Studied by 0 people
2nd Sem prelim period
Power Balance Theory
Popular in north- south, Southern economies were exploited by northern economies.
Poor countries exported raw materials to industrial countries in exchange for goods.
Price of raw materials in relation to price of manufactured goods tend to deteriorate.
Structuralist approach
Models Economic growth as a process of a shift in resources
Stresses rigidities that hinder this shift and studies how the shift in output among sectors takes place over time as development progresses
Shifts from agriculture to industrial output and services
Lewis-Fei Ranis Model
Traditional sector has low capital accumulation and labor skill , Low productivity and low earnings
Meanwhile, Modern sector has high productivity and pays higher wages
New growth theory
Developed by younger economists dissatisfied with the solow-swan model
Endogenize technical change by using external economies and spillovers
Effects of technology and education can help increasing returns to scale , drives growth process to higher levels of income instead of slowing growth to diminishing returns.
Mechanism by which technology is transferred from one firm to another in an industry within the country then across international borders.
Asian growth miracle
High rate growths for the last 40 years from a group of countries in southeast asia
Late 1980’s and early 1990’s when government policy shifted toward supporting a more open and competitive environment
When did southeast asia grow rapidly
Import substitution
Policy environment most developing countries adopted
Countries have a comparative advantage and so they should export these products.
Also argued that since income were low saving rates were also low , inflows of investments and financial aid were needed to life growth
What does import substitution theory state
Outward looking trade policies and the acquisition of foreign technology.
What policies did japan and east asian countries apply
Openness, Macroeconomic Stability, labor market flexibility, education policies
Primary factors of asian growth miracle
Initial conditions and sector policies
Secondary factors of the asian growth miracle
Labor intensive industries
Where did the emphasis shift in southeast asia
Shift from import substitution to export promotion, led by the shift regime
Shift that led to lower tariff rates on exports and imports
Technological transfer
Served to reinforce the shift in export emphasis
Acquiring foreign technology
Copying it without license
Entering into joint ventures(FDI)
(east asia followed 1st route while southeast followed 2nd)
How was openness applied
A lot of gov’t intervention in industrial and financial sectors in some countries and few in others
The government intervention did not seem to have a direct affect on performance
Corruption, Lack of political will, domestic unrest
Why was growth slower in Philippines and Sri Lanka
Diminishing returns as more resources are put into secondary and tertiary education,
Rapid rate of income growth that tended to outstrip the corresponding growth in human development
Reasons for eroding of educational advantages of asia
Behrman and Shneider
Concluded that schooling and attainment in miracle economies was not particularly outstanding.
Than that of the industry at the beginning of the proess
Productivity in agriculture is higher than that of ____
The beginning of industrialization
Surplus from the increase in profitability of agriculture fueled where?
Monsoon weather cycle
Weather cycle that led to reliance in rice production
Cobb-Douglas Production function
What production model stated that variable factors were efficiently allocated but biological assets were not
Econometric model
What model stated that all resources were allocated efficiently
Linear programming
Potential output was higher than the actual output,
There are inefficiencies but these could be removed by improving copping patterns
Tentative conclusion: Traditional Agriculture is efficient but minor improvements can be made.
(Mellor and Mudahar, 1992)
Subsistence Farming
Maximize Family’s chances of survival not maximizing profit
Cultural Value
Uncertainties of change
Inadequate insurance for fallback
Reasons farmers resist innovation and modernization
Landlords, Lack of government Guarantee, Lenders captured all profits , Complementary inputs were not made available
Disincentives to increasing agricultural Productivity
Green revolution, improvements in fertilizer and irrigation
Phenomenon created by Development of higher yielding variety of rice
Farm size, there is an inverse relationship between farm size and overall farm productivity in traditional agriculture
Changes in land tenure- owner operated farms, Tenancy arrangement where farmers give landlords a share of harvest. Rents out land to farmers
What did not help
Keeping an undervalued exchange to maintain appropriate trading terms.
How to help agriculture
Mechanization and demand for labor.
√ Technological transfer, growth, and equity.
√ Genetic Engineering.
√ Zero tillage.
√ Research and development.
√ Food prices and linkages to energy.
√ Shifts out of primary grain production
Modernization of agriculture
Harris-Todaro model
Unemployment can coexist with rapid labor movement to the city
Forward linkage
Tells us how a product is related as an input into production
Reach a variable size of production that takes full advantage of economies of scale
better transport and communication
How can firms be efficient
Foreign Direct Investment (FDI)
Important source of capital and expertise especially for export oriented industries
Brute force application of the Harrod-Domar Model augmented by the growth of population
Reason for rapid growth according to Krugman(1994)-Lau(1996)-Young (1992-1995)
It requires continous process of learning , innovation. Experimentation and continuing structural change.
Amsden(2001) Hobday (1995) Nelson and Pack (1998) stated that
Products are being exported more intensely
A country has more comparative advantage according to Balassa(1965) when:
Innovation
A creative process of abandoning old ways of doing things and adopting new methods
Incomplete information and a certain amount of risk, Rural sector provides a social capital
Factors affecting migration decisions
Decrease output in source country, increase output in host country
Economic impact of migration
Industrial policies
These policies were benign and competition flourished in most countries
Infant industry protection ploicy
In korea and taiwan, these policies were strictly enforced and favored export industries were monitored for efficiency and export peerformance
high levels and growth rates of savings and investment in miracle economies
Variables that increased dramatically as a percent of income
Increased productivity in miracle economies
Measures of TFP show a contribution to output growth until the middle of 1980
Embodied Technical progress
Something to do with the changing nature of inputs
Disembodied Technical Progress
Relates to the way factors are combined in the workplace
Conditional Convergence
Less restrictive form of convergence
log [Y(year)-Y(year)]= a+b log Y (year)
Formula for testing hypothesis of convergence
