The Path Of Unbalanced Growth

1809 WordsDec 15, 20158 Pages
Underdeveloped countries display common characteristics: low levels of GNI per capita, large income inequalities and low productivity levels across sectors. Consequently, there is a lack of investors and entrepreneur’s, thus cash flows cannot be directed into various sectors that influenced balanced economic growth. In many developing countries it is therefore common to see a developmental policy to maintain tension, disproportions and disequilibrium in which Hirschman argued the case of a deliberate unbalancing of the economy. These policies dictate the need for more-developed industries to provide undeveloped industries an incentive to grow. Of course, these policies are decided by those with more power, thus typically seen in urban areas of an economy, in which many can argue this leading to urban bias, which I will unfold in this essay. The path of unbalanced growth is described by three phases; 1) complementarity, 2) induced investment, and 3) external economies. One particular sector can grow faster than another, so the need for unbalanced growth will continue as investments must complement existing imbalance. This is where unbalanced growth differs from balanced growth, in particular, is why it is crucial in developing countries where it is common that the government doesn’t have enough money to support all the sectors. Staggering economic development by focusing on the leading sector (e.g. Supporting the power industry, the country will then become self sufficient
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