Nurkse’s thesis of disguised unemployment is a concept in development economics that focuses on the inefficient allocation of labour in underdeveloped economies, particularly in the agricultural sector. Disguised unemployment occurs when more people are employed in a sector than are actually needed to sustain its output, meaning the marginal productivity of the excess labour is zero or close to zero. This phenomenon is commonly observed in traditional agricultural economies, where large portions of the population are engaged in subsistence farming. Due to outdated farming practices, limited technological advancements, and the absence of industrial opportunities, there tends to be an oversupply of labour in agriculture. In such cases, removing some of the surplus labour does not reduce the total agricultural output, indicating that these workers are effectively underemployed.
Nurkse highlighted that this surplus labour represents a potential resource for economic development. Since the marginal productivity of the excess workers in agriculture is negligible, they can be redirected to more productive sectors such as manufacturing or infrastructure development without adversely affecting agricultural production. This idea aligns with his broader theory of balanced growth, which advocates for the simultaneous development of multiple sectors to stimulate economic progress. By transferring labour from agriculture to industry, underdeveloped economies can foster capital formation, which is essential for industrialization and overall growth.
To operationalize this transition, economic policies should focus on mechanisms to absorb surplus labour effectively.
One approach is to redirect these workers into infrastructure projects, such as building roads, schools, and factories, which not only provide employment but also lay the foundation for future economic growth.
DEVELOPMENT ECONOMICS
DEVELOPMENT ECONOMICS
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ECONOMIC DEVELOPMENT : ITS MEARURING WAYS
Economic development is a process of development of Underdeveloped Countries
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MEASUREMENT OF ECONOMIC GROWTH
Meaning of Economic Growth (Short Definition):
Economic
growth refers to the increase in the production of goods and services in an
economy over a specific period, typically measured by the rise in a
country’s Gross Domestic Product (GDP) or Gross National Product
(GNP). It indicates the expansion of an economy’s capacity to produce and
consume.
Measurement of Economic Growth (Detailed
Explanation):
Economic
growth is measured using various indicators and methods. The most commonly used
metrics are:
1. Gross Domestic Product (GDP):
Definition: GDP is the total monetary
value of all finished goods and services produced within a country’s
borders during a specific period (usually quarterly or annually).
Types of GDP Measurements:
Nominal GDP: Measures GDP at current
market prices without adjusting for inflation.
Real GDP: Adjusts nominal GDP for
inflation to reflect the true growth in output.
Per Capita GDP: Divides GDP by the
population to measure the average income per person, indicating living
standards.
2. Gross National Product (GNP):
Definition: GNP includes the value of
goods and services produced by a country’s residents, regardless of
whether the production takes place within or outside the country’s
borders.
Formula:
GNP=GDP +Net income from abroadtext{GNP} = text{GDP} +
text{Net income from abroad}GNP=GDP +Net income from abroad.
3. Growth Rate of GDP:
Definition: The annual percentage
change in GDP over time, which shows the rate at which the economy is
growing.
Formula:
GDP Growth Rate=(GDP in Current Period−GDP in Previous Period GDP in Previous Period)×100text{GDP
Growth Rate} = left(frac{text{GDP in Current Period} – text{GDP in
Previous Period}}{text{GDP in Previous Period}}right) times
100GDP Growth Rate=(GDP in Previous Period GDP in Current Period−GDP in Previous Period)×100.
4. Productivity Measures:
Definition: Measures growth in output
per unit of labor or capital, indicating how efficiently resources are
being utilized.
Example: Labor
Productivity = Output / Hours Worked.
5. Other Indicators:
Industrial Production Index
(IPI):
Measures output in industrial sectors.
Employment Rates: Indicates economic
expansion if job creation aligns with growth.
Consumption and Investment
Trends:
Higher consumer spending and investment reflect economic growth.
Why GDP is the Most Common Measure:
Comprehensive: Captures all goods and
services within an economy.
Comparable: Allows for easy comparison
across countries and time periods.
Widely Accepted: Used by governments, international
organizations, and researchers.
Limitations of GDP as a Measure of Growth:
Ignores Distribution: GDP does not reflect
income inequality.
Non-Market Activities: Excludes unpaid labor and
informal economy activities.
Environmental Costs: Fails to account for
resource depletion and pollution.
Quality of Life: GDP growth doesn’t
necessarily indicate improved well-being or happiness.
For a
holistic understanding, other metrics like the Human Development Index (HDI)
or Green GDP are often used alongside GDP to measure economic progress.
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ECONOMIC WELFARE
Economic Welfare is a term related with Economic Development where key indicator are defining the major purpose i.e. whether economic development must be done with economic welfare or not
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PER CAPITA INCOME MEASUREMENT ( DEVELOPMENT ECONOMICS )
This topic relates to measurement of per capita income , total national income and total population
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PHYSICAL QUALITY OF LIFE INDEX
This topic relates to Modern methods of measuring economic development like PQLI and HDI , we shall discuss them both
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THEORIES OF POPULATION
This topic includes the various theories related to Population in which Malthusian theory is the basic concept . with the passage of time , various economists have given different theories . that are included in this
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CAPITAL FORMATION IN DEVELOPMENT PROCESS
Capital formation is a critical
concept in development economics, emphasizing the accumulation of capital
assets to foster economic growth and development.
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DISGUISED UNEMPLOYMENT THEORIES
Disguised unemployment occurs when more people are employed in a sector than are actually needed to sustain its output, meaning the marginal productivity of the excess labour is zero or close to zero
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LEWIS MODEL OF UNLIMITED SUPPLY OF LABOUR
the Lewis model remains an essential tool for analysing the
dynamics of economic development in dual-sector economies.
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DUALISM
The topic dualism includes the co-existence of modern sector with traditional sector , developed countries with underdeveloped countries , labour intensive techniques sector with capital intensive techniques sector
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Big Push Theory
this theory explains the investment in all sectors of the economy
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Leibenstein’ s Critical Minimum Efforts Theory
This theory explains the investment in few sectors of the economy and by the process of investment all other sectors shall also develop
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BALANCED GROWTH THEORY
Balanced Growth theory is a collection of views of various economists like Prof. Nurksey , Lewis , Arthur Young , Stovasky and Rosenstein Rodan . this concepts explains the investment process in all sectors of the economy and its impact on various sectors .
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UNBALANCED GROWTH THEORY
This theory relates unbalancing the economy by investing in either social overhead capital sector or direct productivity sector . which shall automatically develop the another sector and increase in National income , productivity in all sectors and economic development .
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ROSTOW’S STAGES OF ECONOMIC GROWTH
this topic relates the development phases of every countries whether developed or underdeveloped . he describes five stages of economic growth process .
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Classical Model of Growth
The classical growth model emphasizes economic growth through capital accumulation, labor, and natural resources, highlighting diminishing returns and constraints from fixed resources. Technological progress offsets these limits, enhancing productivity. Developed by economists like Adam Smith and Malthus, the model underscores structural factors influencing growth and informs sustainable development strategies.
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HARROD MODAR MODEL OF GROWTH
The Harrod-Domar Model explains economic growth based on savings and investment. Growth depends on the savings rate (
𝑠
s) and the capital-output ratio (
𝑘
k), which measures investment efficiency. The growth rate (
𝑔
g) is given by
𝑔
=
𝑠
𝑘
g=
k
s
, meaning higher savings and lower
𝑘
k lead to faster growth. The model highlights the importance of savings and efficient investment for sustained growth but assumes a fixed relationship between capital and output, ignoring factors like technology, human capital, and institutions. It’s particularly relevant for understanding why developing countries struggle with low growth due to insufficient savings and inefficient use of resources.
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ECONOMIC PLANNING
Economic planning in development economics is a strategic process where governments set goals and allocate resources to address challenges like poverty, unemployment, and inequality. It prioritizes sectors such as industrialization, agriculture, and infrastructure while focusing on sustainable development, self-reliance, and balanced regional growth. Through targeted interventions, planning aims to accelerate economic growth, reduce disparities, and create jobs. Challenges include resource constraints, inefficient implementation, and external shocks. Successful planning relies on effective governance, public participation, and international cooperation. Countries like South Korea and China showcase how comprehensive planning can transform economies, making it a crucial tool for sustainable and inclusive development.
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PRICE MECHANISM IN ECONOMIC PLANNING
The price mechanism is the process by which prices are determined in a market economy through the interaction of supply and demand. It acts as a signal for both producers and consumers, guiding the allocation of resources efficiently. In economic planning, governments may intervene in the price mechanism through price controls, subsidies, or taxes to achieve specific developmental goals such as economic growth, income redistribution, and sustainability. While the price mechanism is effective in ensuring resource allocation, challenges like market failures, inflation, and unequal distribution may require government intervention to maintain stability and equity in developing economies.
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CHOICE OF TECHNIQUE
The choice of technique refers to the decision-making process regarding the type of technology or production methods to be adopted in a developing economy. This choice often involves a trade-off between capital-intensive and labor-intensive techniques.
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Course Completion
So , Guys this course completes with different topics related to Development Economics . and their explanations. so if you guys require any further topic to be expand with kindly drop a message .Hope you enjoyed this. Thanks