Course Content
DEVELOPMENT ECONOMICS
DEVELOPMENT ECONOMICS
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Development Economics: A Theoretical Overview
What do you mean by development
ECONOMIC GROWTH V/S DEVELOPMENT
ECONOMIC GROWTH V/S ECONOMIC DEVELOPMENT
ECONOMIC DEVELOPMENT : ITS MEARURING WAYS
Economic development is a process of development of Underdeveloped Countries
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ECONOMIC DEVELOPMENT : ITS MEASURING WAYS
Economic Development-its measuring ways
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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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MEASUREMENT OF ECONOMIC GROWTH
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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ECONOMIC WELFARE
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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PER CAPITA INCOME MEASUREMENT
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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Physical Quality of Life Index
HUMAN DEVELOPMENT INDEX (HDI)
BEST METHOD OF MEASUREMENT WHETHER PQLI or HDI
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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MALTHUSIAN THEORY OF POPULATION
Neo-Malthusianism Theory of Population
Optimum Population Theory
The Demographic Transition Theory of Population
Marxist Theory of Population
Boserup’s Theory of Population
Under Population Theory of Population
Carrying Capacity Theory of Population
Population Momentum Theory
Overpopulation and Resource Scarcity Theory of Population
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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CAPITAL FORMATION
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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Nurksey’s Theory of Disguised Unemployment
Lewis Model of Disguised Unemployment
AMARTYA SEN’ S VIEWS DISGUISED UNEMPLOYMENT
Do Saving Potentials are the results of Disguised Unemployment ?
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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Lewis Model with Unlimited Supply of Labour
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https://youtu.be/PxA6RE3d0t8?si=Q5gSTjD0K7Rsuv1c
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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Dualism : Meaning & Features
SOCIAL DUALISM
TECHNOLOGICAL DUALISM THEORY
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Big Push Theory
this theory explains the investment in all sectors of the economy
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BIG PUSH THEORY
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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Leibenstein’ s Critical Minimum Efforts Theory
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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Balanced Growth Model
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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Unbalanced Growth Theory
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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Rostow’s Stages of Economic Growth
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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CLASSICAL MODEL OF GROWTH
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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Harrod-Domar Model of Growth
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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ECONOMIC PLANNING
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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price mechanism in economic planning
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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CHOICE OF TECHNIQUE
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
Protected: DEVELOPMENT ECONOMICS

Rostow’s Stages of Economic Growth

Walt Whitman Rostow, a prominent economist, proposed the “Stages of Economic Growth” theory in 1960 in his influential work, The Stages of Economic Growth: A Non-Communist Manifesto. This theory outlines a linear model of economic development, suggesting that all societies progress through five distinct stages of growth. Each stage represents a critical phase in the economic evolution of a nation, transitioning from traditional subsistence-based systems to a modern industrialized economy.

Walt W. Rostow’s theory of economic development outlines a progression of five stages, each reflecting a specific phase in a nation’s journey from a traditional, agrarian economy to a modern, industrialized one. Below is a detailed breakdown of each stage with its defining characteristics and real-world examples. Let’s start with the stages :

 

  1. The Traditional Society

The traditional society is the foundational stage of economic growth, where economic activities are predominantly agrarian, and societal structures are rooted in tradition and religion.

Characteristics:

  • Subsistence Agriculture: The economy is primarily based on farming, with limited or no surplus production.
  • Primitive Technology: The use of basic tools and techniques restricts productivity.
  • Static Society: Social structures are hierarchical and rigid, governed by traditions and often influenced by religion.
  • Limited Trade: Economic transactions are local, with minimal external trade or market development.
  • Lack of Investment: There is little to no investment in infrastructure, education, or technological advancements.

Example:

Feudal Europe before the 16th century or many tribal societies that rely on traditional farming and barter systems.

  1. The Preconditions for Take-off

This stage represents a period of transition where societies lay the groundwork for sustained economic growth. It is marked by the introduction of modern science, technological advancements, and a shift towards industrialization.

Characteristics:

  • Agricultural Improvements: New techniques, tools, and crops increase agricultural productivity.
  • Development of Infrastructure: Construction of roads, railways, ports, and energy grids to support commerce and trade.
  • Entrepreneurial Growth: Emerging business leaders invest in small-scale industries and trade ventures.
  • Cultural Shifts: Growth in secular education, scientific thinking, and openness to innovation.
  • Savings and Investment: A gradual increase in savings rates fosters capital formation.

Example:

Europe during the Renaissance and the Age of Enlightenment, when scientific discoveries and exploration began reshaping economies.

  1. Take-off Stage

The take-off stage is a critical juncture where economies experience rapid growth denoted by industrialization, technological innovation, and expanding markets.

Characteristics:

  • Rapid Industrialization: Key industries, such as textiles or steel, experience explosive growth.
  • Urbanization: A significant portion of the population moves to cities to work in factories.
  • Increased Investments: Higher rates of domestic and foreign investment in industrial and infrastructure projects.
  • Export Growth: Nations produce goods not just for domestic consumption but for international trade.
  • Cultural Transformation: The adoption of modern values such as hard work, efficiency, and innovation.

Example:

The Industrial Revolution in Britain during the late 18th century, when manufacturing industries expanded rapidly, supported by technological advancements like the steam engine.

  1. The Drive to Maturity

During this stage, economies achieve self-sustaining growth. Industrial sectors diversify, and technological advancements spread throughout the economy.

Characteristics:

  • Economic Diversification: Reliance on a single industry diminishes as new sectors, such as technology or finance, emerge.
  • Technological Integration: Advanced technologies are adopted across industries, improving efficiency and productivity.
  • Global Competitiveness: Nations actively engage in international trade, exporting high-quality, competitive products.
  • Improved Living Standards: Rising incomes lead to better education, healthcare, and housing.
  • Institutional Development: Governments and institutions focus on stabilizing the economy and ensuring equitable growth.

Example:

The United States and Germany in the late 19th and early 20th centuries, when they transitioned from industrial-based economies to diversified economic powerhouses.

  1. The Age of High Mass Consumption

The final stage of economic growth is characterized by a service-oriented economy, high consumer demand, and a focus on leisure and well-being.

Characteristics:

  • Consumerism: A high standard of living enables the majority of the population to purchase durable goods and luxury items.
  • Service Sector Dominance: Industries like finance, healthcare, education, and entertainment become the primary economic drivers.
  • Social Welfare: Governments implement robust social security systems, ensuring healthcare, pensions, and unemployment benefits.
  • Cultural Refinement: Societies focus on higher-order goals such as environmental sustainability, arts, and cultural development.
  • Technological Ubiquity: Advanced technologies, including information and communication systems, become accessible to most of the population.

Example:

Modern economies like the United States, Japan, and Western Europe, where high living standards, advanced infrastructure, and a strong focus on consumption define the economic landscape.

 

Criticisms of Rostow’s Theory

While Rostow’s theory provides a structured framework for understanding economic growth, it has been criticized for its:

  • Linear Approach: Assumes all nations follow the same path without accounting for unique cultural, political, and geographical factors.
  • Euro centrism: Based heavily on the Western experience, overlooking alternative models of development.
  • Neglect of Inequality: Fails to address how growth benefits are distributed within a society.

 

Overall it concludes that Rostow’s model provides a structured framework for understanding economic growth, emphasizing the transformative role of technology, capital, and societal values at each stage. While the theory is not without its criticisms, it remains a valuable tool for analysing historical and contemporary economic development.

 

 

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