Growth and Development: with special reference to developing economies

529 Pages·1999·78.08 MB·English

by  A. P. Thirlwall (auth.)

Growth and Development
OTHER BOOKS BY THE AUTHOR
Inflation, Saving and Growth in Developing Economies
Regional Growth and Unemployment in the United Kingdom (with R. Dixon)
Financing Economic Development
Balance-of-Payments Theory and the United Kingdom Experience (Fourth
Edition with H. Gibson)
Nicholas Kaldor
UK Industrialisation and Deindustrialisation (Third Edition with S. Bazen)
The Performance and Prospects of the Pacific Island Economies in the World
~conomy
Economic Growth and the Balance-of-Payments Constraint (with]. McCombie)
The Economics of Growth and Development: Selected Essays, Vol. 1
Macroeconomic Issues from a Keynesian Perspective: Selected .Essays, Vol. 2
EDITED WORKS
Keynes and International Monetary Relations
Keynes and Laissez-Faire
Keynes and the Bloomsbury Group (with D. Crabtree)
Keynes as a Policy Adviser
Keynes and Economic Development
Keynes and the Role of the State (with D. Crabtree)
European Factor Mobility: Trends and Consequences (with I. Gordon)
The Essential Kaldor (with F. Targetti)
Further Essays in Economic Theory and Policy, Volume 9, Collected Economic
Papers of N. Kaldor (with F. TargettJ)
Causes of Growth and Stagnation in the World Economy (the Mattioli Lectures
of N. Kaldor with F. Targetti)
Economic Dynamics, Trade and Growth: Essays on Harrodian Themes
(with G. Rampa and L. Stella)
Growth and Development
with special reference to developing
economies
A. P. Thirlwall
Professor of Applied Economics
University of Kent at Canterbury
Sixth Edition
© A. P. Thirlwall 1972, 1978, 1983, 1989, 1994, 1999
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Designs and Patents Act 1988.
First edition 1972
Reprinted once
Second edition 1978
Reprinted three times
Third edition 1983
Reprinted once
Fourth edition 1989
Reprinted twice
Fifth edition 1994
Reprinted five times
Sixth edition 1999
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Additional material to this book can be downloaded from http://extras.springer.com
ISBN 978-0-333-74679-0 ISBN 978-1-349-27214-3 (eBook)
DOI 10.1007/978-1-349-27214-3
A catalogue record for this book is available from the British Library.
This book is printed on paper suitable for recycling and made from
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10 9 8 7 6 5 4 3 2 1
08 07 06 05 04 03 02 01 00 99
To Elizabeth
For love and friendship
Contents
Preface to the Sixth Edition xii Chapter 3: The Characteristics of
Map of the World by Income xvii Underdevelopment and
Structural Change 43
PART I DEVELOPMENT AND The Characteristics of Underdevelopment 43
UNDERDEVELOPMENT The Dominance of Agriculture and Petty
Services 43
Low Level of Capital Accumulation 45
Chapter 1: The Study of Economic
Rapid Population Growth 46
Development 3
Exports Dominated by Primary
Development Economics as a Subject 3
Commodities 47
Academic Interest in Development 4
Other Dimensions of the Development Gap 48
The New International Economic Order 9
Unemployment 4~
The Mutual Interdependence of the
Education 52
World Economy 10
The Distribution of Income 55
The Meaning of Development and
Growth and Distribution 56
the Challenge of Development
Nutrition and Health 60
Economics 12
Poverty, Famine and Entitlements 65
The Perpetuation of Underdevelopment 14
Food Production 66
Basic Needs 68
Chapter 2: The Development Gap Stages of Development and Structural
and the Measurement of Change 69
Poverty 16 Rostow's Stages of Growth 71
The Measurement of Poverty and Industrialisation and Growth 77
the World Distribution of Income 16 Kaldor's Growth Laws 79
Poverty 20
Distribution of World Income 22 Chapter 4: Theories of Economic
The Measurement and Comparability of Growth: Why Growth Rates
Per Capita Incomes 24 Differ Between Countries 82
Per Capita Income as an Index of Classical Growth Theory 82
Development 27 The Harrod-Damar Growth Model 89
Human Poverty Index and Human Neoclassical Growth Theory 94
Development Index 30 The Production Function Approach to
The Development Gap: Will Poor the Analysis of Growth 97
Countries Ever Catch up? 36 'New' (Endogenous) Growth Theory and
Are the Poor Countries Catching up? 40 the Macrodeterminants of Growth 115
vii
viii Contents
PART II FACTORS IN THE International Inequality and
DEVELOPMENT PROCESS Centre-Periphery Models 181
Models of 'Regional' Growth Rate
Chapter 5: Land, Labour and
Differences: Prebisch, Seers and Kaldor 183
Agriculture 12 7
The Prebisch Model 183
Land 128
The Seers Model 184
The Role of Agriculture in Development 128
An Export Growth Model of Regional
Barriers to Agricultural Development 131
Growth Rate Differences 185
The Organisation of Agriculture and
Theories of Dependence and Unequal
Land Reform 132
Exchange 188
The Supply Response of Agriculture 133
Unequal Exchange 190
Transforming Traditional Agriculture 135
The Growth of the Money Economy 136
Chapter 8: Population and
Finance for Traditional Agriculture 138
Development 193
The Interdependence of Agriculture and
Introduction 193
Industry 140
Facts about World Population 194
Economic Development with Unlimited
The Determinants of Fertility 197
Supplies of Labour 140
The Conflicting Role of Population
A Model of the Complementarity
Growth in the Development Process 200
Between Agriculture and Industry 145
Evaluating the Effect of Population
Rural-Urban Migration and Urban
Growth on Living Standards 203
Unemployment 147
Enke's Work 205
Disguised Unemployment: Types and
Simon's Challenge 207
Measurement 149
The 'Optimum' Population 209
Incentives and the Costs of Labour
A Model of the Low-Level Equilibrium
Transfers 155
Trap 210
Chapter 6: Capital and Technical The Critical Minimum Effort Thesis 213
Progress 158
The Role of Capital in Development 158 PART IV THE ROLE OF THE STATE,
The Capital-Output Ratio 160 THE ALLOCATION OF
Technical Progress 163 RESOURCES, SUSTAINABLE
Capital- and Labour-Saving Technical DEVELOPMENT AND THE
Progress 163 CHOICE OF TECHNIQUES
How Societies Progress Technologically 166
Learning 167 Chapter 9: Resource Allocation in
Investment in Human Capital: Education 168 Developing Countries:
Infrastructure Investment 171 The Market Mechanism
and the Role of the State 219
PART III OBSTACLES TO
The Market Mechanism and Market
DEVELOPMENT
Failures 219
Chapter 7: Dualism, Centre-Periphery The Role of the State 221
Models, and the Process of Development Plans 226
Cumulative Causation 175 Policy Models 227
Dualism 176 Projection Models 229
The Process of Cumulative Causation 177 The Allocation of Resources: The Broad
Regional Inequalities 180 Policy Choices 230
Contents lx
Industry versus Agriculture 231 Chapter 11: Development and the
The Comparative Cost Doctrine 231 Environment 268
Present versus Future Consumption 232 Introduction 268
Choice of Techniques 233 A Model of the Environment and
Balanced versus Unbalanced Growth 234 Economic Activity 270
Unbalanced Growth 237 The Market-Based Approach to
Investment Criteria 242 Environmental Analysis 271
Early Discussion of Project Choice 243 Externalities 272
The minimum capital-output ratio Common Property Rights 275
criterion 243 The Discount Rate 275
The social marginal product criterion 244 The Harvesting of Renewable Resources 276
The marginal per capita reinvestment Non-Renewable Resources 278
quotient criterion 245 Other Values 279
The marginal growth contribution Measuring Environmental Values 280
criterion 247 National Income Accounting 282
The Social Welfare Function 248 Risk and Uncertainty 283
Economic Growth and the Environment 284
Chapter 10: Project Appraisal, Social Sustainable Development 284
Cost-Benefit Analysis and Natural Capital and Equity 285
Shadow Wages 2SO Economic Thought and the Environment 288
Project Appraisal 250 International Agencies and the
Financial Appraisal 251 Environment 289
Economic Appraisal 252
Divergencies Between Market Prices and Chapter 12: The Choice of Techniques 291
Social Values 253 The Capital Intensity of Techniques in
Economic Prices for Goods 254 Developing Countries 291
Non-Traded Goods and Conversion Factors 255 The Conflict Between Employment and
Traded Goods 256 Output and Employment and Saving
Shadow Prices for Factors of Production 257 in the Choice of Techniques 294
The Social Rate of Discount 257 Employment versus Output 295
The Social Cost of Investment 258 Aggregative Implications of Factor
The Shadow Wage Rate 258 Substitution 296
A Closer Examination of the Change in Employment versus Saving 298
Consumption in Industry and Wages and the Capital Intensity of
Agriculture 261 Production 299
The Valuation of Production Forgone DiJferent Classes' Propensity to Consume 301
and the Increase in Consumption 261 Support of the Unemployed 301
Social Appraisal 262 Are Consumption and Investment Distinct? 302
The Equivalence of the Little-Mirrlees Taxes and Subsidies 303
Formulation of the Shadow Wage and Conclusion 304
the UNIDO Approach 264
Is It Worth Valuing All Goods At World Chapter 13: Input-Output Analysis 306
Prices? 264 The Uses of Input-Output Analysis 306
A Simple Numerical Example Showing the The Input-Output Table 307
Application of the Little-Mirrlees and Input Coefficients 309
UNIDO Approaches to Project Appraisal 265 A Digression on Matrix Inversion 310
x Contents
The General Solution to the Input-Output Non-Inflationary Financing of
Model 311 Investment 359
Forecasting Import Requirements 314 The Dangers of Inflation 360
Forecasting Labour Requirements 315 Inflation and Growth: the Empirical
Forecasting Investment Requirements 315 Evidence 361
Backward and Forward Linkages 316 The Inflationary Experience 362
Triangularised Input-Output Tables 317 The Structuralist-Monetarist Debate in
The Input-Output Table of Papua New Latin America 363
Guinea 317
The Assumptions of Input-Output Analysis 319 Chapter 15: Foreign Assistance, Debt
Input-Output, Linkage Analysis and and Development 367
Development Strategy 320 Introduction 367
Empirical Studies of Linkages 320 Dual-Gap Analysis and Foreign Borrowing 369
The Hirschman Compliance Index and the The Investment-Savings Gap 3 71
Growth of Countries 323 The Import-Export Gap, or Foreign
Exchange Gap 372
PART V FINANCING ECONOMIC A Practical Example of Dual-Gap
DEVELOPMENT Analysis 373
The Assumptions of Dual-Gap Analysis 374
Chapter 14: Financing Development Models of Capital Imports and Growth 375
From Domestic Resources 327 Capital Imports, Domestic Saving and the
Introduction 327 Capital-Output Ratio 376
Saving 328 The Types and Magnitude of International
The Prior-savings Approach 332 Capital Flows 377
Financial Systems and Economic The Debate Over International Assistance
Development 335 to Developing Countries 3 77
The Informal Financial Sector 335 The Motives for Official Assistance 3 78
Monetisation and Money Market The Total Net Flow of Financial
Integration 336 Resources to Developing Countries 380
Developing a Banking System 337 Official Development Assistance 380
Special Development Banks and Total Net Flow of Financial Resources
Micro-Credit 338 from DAC Countries 381
Financial Intermediaries 340 British Assistance to Developing Countries 381
Financial Liberalisation 340 The Recipients of External Assistance 384
Critics of Financial Liberalisation and Aid Tying 387
Empirical Evidence 342 Multilateral Assistance 388
Fiscal Policy and Taxation 347 World Bank Activities 390
Tax Reform in Developing Countries 350 Structural Adjustment Lending 391
Inflation, Saving and Growth 352 Estimating the Aid Component of
The Keynesian Approach to the Financing International Assistance 393
of Development 352 The Distribution of International
Reconciling the Prior-saving and Assistance 396
Forced-saving Approaches to Schemes for Increasing the Flow of
Development 357 Resources 398
The Quantity Theory Approach to the Foreign Direct Investment and
Financing of Development 357 Multinational Corporations 400