ECONOMICS OF DEVELOPMENT

Transcription

1 ECONOMICS OF DEVELOPMENT (With special reference to India) M.L. Taneja Dr. R.M. Myer M.A. M.A., Ph.D Ex-Principal Ex-Head, D.R.V.D.A.V. Centenary College, Post-Graduate Deptt. of Economics PHILLAUR Government College, LUDHIANA Complete book of Economics of Development & Planning is also available Future for WINNERS VISHAL PUBLISHING CO. JALANDHAR DELHI

2 Chapters CONTENTS PART 1 : BASIC CONCEPTS OF ECONOMIC DEVELOPMENT 1. Economic Development Introduction 2. Defining Economic Development 3. Modern Interpretation of Development 4. Core Values of Development 5. Amartya Sen s Approach 6. The Millennium Development Goals 7. Economic Development and Economic Growth 8. Economic Growth and Economic Progress 9. Economic Progress and Economic Welfare 10. Importance of Economic Development 11. Role of values in Development Economics. 2. Comparative Economic Development Introduction 2. Definition 3. Characteristics of Underdevelopment 4. Nature of Indian Economy 5. Diversity among Developing Countries. 3. Obstacles to Economic Development Introduction 2. Non-Economic Factors 3. Economic Factors. 4. Determinants of Development Introduction 2. Non-Economic Forces 3. Economic Forces. 5. Measuring Development Introduction 2. Social and Economic Indicators 3. Physical Quality of Life Index (PQLI) 4. The Human Development Index (HDI) 6. Poverty, Inequality, and Development Introduction 2. Measuring Inequality 3. Dualistic Development and Lorenz Curves 4. Kuznets Inverted - U Hypothesis 5. Measuring Poverty 6. Poverty : Extent and Magnitude 7. Characteristics of Poverty Groups 8. The Functional Impact of Poverty 9. Tackling Poverty 10. International Development Goals 11. Welfare Index 12. Poverty Weighted Index of Social Welfare 13. Policy Options. PART 2 : THEORIES OF DEVELOPMENT 7. Classical Theory Introduction 2. Adam Smith s Theory 3. Thomas Malthus Theory 4. David Ricardo s Theory 5. Evaluation 6. Mathematical Interpretation. 8. Karl Marx s Theory Introduction 2. Main Ideas of Karl Marx 3. Critical Appraisal 4. Marx-A False Prophet 5. Model and Developing Countries 6. Mathematical Interpretation. 9. Schumpeter s Theory Introduction 2. Essential Elements of the Theory 3. Disintegration of Capitalism 4. Critical Appraisal 5. Mathematical Interpretation. 10. Keynes Views About Development Introduction 2. Keynes Ideas on Development. 11. Rostow s Growth Theory Introduction 2. Stages of Growth 3. Critical Appraisal 4. Take-Off and UDCs 5. Take-Off and Indian Economy 6. Infrastructure and Indian Economy. 12. Balanced Growth Introduction 2. Meaning 3. Explanation of Balanced Growth 4. Basic Elements of Balanced Growth 5. Essential Conditions for Balanced Growth 6. Advantages of Balanced Growth 7. Critical Appraisal. 13. Unbalanced Growth Introduction 2. Meaning 3. Explanation of the Theory 4. Linkage Effects 5. Advantages of Unbalanced Growth 6. Critical Appraisal 7. Balanced versus Unbalanced Growth 8. Reconciliation. Page

3 14. Big Push Theory Introduction 2. Coordination-Failure Problem 3. The Three Indivisibilities 4. Need for Big Push 5. Ways to Undertake Big Push 6. Critical Appraisal. 15. Theory of Critical Minimum Effort Introduction 2. Shocks and Stimulants 3. Explanation of the Theory 4. Need for Critical Minimum Effort 5. Difficulties 6. Critical Appraisal. 16. Low Level Equilibrium Trap Theories Introduction 2. Leibenstein s Theory 3. Nelson s Theory 4. Critical Appraisal of Trap Theories. 17. Utilisation of Surplus Manpower I (Lewis Theory) Introduction 2. Lewis Model 3. Working of the Model 4. Critical Appraisal 5. Chenery s model of structural change. 18. Utilisation of Surplus Manpower II (Fei and Ranis Theory) Introduction 2. Assumptions 3. Explanation 4. Critical Appraisal. 19. Utilisation of Surplus Manpower III (Nurkse Theory) Introduction 2. Measurement 3. Estimates 4. Types 5. A.K. Sen s View 6. Disguised Unemployment as Saving Potential 7. Critical Appraisal 8. Summary 20. Rural Urban Migration (Harris-Todaro Model) Introduction 2. Pattern of Migration 3. Economic Theory of Rural-Urban Migration 4. Harris- Todaro Model 5. Relevance 6. Policy Options 7. Mathematical Formulation of Todaro Migration Model 8. The Lewis Versus The Harris Todaro Model of Underemloyment. PART 3 : GROWTH MODELS 21. Harrod-Domar Model (Capital Expansion and Growth) Introduction 2. Harrod Model 3. Domar Model 4. Comparison of Harrod and Domar Models 5. Critical Appraisal 6. Harrod-Domar Model and LDCs 7. Harrod-Domar Model and Indian Plans. 22. Joan Robinson Model (Golden Age Model) Introduction 2. Explanation of the Model 3. State of Disequilibrium 4. Types of Golden Age 5. Platinum Age 6. Critical Appraisal 7. Comparison between Harrod-Domar and Robinson Models. 23. Meade Model (Steady Growth Model) Introduction 2. Explanation of the Model 3. Conditions of Steady Growth 4. Critical Appraisal. 24. Solow Model (Model of Growth) Introduction 2. Explanation of the Model 3. Critical Appraisal. 25. Endogenous Growth Model (Romer Model) Introduction 2. New Growth Theory 3. The Romer Model 4. Convergence 5. Criticism. APPENDIX (Chapter 25) : The AK Model Convergence Introduction 2. Types of Convergence 3. Testing the Convergence Hypothesis 4. Conclusion. 27. Technical Progress and Growth Introduction 2. Technical Progress and Growth Models 3. Technical Progress and Human Decisions 4. Technical Externalities 5. Complementarities 6. Total Factor Productivity (TFP) 7. Appraisal 8. Total Factor Productivity and East Asian Miracle. 28. Human Capital and Growth Introduction 2. Mathematical Explanation 3. Implications 4. Convergence in The Model of Human Capital and Growth. 29. International Dependence Model (False-Paradigm and Dualism) Introduction 2. Neocolonial Dependence Models 3. The False-Paradigm Model 4. Dualistic- Development Thesis 5. Typology 6. Social Dualism 7. Technological Dualism. 30. Myrdal Model (Cumulative Causation Thesis) Introduction 2. Explanation 3. Assessment of the model. 31. Production Function Model Introduction 2. The Production Function 3. The Cobb-Douglas Production Function 4. Properties

4 5. Cobb-Douglas Function and Empirical Data 6. Empirical Studies. 7. Limitations 32. Swan Model (Model of Accumulation) Introduction 2. Unclassical Approach 3. Classical Approach 4. Comparison with Harrod Model. 33. Kaldor Model (Model of Distribution) Introduction 2. Explanation of the Model 3. Critical Appraisal 4. Model and the Less-Developed Countries. 34. Kaldor and Mirrlees Model (Growth Model with Induced Technical Progress) Introduction 2. Assumptions 3. Working of the Model 4. Risk and Uncertanity 5. Role of Savings 6. Constraints 7. Conditions for Steady Growth 8. Summary 9. Criticism. 35. Pasinetti Model (Profit and Growth Model) Introduction 2. Assumptions 3. Mathematical Explanation 4. A Correction 5. Reformulating the Model 6. Relation between Profits and Savings 7. Implications 8. Relevance of the Model 9. Comparison with Kaldor Model. 36. Jorgenson Model (The Development of a Dual Economy) Introduction 2. Assumptions 3. Explanation of the Theory 4. Policy Implications 5. Theory of Population 6. Manufacturing Sector 7. Pattern of Growth 8. Summary. 37. Uzawa Model (Two-Sector Model of Growth) Introduction 2. Assumptions 3. Working of the Model 4. Conditions for Stability 5. Amartya Sen s Views. 38. Tobin Model (Dynamic Aggregative Model) Introduction 2. Assumptions 3. Explanation 4. Summary. 39. Johnson Model (Money in a Growth Model) Introduction 2. Assumptions 3. Explanation 4. Savings Behaviour and Inside Money 5. Criticism. PART 4 : DOMESTIC MEASURES FOR ECONOMIC DEVELOPMENT 40. Capital Formation Introduction 2. Meaning of Capital Formation 3. Importance of Capital Formation 4. Factors Determining Capital Formation 5. Stages of Capital Formation 6. Choice between Rapid Capital Formation and Rapid Increase in Income 7. Measurement of Capital Formation 8. Capital Formation in India. 41. Domestic Savings and Capital Formation Introduction 2. Sources of Domestic Savings 3. Mobilisation of Savings. 42. Agriculture and Industry in Economic Development Introduction 2. Role of Agriculture in Development 3. New Technology and Sustainable Agricultural Growth 4. Theories of Informal Credit Markets 5. Industrialization and Economic Development 6. Pattern of Industrialisation 7. A Model of the Complementarity between Agriculture and Industry 8. Transforming Traditional Agriculture. 43. Marketable Surplus and Economic Development Introduction 2. Marketable Surplus and Marketed Surplus 3. Importance of Marketable Surplus 4. Measures to Increase Marketable Surplus 5. Marketable Surplus in India. 44. Population and Economic Growth Introduction 2. Fertility Choice and Missing Markets 3. Population and Economic Development 4. Leibenstein s Thesis on Population and Economic Growth 5. Population Growth and Economic Development in India. 45. Technological Change and Economic Development Introduction 2. Role of Technology in Economic Development 3. Transfer of Technology to Underdeveloped Countries 4. Choice of Appropriate Technology 5. Intermediate Technology 6. Brain Drain 7. Technological Development in India. 46. Monetary Policy and Economic Development Meaning and Objectives of Monetary Policy 2. Monetary Policy for Economic Development

5 3. Lags of Monetary Policy 4. Limitations of Monetary Policy in UDCs 5. Mathematical Note on Monetary Policy 6. Monetary Policy in India. 47. Fiscal Policy and Economic Development Introduction 2. Objectives of Developmental Fiscal Policy 3. Role of Fiscal Policy 4. Instruments of Fiscal Policy 5. Fiscal Policy in Developed Countries 6. Limitations of Fiscal Policy 7. Mathematical Note on Fiscal Policy 8. Fiscal Policy in India 9. Income Tax vs. Expenditure Tax. 48. Inflation and Economic Development Introduction 2. Nature and Consequences of Inflationary Finance 3. Structuralism vs. Monetarism 4. Deficit Financing and Economic Development 5. Safe Limit of Deficit Financing. 49. Public Enterprises and Economic Development Introduction 2. Role of Public Enterprises 3. Public Enterprises in India 4. Profitability of Public Enterprises 5. Ailments and Remedies of Public Enterprises. 50. Price Policy in a Developing Economy Introduction 2. Components of Price Policy 3. Prices in India. 51. State and Economic Development Introduction 2. Role of State in Economic Development. PART 5 : INTERNATIONAL MEASURES FOR ECONOMIC DEVELOPMENT 52. Foreign Capital and Economic Development Introduction 2. Private Foreign Investment 3. Case for and against Multinational Corporations 4. Equity vs. Portfolio Investment 5. Measures to Stimulate Private Foreign Investment 6. Two- Gap Model 7. Costs and Benefits of Foreign Aid 8. New Phase in Private Foreign Investment in India. 53. Public Foreign Investment Inter-governmental lending 2. Tied vs. United Aid 3. Institutional Lending 4. Factors Influencing Quantum of Foreign Aid 5. Impact of Foreign Aid. 54. Foreign Trade and Economic Development Introduction 2. Effects of International Trade 3. Aid or Trade 4. India s Foreign Trade and Economic Development. 55. Commercial Policy and Economic Development Introduction 2. Role of Commercial Policy 3. Commercial Policy of India. 56. New International Economic Order (NIEO) Need for NIEO 2. NIEO Issues 3. Way for NIEO 4. Globalisation and Interdependence of World Economy. 57. The Environment and Development Introduction 2. Role of Political and Social Environment 3. Environment of Development : The Basic Issues 4. Models of The Environment 5. Policy Options in Developing and Developed Countries 6. Earth Summits : 1992, 1997 and SUBJECT INDEX ( Economics of Development) (i iv)

6 SUBJECT INDEX (ECONOMICS OF DEVELOPMENT) A Absorptive capacity 381 Action lag 442 Actual growth rate 226 Adam Smith theory Age of high mass consumption 135 Agricultural sector 395 Aid, see Foreign aid AK model Appropriate technology 429 Appropriate technology, see intermediate technology 431 Asian Development Bank (ADB) 531 Associated Chambers of Commerce and Industry (ASSOCHAM) 517 Association of South East Asian Nations (ASEAN) 58 B Backwash effects 298 Balance of payments 554 Balanced growth 150 Bank credit 439 Bank rate 447 Basic needs 6 Benefits of foreign aid 516 Big push theory 169 Bilateral trade agreement 560 Brain drain 432 Bretton Woods System 566 Business cycle 120 C Capital absorption with stability 381 Capital accumulation 99 Capital formation 371 Capitalistic development 110 Capital-labour ratio 278 Cash reserve ratio 448 Caste system 41 Chenery's model of structural change 193 Circular flow 118 Classical theory of development 99 Cobb-Douglas production function 311 Coefficient of variation 71 Commercial policy 551 Commodity trade 569 Common fund 570 Comparative economic development 16 Complementarities 282 Conditions for steady growth 331 Constant returns to scale 258 Convergence 272 Convergent series of investment 162 Coordination failure problem 169 Costs and Benefits of foreign aid 516 Credit control 447 Critical minimum effort thesis 176 Cumulative Causation Thesis 307 Cyclical instability 48 D David Ricardo theory 102 Debt management 441 Deficiency of capital 26,157 Deficit financing 466 Derived growth sectors 133 Development 4 Amartya Sen s version 7 core values 6 determinants 51 modern interpretation 5 Development assistance, see foreign aid Development economics 3 role of values 14 Development of a dual economy 340 Development planning, see economic planning Directly productive activities (DPA) 162 Disguised unemployment 30, 200 Disinvestment 489 Divergent series of investment 162 Diversity among developing countries 35 Division of labour 99 Domestic savings 386 Drive to maturity 134 Dual prices 492 Dualistic development 32 Dualistic development thesis 296 Dynamic aggregative model 353 Dynamic surplus 200 E East Asian miracle 285 Eastern economy 299 Ecological dualism 297 Economic development definition 4 economic growth economic progress 11 economic welfare 11 importance 12 obstacles 41 Economic overheads 481 Economic stability 55 Economic surplus 164 Education and development 373 Effective demand 126 Employment function 324 Enclave dualism 297 Endogenous growth model 264 Environment and development 583 Equity investment 510 European economic community (EEC) 58 Ex ante gaps 514 Exchange controls 512 Exim Bank 520 Exim policy 547 Export sector 547 External depenence 31 External diseconomies 173 (i)

7 F Factor immobility 42 Factor price distortion 216 Factor proportion 304 False-paradigm model 296 Fertility choice 411 Fertility gap 420 Financial dualism 298 Fiscal policy 452 Foreign aid 543 Foreign exchange gap 506 Foreign investment effect 49 private 506 public 520 Foreign trade 537 Freedom 7 Free trade 100 Functional distribution 72 G GATT 576 Gini coefficient 70 Globalisation 580 Golden age 245 Gross national income (GPI). 19 Growth agents 179 H Harris-Todaro model 211 Harrod Domar model 225 High mass consumption 135 Human Capital 372 Human capital and growth 288 Human health 22 I Ideological transformation 52 Import controls 559 Import sector 546 Income distribution 18 Indivisibilities 170 Induced technical progress 328 Industrialisation 12 Inequality 25, 68 Infant mortality 23 Inflation defined 472 Inflationary finance 472 Information technology 436 Infrastructure and Indian economy 142 Innovations 118 Inside lag 442 Intermediate technology 431 International Bank for Reconstruction and Development (IBRD) 524 International cooperation 58 International dependence model 293 International Development Association (IDA) 529 International development goals 88 International dualism 298 International Finance Corporation (IFC) 528 International Monetary Fund (IMF) 522 International specialisation 48 International trade 538 Invisible capital 372 J Joan Robinson model 243 Joint enterprises 513 Joint family system 41 Joint participation 509 Jorgenson model 340 K Kaldor model 323 Kaldor and Mirrlees model 328 Karl Marx theory 108 Keynes views about development 125 Kuznets inverted U hypothesis 74 L Labour intensive industries 216 Labour utilisation ratio 196 Lags of monetary policy 441 Laissez-faire 100 Leibenstein s theory 183 Lewis theory 188 Life-sustenance 6 Linkage effects : forward and backward 164 Literacy level 24 Lorenz curve 69 Low income countries (LICs) 35 Low level equilibrium trap theory 183 Lower-middle income countries (LMC) 35 M Malthus theory 101 Malthusian theory of population 410 Manufacturing sector 345 Market economy 54 Market imperfections 42 Marketable and marketed surplus 406 Material capital 371 Materialistic interpretation of history 108 Meade model 251 Measurement of human capital 372 Measuring human capital 288 inequality 69 Measuring Development 60 Adelman and Morris approach 60 human development index (HDI) 62 physical quality of life index (PQLI) 61 UNRISD approach 60 Millennium development goals (MDGs) 9 Missing markets 411 Multinational corporations (MNCs) 506 Multiple exchange rates 557 Multiplier 126 Myrdal Model 307 Myrdal hypothesis 293 (ii)

8 N National income, see gross national products Natural growth rate 228 Natural law 100 Nature of Indian economy 34 Nelson s theory 194 Neo-colonial dependence model 293 New growth theory 264 New International Economic Order (NIEO) 564 New industrialised countries (NICs) 35 New phase in investment 517 Non aligned nations conferences 567 Non-redundancy coefficient 196 North South cooperation 575 Nurkse theory 200 O Official Development Assistance (ODA) 571 OPEC 542 Optimisation in planning, see linear programming Outside lag 442 Organisation for economic cooperation and development (OECD) 35 Organisation of petroleum exporting countries (OPEC) 35 Outward looking trade policy 556 Over head capital 496 P Paths to development 162 Path of disequilibrium 232 Pasinetti model 334 Pattern of growth 346 Per capita income 19 Personal capital 372 Personal distribution 69 Physical capital 371 Physical quality of life index (PQLI) 61 Physical resource endowments 38 Platinum age 248 Political structure 40 Poor health 22 Population policy 421 Portfolio investment 510 Positive-sum incentives 178 Poverty characteristics of poverty groups 80 extent and magnitude 80 functional impact of poverty 83 human poverty index (HPI) 79 measuring poverty 78 poverty gap 79 poverty-weighted index 91 tackling poverty 87 Power development 144 Prebisch model 294 Prebisch Singer thesis 541 Pre conditions for take off 130 Price rigidity 43 Primary exports 30 Primary growth sectors 133 Primary inward and outward looking policies 556 Principle of comparative advantage 48 Process 4 Production function model 310 Profit and growth model 334 Public borrowing 457 Public cooperation 155 Public expenditure 458 Public revenue 13 Q Quantitative controls 447 Quasi-stable equilibrium 183 Quotas 555 R Real cost of labour 203 Real national income 4 Recoginition lag 442 Regional balanced development 156 Research and design (R and D) 435 Reserve army 110 (iii) Resource endowments 38 Risk and uncertainty 329 Romer model 264 Rostow s growth theory 129 Rural-urban migration 211 S Saving function 323 Saving gap 506 Schumpeter s theory 118 Secondary inward outward looking policies 556 Seer s model 295 Self esteem 7 Self reliance 164 Shocks and stimulants 176 Skill formation 165 Social fractionalisation 31 Social justice 54 Social overheads 496 Social overhead capital 33, 162 Social services 13 Social fractionalisation 312 Sociocultural dualism 297 Solow model 258 South-Asian regional cooperation (SARC) 58 Special Economic Zones (SEZ) 548 Stable equilibrium system 184 Stages of growth 129 State trading 560 Static surplus 200 Stationary state 104 Steady growth model 251 Stock exchanges 393 Structural adjustment policy 527 Structural factors 55 Structural underemployment 27 Supplementary growth sectors 133 Swan model 317 T Take-off 131 Take-off and Indian economy 142 Tariffs and non tariff barriers 569

9 Taxation 455 Technical externalities 280 Technical progress function 325 Technical progress and growth models 279 Technical progress and human decisions 280 Technological dualism 303 Technology defined 425 Technology transfer 427 Terms of trade 551 Theil s index 72 Theories of informal credit markets 398 Theory of class war 109 Theory of demographic transition 410 Theory of effective demand 126 Theory of population 101 Theory of surplus value 109 Third world 35 Tied aid 521 Tobin model 353 Total factor productivity (TFP) 283 Trade cycle (business cycle) 100 Trade restrictions 554 Trade strategies 553 Traditional society 129 Trigger approach 51 Two gap model of aid 514 U Unbalanced growth 160 UNCTAD 543 Underconsumption 112 Underdeveloped countries characteristics 18 definition 16 diversity among developing countries 35 UN development decade 5 UNDP 533 Underdevelopment trap 32 Unfavourable balance of payments 506 Untied aid 521 United Nations Research Institute on Social Development (UNRISD) 60 Urbanisation 52 USAID 520 Utilisation of surplus manpower Fei and Ranis theory 195 Lewis theory 188 Nurkse theory 200 Uzawa model 349 V Vicious circles of poverty 44, 347 W Warranted growth rate 226 Water resources 143 Welfare index 90 World Bank 524 World Trade Organisation (WTO) Z (iv) 580 Zero-sum incentives 178