Skip to main content
main-content

Über dieses Buch

Growth theory provides a rich and versatile analytical framework through which fundamental questions about economic development can be examined. This book is an introduction to the newer features of growth theory that are particularly useful in examining the issues of economic development. Structural transformation, in which developing countries transition from traditional production in largely rural areas to modern production in largely urban areas, is an important causal force in creating early economic growth, and as such, is made central in this approach. Towards this end, the authors augment the Solow model to include endogenous theories of saving, fertility, human capital, institutional arrangements, and policy formation, creating a single two-sector model of structural transformation. Based on applied research and practical experiences in macroeconomic development, the model in this book presents a more rigorous, quantifiable, and explicitly dynamic dual economy approach to development. Common microeconomic foundations and notation are used throughout, with each chapter building on the previous material in a continuous flow. With its single model and focus on data and policy analysis, this text is intended for beginning graduate students and policy makers interested in economic development.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Overview

Abstract
Among the most enduring questions in economics are those related to growth and development. Since 1776, when Adam Smith published An Inquiry into the Nature and Causes of the Wealth of Nations, economists have been assessing the factors determining a nation’s standard of living and rate of economic progress. More than two centuries of research have improved our understanding of the roles of investments in physical and human capital, advancing technologies, openness, and sound institutions in transforming relatively poor economies into economic powerhouses. This book is an introduction to some of the newer features of growth theory that were developed after 1950. We show how the theory can be blended with historical data and case studies to think about the sources of economic prosperity.
Sibabrata Das, Alex Mourmouras, Peter C. Rangazas

Introduction to Economic Growth

Frontmatter

Chapter 2. Neoclassical Growth Theory

Abstract
This chapter discusses the one-sector neoclassical growth model—the foundation for all the growth theory in the book. The primary focus of the chapter is growth via capital accumulation. We think of capital as man-made durable inputs to the production process. The first type of capital we include is physical capital. For our purposes, physical capital can be primarily thought of as plant and equipment that is produced in one period and then used in production in the following period. (Definitions of physical capital will vary depending on the purpose at hand. In some cases, physical capital is defined to include inventories, software, land, and other inputs that extend beyond plant and equipment.) To model production, we introduce firms, economic institutions that combine physical capital and labor to produce goods and services.
Sibabrata Das, Alex Mourmouras, Peter C. Rangazas

Chapter 3. Extensions to Neoclassical Growth Theory

Abstract
In this chapter, we extend the basic neoclassical growth model in several ways. In the previous chapter, we learned that human capital is an important source of economic growth. Here, we introduce a simple theory of human capital formation based on parents desire to invest in the “quality” or economic productivity of their children. Parents will also choose the “quantity” of their children, giving us a theory of fertility that makes population growth, another important determinant of economic growth identified in Chap. 2, endogenous. Recall that high population growth makes it difficult to accumulated capital per worker and thus slows the growth in per capita income.
Sibabrata Das, Alex Mourmouras, Peter C. Rangazas

Chapter 4. Two-sector Growth Models

Abstract
This section provides an introduction to two-sector growth models. We begin with a model where a single good is produced using traditional means of production. In the traditional sector, production is carried out by households using land (natural resources) and labor. There are no firms or factories that rely on heavy plant and equipment and modern production methods to produce goods. This setting can be used to identify the conditions necessary for a modern sector to appear that would begin an “industrial revolution,” as in Hansen and Prescott (2002).
Sibabrata Das, Alex Mourmouras, Peter C. Rangazas

Dual Economies

Frontmatter

Chapter 5. Wage and Fertility Gaps in Dual Economies

Abstract
This chapter begins our analysis of two-sector models where markets may be missing. Here, we focus on the fact that wages are lower and fertility is higher in the traditional sector than in the modern sector of economies. This has important consequences for economic growth for two reasons. First, the wage gap suggests that the allocation of labor may be inefficient—the movement of labor from the traditional sector to the modern sector should raise average labor productivity. Second, if fertility falls as households move from the traditional sector to the modern sector, then population growth will decline making it easier to increase physical capital per worker.
Sibabrata Das, Alex Mourmouras, Peter C. Rangazas

Chapter 6. Physical Capital in Dual Economies

Abstract
In this chapter, we shift attention to industrialization and economic growth in dual economies. We focus again on the consequence of missing land markets, a common characteristic of developing economies that was documented in the previous chapter. Here, we examine the connections between land ownership, saving, and physical capital formation.
Sibabrata Das, Alex Mourmouras, Peter C. Rangazas

Chapter 7. A Complete Dual Economy

Abstract
In this chapter we combine the main features introduced in previous chapters into a complete dual economy model. The model includes physical and human capital, fertility, wage gaps, and technological change. We then examine the ability of the model to replicate key features of the economic growth observed in real-world economies.
Sibabrata Das, Alex Mourmouras, Peter C. Rangazas

Chapter 8. Urbanization

Abstract
In this chapter, we study migration to the city and its effects on urbanization. In previous chapters, we studied how the structural transformation affects economic growth and, in particular, how migration to the modern sector may alter private sector behavior. Here, we focus on the question of the best pace of urbanization as it relates to the allocation of rural and urban government services. Our motivation comes from the fact that the vast majority of governments around the developing world are concerned about the adequacy of public goods provision and the crowding associated with rapid urbanization (Bloom and Khanna 2007). In this sense, the structural transformation, which generally raises economic growth, can occur too quickly. A second important issue we address is the role politics plays in exacerbating rural–urban inequalities. As first stressed by Lipton (1977), the disproportionate political power of urban interests (the “urban elite”) in some developing countries’ economic policies may distort the allocation of government services, exacerbate rural–urban inequalities, and intensify migration beyond efficient levels.
Sibabrata Das, Alex Mourmouras, Peter C. Rangazas

Chapter 9. Conclusion

Abstract
In this chapter, we summarize some of the main points we have learned about development and their related policy implications. The points are organized into those related to the onset of growth and those related to the nature of growth once it begins. We also discuss policy implications and topics for future research.
Sibabrata Das, Alex Mourmouras, Peter C. Rangazas

Backmatter

Weitere Informationen

Premium Partner

    Bildnachweise