Advantages And Disadvantages Of Growth Model

Rostow's suggests that development is seen as an evolutionary process that countries progress up a ladder, his five-stage model;

Economic development can be defined generally as involving an improvement in economic welfare, measured using a variety of indices, such as the Human Development Index (HDI). A developing country is described as a nation with a lower standard of living, underdeveloped industrial base, and a low HDI relative to other countries. There are several factors which may have the effect of limiting economic development in such countries. Factors such as these include: primary product dependency, the savings gap and political instability.

Countries have different endowments. Differing climates give advantages to the production of different crops. Differing histories and inclinations result in different advantages in finance, skills and manufacturing.

19. After reading this chapter, what do you believe are the two greatest obstacles preventing poor countries from becoming rich?

Economic Development: Growth is associated with structural, social change and change in the important institutions of the economy.

Growth to Self-Sustaining Economic Development. Rostow puts forward that there is a short time span between take off (stage 2) and maturity (stage 3) when a country becomes

Review of: Olson, Matthew S., Van Bever, Derek ,Verry, Seth. 2008. When Growth Stalls. Harvard Business Review, 51-62.

Economic growth, put simply, is “an increase in the amount of goods and services produced per head of the population over a period of time”; development is inextricably linked with this economic growth. By utilising theories of economic growth and development we can see how the Chinese and Sub-Saharan African economies have emerged, but, more notably, we can use these to look at patterns from past and present to show their experience and the implications of this growth for the future.

Moreover, falling terms of trade due to primary product dependency could limit economic development. This is illustrated by the Prebisch-Singer hypothesis states that primary products tend to be income inelastic whereas the demand for manufactured good is income elastic in the long run. Therefore, as real incomes rise, the demand for manufactured goods will increase at a faster rate than the demand for primary products. This therefore means that primary product dependency acts as a limit to development in developing countries because it means that in the long run the terms of trade would be better for manufacturing products thus there would be more financial

The Solow Model is designed to show how the growth in the labour force, capital stock and advances in technology interact and how they affect a nations total output. The model is important for the analysis of economic growth in developing countries as it demonstrates the nature of an economy to be a key determinant of steady-state capital stock within a country. If the savings rate is high, the economy will have a large capital stock and thus high level of output and vice versa. Correspondingly changes in capital stock can lead to economic growth.

Amartya Sen defines economic development in terms of personal freedom, freedom to choose from a range of options. While economic growth may lead to an increase in the purchasing power of people, if the country has a repressed economy, there is lack of choice and hence personal freedom in restricted. Hence once again growth has taken place without any development. While economic growth may result in an improvement in the standard of living of a relatively small proportion of the population whilst the majority of the population remains poor. It is how the economic growth is distributed amongst the population that determines the level of development.

The Solow model is widely considered to be the standard neoclassical economic growth model which serves as the basis for understanding economic growth. I will first introduce the two basic equations that the Solow model is built around, discussing the main assumptions made along the way. I will then present the key equation of the Solow model and discuss its results and implications. I will then address why it is desirable to use log-linearization, and how it can be used to study the dynamics near the steady-state. We will then briefly look into the empirical results of Mankiw et al. (1992) and what they mean for the Solow model.

Eyeballing any cross sectional data on growth across countries shows that countries grow at different rates. Many theories try to explain this phenomenon with emphasis with capital accumulation being one of them. I will start by developing the standard neoclassical growth model as developed by Solow(1956)[1]. I will then proceed to discuss the extensions that have been made to this basic model in an attempt to better understand actual growth figures, for e.g. the standard neoclassical model cannot explain the magnitude of international differences in growth rates. Mankiw[2] points out that “the model can explain

The term developmental state has been widely utilised to describe any state experiencing a period of economic development and improvement in living standards (Pham, 2012). One of the most significant arguments in this scope is the performance of developmental state model. A number of scholars have attempted to investigate this issue and arguments can be divided into three categories. Proponents of state intervention indicate that the state plays an indispensable role in directing economic development and utilising the resources of the country to achieve development goals. On the contrary, those who oppose state-led model argue

He pointed out that different economic levels have their own requirements and they may not follow the same process of industrialization. Moreover, he raised the most influential theory related to late industrialization that the economically backward states may have rapider growth rate as they are late comers, and the national development process relied on the degree of economic backwardness. That is to say the more backward a country, the faster it will advance (ibid).