Development and Economic Growth

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Development and Economic Growth

• Econ 403 Development Economics
• Sonoma State University
• Professor Carlos A. Benito

ECON 403
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Countries by Income Groups
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Development along a continuum

• GNI
• Comparability
• PPP

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Development Patterns
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Fig. 1.1
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Fig. 1.2
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Fig. 1.3
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Fig. 1.4
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Table 2.2
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Historical Patterns by Regions
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Fig. 2.1
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Growth patterns

• Growth rates and income levels

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Table 2.3
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Growth Catching Up
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Development Question

• What explain differences between production and
  consumption possibilities among low income and
  high income countries?
• What can be done to reduce such differences?
• How to think about these questions?

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Development Notions
Progressive Development
Human Development
Basic Needs
Economic Development
Fairness
GNP per capita
Structural Changes
Resource Sustainability
Econ Growth
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Growth Process Graphic Representation of a
Differential Equation
Flow of Goods Services
Consumption
Flow of Goods Services
Accumulation
Stock
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Growth and Development

• Economic growth
• How savings, technology and organization affect
  net investment and thereby the stock of capital
  physical, human and social capital
• Economic development
• What institutional and cultural changes induce
• Increases in savings rates,
• Allocation of savings into investment projects
  that optimize economic growth and human
  development

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Economic Development Level

• Development Indicator ()
• GNP per Capita GNP/Population
• y Y/ N
• Over Time Comparisons
• Real GNP per Capita GNP per Capita/Price Level
• yt yt/Pt
• Across Country Comparisons
• Adjusted GNP per Capita GNP per Capita/PPP
• yi yi/PPPi

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Human Development Level

• Definition Possibility of
• A long and healthy life,
• With knowledge,
• A decent standard of living
• Indicator Human Development Index
• HDI a1Life Expectance Index a2Education
  Index a3GDP Index

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Fig. 2.2
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Fig. 2.3
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Fig. 2.4
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Fig. 2.5
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Economic Development Process

• Indicator Economic Growth Rate ()
• Growth Rate (Real GNP per Capita this year
  Real GNP per Capita last year)/Real GNP per
  Capita last year
• gt (yt yt-1)/yt-1

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Development Goals

• The Indian Congress Consensus
• India, 1948-1970s
• Economic development results from the economic
  growth of a nation. The dominate goal is to grow.
• The Washington Consensus
• USA, 1984 to now
• The purposes of development policies are
• to assist countries pay back their international
  debts--the goal being to sustain private
  financial markets.
• To adjust developing countries into globalization
  process
• The Millennium Development Goals
• UNDP, 2000
• Satisfying basic needs. The goals is Human
  Development
• http//hdr.undp.org/reports/global/2003/

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Is Economic Development Possible?

• Before World War II and in Reference to European
  colonies
• Economic Development was not possible in
  traditional societies.
• Their peoples were happy with their living
  styles.
• Backward bending labor supply
• A view sustained by some cultural anthropologists

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Implicit Assumption about Market Structures of
Cultural Determinism

Backward bending supply of labor
1.30
6.50/week
Wage Rate/Day
0.80
4.80/week
Quantity of Labor
6
5
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Is Economic Development Possible? Again

• After 1930 in reference to Latin America
• After World War II in reference to ex- European
  colonies
• Yes, Economic Development is possible in
  traditional societies.
• The view of most economists and engineers
• How?
• Three development paradigms

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Vocabulary
In studying development, we will encounter the
following terms

• Development paradigms
• Linear Stages of Growth
• Structuralism
• Neo-Marxism
• Modeling growth processes
• Stocks
• Flows
• Changes/Accumulation

• Economic Development
• Development Level
• GNP per Capita
• Economic Growth
• Growth Rate of Real GNP per Capita
• Human Development
• Institutional Development
• Cultural Development

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Development Paradigms

• Linear Stages of Growth (view from 1st. World)
• Structuralism (view from 3rd. World)
• Neo-Marxism (view from the 2nd. World)

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Development theme