Growth and Development: With Special Reference to Developing Economies PDF
Preview Growth and Development: With Special Reference to Developing Economies
Growth and Development The English Language Book Society is funded by the Overseas Development Administration of the British Government. It makes available low-priced, unabridged editions of British publishers' textbooks to students in developing countries. Below is a list of some other books on development studies published under the ELBS imprint. Casley and Lury Data Collection in Developing Countries Oxford University Press Fitzgerald Public Sector Investment Planning for Developing Countries Macmillan Ghatak Monetary Economics in Developing Countries Macmillan Gilbert and Gugler Cities, Poverty and Development Oxford University Press Harriss (editor) Rural Development Hutchinson Killick Policy Economics Heinemann Educational Kirkpatrick, Lee and Nixson Industrial Structure and Policy in Less Developed Countries Unwin Hyman Prest Public Finance in Developing Countries Weidenfeld & Nicolson Prest and Barr Public Finance in Theory and Practice Weidenfeld & Nicolson Growth and Development With Special Reference to Developing Economies Fourth Edition A. P. THIRLWALL Professor of Applied Economics, University of Kent at Canterbury g BS English Language Book Society/Macmillan Macmillan Education Ltd London and Basingstoke Companies and representatives throughout the world ©A. P. Thirlwall 1972, 1978, 1983, 1989 All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, without permission. First published 1972 Reprinted 1974 Second edition 1978 Reprinted 1979, 1981, 1982 Third edition 1983 Reprinted 1986, 1987 Fourth edition 1989 ELBS edition first published 1978 Reprinted 1979, 1980, 1982 ELBS edition of third edition 1985 Reprinted 1986, 1987 ELBS edition of fourth edition 1989 ISBN 978-0-333-49311-3 ISBN 978-1-349-19837-5 (eBook) DOI 10.1007/978-1-349-19837-5 To all my students past and present Contents Preface to the Fourth Edition xiii Part I INTRODUCTION 1 Development and Underdevelopment 3 Current interest in development economics 3 Academic interest in development 4 The New International Economic Order 5 The mutual interdependence of the world economy 6 The meaning of development and the challenge of development economics 8 The perpetuation of underdevelopment 9 The world distribution of income 10 The development gap 16 Per capita income as an index of development 20 The measurement and comparability of per capita incomes 22 Other dimensions of the development gap 26 Unemployment 27 The distribution of income 30 Growth and distribution 34 Nutrition and health 35 Poverty, famine and entitlements 36 Food production 36 Education 45 Basic needs 45 The stages of development 50 Industrialisation and growth 52 Rostow's stages of growth 60 2 The Production-Function Approach to the Study of the Causes of Growth 65 The analysis of growth 65 The production function 66 The Cobb-Douglas production function 68 viii Contents Embodied technical progress 74 Improvements in the quality of labour 76 Resource shifts 77 Empirical evidence Production-function studies of developing countries 80 Part II F ACTORS IN THE DEVELOPMENT PROCESS 3 Land, Labour and Agriculture 87 The role of agriculture in development 87 The organisation of agriculture and land reform 89 The supply response of agriculture 90 Transforming traditional agriculture 91 The growth of the money economy 92 Finance for traditional agriculture 94 The interdependence of agriculture and industry 95 Economic development with unlimited supplies of labour 96 A model of the complementarity between agriculture and industry 100 Rural-urban migration and urban unemployment 103 Disguised unemployment: types and measurement 106 Incentives and the costs of labour transfers 112 4 Capital and Technical Progress 115 The role of capital in development 115 The capital-output ratio 117 Technical progress 120 Capital-and labour-saving technical progress 120 How societies progress technologically 123 Learning 124 Education 125 Part III OBSTACLES TO DEVELOPMENT 5 Dualism, Centre-Periphery Models, and the Process of Cumulative Causation 130 Dualism 130 The process of cumulative causation 132 Regional inequalities 135 International inequality and centre-periphery models 136 Models of 'regional' growth-rate differences: Prebisch, Seers and Kaldor 137 The Prebisch model 138 The Seers model 139 An export-growth model of regional growth-rate differences 140 Theories of dependence and unequal exchange 143 Unequal exchange 145 6 Population and Development 148 The conflicting role of population growth in the development process 148 Evaluating the effect of population growth on living standards 151 Enke's work Simon's challenge 155 Contents ix Facts about world population 157 The 'optimum' population 168 A model of the low-level equilibrium trap 170 The critical minimum effort thesis 174 Part IV PLANNING, THE ALLOCA nON OF RESOURCES AND THE CHOICE OF TECHNIQUES 7 Planning and Resource Allocation in Developing Countries 179 Arguments for and agaiJ\~t planning 179 Development plans 181 Policy models 182 Projection models 184 The allocation of resources: the broad policy choices 184 Industry v.s agriculture 185 The comparative cost doctrine 186 Present vs future consumption 186 Choice of techniques 187 Balanced vs unbalanced growth 189 Unbalanced growth 192 Investment criteria 196 Early discussion of project choice 197 The minimum capital-output ratio criterion 197 The social marginal product criterion 198 The marginal per capita reinvestment quotient criterion 199 The marginal growth contribution criterion 201 The social welfare function 202 8 Social Cost-Benefit Analysis and the Shadow Wage 204 Divergences between private and social costs and benefits 205 Social prices for goods 205 Shadow prices for factors of production 206 Choice of numeraire 206 The benefit flow 207 The social rate of discount 207 The social cost of investment 209 The shadow wage rate 209 A closer examination of the change in consumption in industry and agriculture 213 Distributional considerations in project appraisal 213 The valuation of production forgone and the increase in consumption 215 The equivalence of the Little-Mirrlees formulation of the shadow wage and the UNIDO approach 215 Is it worth valuing all goods at world prices? 215 A simple numerical example showing the application of the Little-Mirrlees and UNIDO approaches to project appraisal 217 The shadow exchange rate 218 9 The Choice of Techniques 220 The capital intensity of techniques in developing countries 220 x Contents The conflict between employment and output and employment and saving in the choice of techniques 223 Employment vs output 223 Aggregative implications of factor substitution 225 Employment vs saving 228 Wages and the capital intensity of production 229 The propensity to consume of different classes 231 Support of the unemployed 232 Are consumption and investment distinct? 233 Taxes and subsidies 233 Conclusion 235 10 Input-Output Analysis 237 The uses of input-output analysis 237 The input-output table 238 Input coefficients 240 A digression on matrix inversion 242 The general solution to the input-output model 243 Forecasting import requirements 247 Forecasting labour requirements 248 Forecasting investment requirements 249 Backward and forward linkages 250 Triangularised input-output tables 250 The input-output table of Papua New Guinea 251 The assumptions of input-output analysis 251 11 The Programming Approach to Development 255 Linear programming 256 The dual 259 Part V FINANCING ECONOMIC DEVELOPMENT 12 Financing Development from Domestic Resources 265 The prior-savings approach 267 Monetary policy 269 Fiscal policy 272 Tax reform in developing countries 276 Inflation, saving and growth 278 The Keynesian approach to the finance of development 279 Reconciling the prior-saving vs forced-saving approaches to development 284 The quantity theory approach to the finance of development 285 Non-inflationary finance of investment 286 Inflation and the credit-financed growth rate 287 The dangers of inflation 289 Inflation and growth: the empirical evidence 290 The inflationary experience 291 The structuralist-monetarist debate in Latin America 291
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