Research on Immigration and Integration in the Metropolis

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• Research on Immigration and Integration in the
  Metropolis
• www.riim.metropolis.net

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Lecture 4

• Development Theories
• A way to Organize our Ideas
• or an Ideology ?

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Questions for Theory to Answer

• 1. What do you want a theory of development to
  explain ?
• Income per capita, social stability,equality
• 2. Why do some countries grow and then decline?
• Theory must explain both directions
• 3. Why do some poor countries 'take-off' and
  continue to grow?

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More Questions to Ponder

• 4. Why do some poor countries remain in a low
  level trap?
• Trap defined as constant Yp
• 5. What arguments should be included in
  development theory?

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More Questions to Ponder

• a. Population growth does it hinder or
  accelerate growth?
• b. Capital accumulation
• How do you accumulate when you are already poor?
• c. Technical Change
• i. Where do you access technical change if you
  are already poor?
• Via trade or indigenous adaptation ?
• ii. What does Canada's historical experience with
  the wheat and the reaper tell us about technical
  change and trade ?.

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Questions for you to answer

• 6. Find an example of a poor country which has
• a. Taken off in last 20 years
• b. Remained stagnant for last twenty
  years
• c. Grew and then declined in last twenty
  years
• 7. How did your country of choice do with respect
  to the categories a to c and why ?

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Lecture 5 Theories

• A. Linear-Stages Theory (1950s and early 1960s)
• 1. It views economic development as a series of
  successive stages of economic growth through
  which every nation must go through.
• 2. It emphasizes that more investment leads to
  more growth.
• 3. It can be described by an economic mechanism
  known as the Harrod-Domar Growth model.

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The Harrod -Domar Growth Model

• 1. Rate of GNP growth is a function of
• national savings ratio (s)
• and rate of national capital-output ratio (k).
• GNP growth is positively related to the savings
  ratio and negatively related to the
  capital-output ratio.
• 2. It could explain the massive transfers of
  capital and technical assistance from developed
  to less developed nations.

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More Harrod -Domar Growth Model

• 3. Is investment a sufficient condition for
  economic growth?
• No.
• It is necessary but not sufficient condition for
  economic growth.
• Necessary one of many ingredients
• Sufficient minimum set required to grow

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II. Structural- Change Theory

• 1. It emphasizes on the mechanism by which
  underdeveloped economies alter their domestic
  economic structures from a traditional
  subsistence agriculture to a more urbanized,
  industrially diversufued economy.
• 2. It employs tools of neoclassical price and
  resource allocation theory.

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Lewis Two-Sector Model

• i. It became the general theory of the
  development process in surplus-labor Third World
  nations during the 1960s and early 1970s.
• ii. It focuses on the process of labor transfer
  from the traditional economy to the urbanized,
  industrial sector and the growth of output and
  employment in the high-productivity sector

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Assumptions

• i. Marginal product of labor is zero
  (surplus-labor).
• This implies that labor can be removed from the
  agricultural sector without any loss of output in
  that sector.
• ii. Rural supply of labor to industrial sector
  is perfectly elastic.
• iii. Full employment in the urban sector.

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More Assumptions

• iv. Constant urban wage- premium over a fixed
  average subsistence wage.
• v. Capitalists reinvest all profits.
• vi. Rate of labor transfer and job creation is
  proportional to the rate of capital accumulation.
  

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Agricultural Sector
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Industrial Sector
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Conclusions for Lewis Model

• i. Employment growth and labor transfer is
  induced by output expansion in which the speed of
  expansion depends on the rate of industrial
  investment and capital accumulation in the
  industrial sector.
• ii. The self-sustaining growth and employment
  expansion process continues until all surplus
  labor is exhausted.

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