ECO501 Handouts by VUBuddy

ECO501 –DEVELOPMENT ECONOMICS Lesson No. Topics Page No.

Lesson 01 Lesson 02 Comparative Economic Development …………………………………… 10 Lesson 03 Comparative Economic Development (Continued)………………………. 20 Lesson 04 Classic Theories of Economic Growth and Development………………...30 Lesson 05 Classic Theories of Economic Growth and Development (Continued1)….35 Lesson 06 Classic Theories of Economic Growth and Development (Continued2)….41 Lesson 07 Poverty, Inequality and Economic Development………………………….50 Lesson 08 Poverty, Inequality and Economic Development (Continued1)…………...57 Lesson 09 Poverty, Inequality and Economic Development (Continued2)…………...63 Lesson 10 Population Growth and Economic Development: Causes, Consequences and Controversies………………………………………………………………71 Lesson 11 Population Growth and Economic Development: Causes, Consequences and Controversies (Continued1)………………………………………………..78 Lesson 12 Population Growth and Economic Development: Causes, Consequences and Controversies (Continued2)………………………………………………..84 Lesson 13 Population Growth and Economic Development: Causes, Consequences and Controversies (Continued3)………………………………………………..90 Lesson 14 Human Capital: Education and Health in Economic Development………..95 Lesson 15 Human Capital: Education and Health in Economic Development (Continued1)………………………………………………………………..99 Lesson 16 Human Capital: Education and Health in Economic Development (Continued2)……………………………………………………………….107 Lesson 17 Human Capital: Education and Health in Economic Development (Continued3)……………………………………………………………….113 Lesson 18 Exogenous and Endogenous Growth Theory……………………………...122 Lesson 19 Production Function Approach to the Analysis of Growth………………..129 Lesson 20 Contemporary Models of Development and Underdevelopment………….134 Lesson 21 Contemporary Models of Development and Underdevelopment (Continued)………………………………………………………………...144 Lesson 22 Urbanization and Rural Urban Migration: Theory and Policy…………….151 Lesson 23 Urbanization and Rural Urban Migration: Theory and Policy (Continued1)……………………………………………………………….158 Lesson 24 Urbanization and Rural Urban Migration: Theory and Policy (Continued2)……………………………………………………………….166 Lesson 25 Agricultural Transformation and Rural Development……………………..173 Lesson 26 Agricultural Transformation and Rural Development (Continued1)………179 Lesson 27 Agricultural Transformation and Rural Development (Continued2)………184 Lesson 28 Agricultural Transformation and Rural Development (Continued3)………192 Lesson 29 The Environment and Economic Development…………………………….199 Lesson 30 The Environment and Economic Development (Continued1)……………...204 Lesson 31 The Environment and Economic Development (Continued2)……………...210 Lesson 32 The Environment and Economic Development (Continued3)……………...216 Lesson 33 The Environment and Economic Development (Continued4)……………...223 Lesson 34 International Trade Theory and Development Strategy…………………….228 Lesson 35 Lesson 36 Lesson 37 Lesson 38 Lesson 39 Lesson 40 Balance of Payments, Debt, Financial Crises and Stabilization Policies….274 Lesson 41 Balance of Payments, Debt, Financial Crises and Stabilization Policies (Continued1)……………………………………………………………….281 Lesson 42 Balance of Payments, Debt, Financial Crises and Stabilization Policies (Continued2)……………………………………………………………….289 Lesson 43 Foreign Finance, Investment, and Aid: Controversies and Opportunities…300 Lesson 44 Foreign Finance, Investment, and Aid: Controversies and Opportunities (Continued) ………………………………………………………………..311 Lesson 45 Finance and Fiscal Policy for Development……………………………….318 Lesson 01

WHAT IS DEVELOPMENT ECONOMICS?

Development Economics is a branch of economics that focuses on improving the economies of developing countries. Development economics considers how to promote economic growth in such countries by improving factors like health, education, working conditions, domestic and international policies and market conditions. It examines both macroeconomic and microeconomic factors relating to the structure of a developing economy and how that economy can create effective domestic and international growth.

KEY CONCEPTS IN ECONOMICS AND DEVELOPMENT STUDIES

Absolute poverty:

It is a situation of being unable to meet the minimum levels of income, food, clothing, healthcare, shelter, and other essentials.

Subsistence economy:

An economy in which production is mainly for personal consumption and the standard of living yields little more than basic necessities of life—food, shelter, and clothing.

It is the process of improving the quality of all human lives and capabilities by raising people’s levels of living, self-esteem, and freedom.

Developing countries:

Countries of Asia, Africa, the Middle East, Latin America, Eastern Europe, and the former Soviet Union, that are presently characterized by low levels of living and other development deficits. Used in the development literature as a synonym for less developed countries.

THE NATURE OF DEVELOPMENT ECONOMICS

Development economics has an even greater scope. In addition to being concerned with the efficient allocation of existing scarce (or idle) productive resources and with their sustained growth over time, it must also deal with the economic, social, political, and institutional mechanisms, both public and private, necessary to bring about rapid (at least by historical standards) and large-scale improvements in levels of living for the peoples of Africa, Asia, Latin America, and the formerly socialist transition economies. Unlike the more developed countries (MDCs), in the less developed countries, most commodity and resource markets are highly imperfect, consumers and producers have limited information, major structural changes are taking place in both the society and the economy, the potential for multiple equilibria rather than a single equilibrium is more common, and disequilibrium situations often prevail (prices do not equate supply and demand). Thus development economics, to a greater extent than traditional neoclassical economics or even political economy, must be concerned with the economic, cultural, and political requirements for effecting rapid structural and institutional transformations of entire societies in a manner that will most efficiently bring the fruits of economic progress to the broadest segments of their populations. Consequently, a larger government role and some degree of coordinated economic decision making directed toward transforming the economy are usually viewed as essential components of development economics.