TOPIC 6: Structural-Change and Lewis Two-Sector Models of DevelopmentTheoretical Context* Early economic growth models, like Rostow's stages and Harrod-Domar, often implicitly assumed the presence of conducive attitudinal and institutional conditions (e.g., integrated markets, skilled workforce, efficient government) in underdeveloped nations. However, these are often lacking, along with complementary factors such as managerial competence and skilled labor.* There was also insufficient focus on reducing the capital-output ratio ($$c$$), which is an alternative strategy for raising growth (as seen in Equation 3.7), by increasing the efficiency of investment.### Structural-Change Models Overview* Structural-change theory examines how underdeveloped economies transition from traditional subsistence agriculture to more modern, urbanized, and industrially diverse manufacturing and service economies.* It utilizes neoclassical price and resource allocation theory and modern econometrics to explain this transformation.* Two prominent examples are: * The
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