVELOPMENT PLANNING......Page 312
The assumptions of the IO analysis......Page 313
General formulation of LP problems......Page 316
The graphical solution......Page 317
Duality......Page 319
11.12  MICRO-PLANNING: AIMS OF COST-BENEFIT ANALYSIS......Page 320
Some basic principles of CBA......Page 321
The decision rules in CBA......Page 322
Reasons for undertaking CBA in LDCs......Page 323
LM methods of estimation......Page 324
The accounting rate of interest......Page 325
11.14  THE UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION (1972) GUIDELINES......Page 328
Social accounting matrices......Page 330
Social accounting multipliers......Page 332
NOTE......Page 333
APPENDIX 11  THE FELDMAN-MAHALANOBIS MODEL......Page 334
The Mahalanobis model......Page 335
12.1  INTRODUCTION......Page 338
12.2  THE EVOLUTION OF THE NEW INTERNATIONAL ECONOMIC ORDER......Page 339
12.3  THE MAIN OBJECTIVES OF A NEW INTERNATIONAL ECONOMIC ORDER......Page 341
12.4  THE THEORY OF COMMODITY PRICE STABILIZATION: DEMAND/SUPPLY SHIFTS......Page 342
12.5  COMMODITY PRICE STABILIZATION: GAINS AND LOSSES......Page 344
12.6  IMPLICATIONS OF INTERNATIONAL COMMODITY AGREEMENTS, BUFFER STOCKS AND COMPENSATORY FINANCES......Page 346
12.7  CONCLUSION......Page 347
13.2  THE EVOLVING DEBT POSITION OF THE DEVELOPING WORLD......Page 350
13.3  WHY DO DEVELOPING COUNTRIES BECOME INDEBTED?......Page 352
13.4  SOURCES OF EXTERNAL FINANCE......Page 353
13.5  WHY DO DEBT SERVICING PROBLEMS ARISE?......Page 354
The first oil-price ‘shock’......Page 355
The second oil-price ‘shock’......Page 356
The Baker Plan......Page 357
Muddling through: the view from the banks......Page 358
Muddling through: the view from the developing world......Page 359
The emergence of market-based debt reduction......Page 360
13.8  PHASE TWO: DEBT FORGIVENESS AND THE BRADY PLAN......Page 361
The case for and against debt forgiveness......Page 362
13.9  CONCLUSIONS......Page 365
14.1  INTRODUCTION......Page 367
14.2  DEFORESTATION AND MACROECONOMIC ENVIRONMENT......Page 368
14.3  ‘TRAGEDY OF THE COMMONS’......Page 369
The pollution tax: polluters pay principle......Page 371
The fixed standard, bargaining and the Coase theorem......Page 373
14.5  A CASE STUDY: THE IMPORTANCE OF FUELWOODS IN HOUSEHOLD ENERGY CONSUMPTION......Page 374
Household income and size......Page 375
Urban/rural location......Page 376
Real exchange rates and the price of fuelwoods......Page 377
Role of economic policies......Page 378
14.6  AN ALTERNATIVE FARMING SYSTEM: ALLEY CROPPING IN HUMID WEST AFRICAN AGRICULTURE......Page 379
Conclusions......Page 382
BIBLIOGRAPHY......Page 383
INDEX......Page 412