Lecture 5 Don DeVoretz

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Lecture 5Don DeVoretz

• Modern Theories
• Neo-Colonial,
• Neo-Classical
• and Endogenous

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Neo-Colonial Dependence1970s

• Center-Periphery is key concept
• Center is developed and Periphery is LDC
• Power Elites in Center
• Multi-nationals, aid agencies, IMF, World Bank
• Reward Power Elites in Periphery
• landlords, military, public officials

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Neo-Classical1980s

• Underdevelopment self-induced
• Too much state intervention
• Wrong set of prices
• Conclusion Need free markets
• Give correct price signals
• reduce corruption, inefficiency
• examples NICS

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Neo-Classical Model
Nr
Yp rate
Yp
Nr
E
Savings
f
High
Medium
Y/L K/L
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Neo-Classical Working

• Growth determined by
• NCb-Cd or population growth
• r k/l or capital labour ration of efficiency
• Ssavings rate f(Y/L)
• Conclusions
• Level of Y/L result of n and savings rate
• Y/L inverse(direct) on (n) and (s)
• E (F) high (low) level equilibrium

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Endogenous Growth Theory 1990s

• Once you start to grow you continue
• increasing returns to scale
• first to the post wins
• First in international trade get all rents
• Gains from trade translate into further gains
• Complementary investments key to growth
• education, infrastructure, and R and D
• Conclusion No convergence

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End of Show