Theories on economic growth
8 important questions on Theories on economic growth
Compare the internal and external explanations of development and stagnation. Is the use of the term less developed associated with internal or external explanations of the situation of development?
oThe continuation of a traditional economy alongside the modern enclave
oIssues within a country e.g. backwardness (laws and culture)
-External approaches: to explain situation of developing countries by referencing to negative influences from the advanced economies
How do economic theories of imperialism explain economic stagnation in developing countries?
Discuss the concept of dualism. Why is dualism an obstacle to development?
- Modern societies: technologically developed, commercialised, urban centres
- Traditional: low productivity, traditional technologies, rural
Dualism is created by external economic and political penetration and exploitation
Problem of dualism is the economic and social gap between the modern and traditional sector
Underdevelopment view: dualistic structure of developing economies was not only the consequence of Western penetration in the past but remains due to relationships with the rich Western countries today.
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What are the potential advantages of backwardness?
oWithout bearing the full cost of R&D and development.
oThis creates potential for accelerated growth.
-The advantages that developing countries can have from technologies developed in advanced economies depends on their social capabilities.
How do North and Thomas define efficient institutions? Give examples of institutions which are considered to be efficient.
oWell-defined property rights guarantee that individuals will profit from their own work.
oThis went hand in hand with increasing importance of state interventions which prevents free ridership
1.Discuss the characteristics of dependent development, as emphasised by dependency theorists.
Prosperity in the rich countries is the result of exploitation of developing countries. Poverty in developing countries is the result of such exploitations. Characteristics:
- Importance of export of primary commodities
- Surpluses are sent back abroad
- Dependence on imports of manufactured goods
- Dependence on imports of intermediate goods, capital goods and technology
- Modern sector of economy is dominated by foreign firms and TNC’s
- Dependence is not limited to economic sphere, also political, cultural relations of dependence.
How do structuralist explanations of development differ from those of liberal and neoclassical theories?
- Developing countries mainly export primary products, demand for primary products will not experience high growth
- The abundance of cheap labour in poor countries will limit technological advancements
They argue a development strategy where developing countries are less dependent on international trade.
- Substitution strategy: protect domestic industrial sector to replace imports
Discuss the theoretical and empirical relationships between growth and inequality.
- Higher saving rates contribute to growth of per capita incomes
Overall, growth of per capita incomes reduces poverty, but distributive policies might be needed.
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