Research on Immigration and Integration in the Metropolis www.riim.metropolis.net

1. Research on Immigration and Integration in the Metropolis www.riim.metropolis.net

2. Lectures 3 and 4 Development Theories: A way to Organize our Ideas or an Ideology ?

3. Questions for Theory to Answer • 1. What do you want a theory of development to explain ? • Income per capita, social stability,equality • 2. Why do some countries grow and then decline? • Theory must explain both directions • 3. Why do some poor countries 'take-off' and continue to grow?

4. More Questions to Ponder • 4. Why do some poor countries remain in a low level trap? • Trap defined as constant Yp • 5. What arguments should be included in development theory?

5. More Questions to Ponder • a. Population growth: does it hinder or accelerate growth? • b. Capital accumulation: • How do you accumulate when you are already poor? • c. Technical Change: • i. Where do you access technical change if you are already poor? • Via trade or indigenous adaptation ? • ii. What does Canada's historical experience with the wheat and the reaper tell us about technical change and trade ?.

6. Questions for you to answer • 6. Find an example of a poor country which has • a. Taken off in last 20 years • b. Remained stagnant for last twenty years • c. Grew and then declined in last twenty years • 7. How did your country of choice do with respect to the categories a to c and why ?

7. Lecture 4: Theories • A. Linear-Stages Theory (1950s and early 1960s) • 1. It views economic development as a series of successive stages of economic growth through which every nation must go through. • 2. It emphasizes that more investment leads to more growth. • 3. It can be described by an economic mechanism known as the Harrod-Domar Growth model.

8. The Harrod -Domar Growth Model • 1. Rate of GNP growth is a function of • national savings ratio (s) • and rate of national capital-output ratio (k). • GNP growth is positively related to the savings ratio and negatively related to the capital-output ratio. • 2. It could explain the massive transfers of capital and technical assistance from developed to less developed nations.

9. More Harrod -Domar Growth Model • 3. Is investment a sufficient condition for economic growth? • No. • It is necessary but not sufficient condition for economic growth. • Necessary: one of many ingredients • Sufficient; minimum set required to grow

10. II. Structural- Change Theory • 1. It emphasizes on the mechanism by which underdeveloped economies alter their domestic economic structures from a traditional subsistence agriculture to a more urbanized, industrially diversufued economy. • 2. It employs tools of neoclassical price and resource allocation theory.

11. Lewis Two-Sector Model • i. It became the general theory of the development process in surplus-labor Third World nations during the 1960s and early 1970s. • ii. It focuses on the process of labor transfer from the traditional economy to the urbanized, industrial sector and the growth of output and employment in the high-productivity sector

12. Assumptions • i. Marginal product of labor is zero (surplus-labor). • This implies that labor can be removed from the agricultural sector without any loss of output in that sector. • ii. Rural supply of labor to industrial sector is perfectly elastic. • iii. Full employment in the urban sector.

13. More Assumptions • iv. Constant urban wage- premium over a fixed average subsistence wage. • v. Capitalists reinvest all profits. • vi. Rate of labor transfer and job creation is proportional to the rate of capital accumulation.

14. Agricultural Sector

15. Industrial Sector

16. Conclusions for Lewis Model • i. Employment growth and labor transfer is induced by output expansion in which the speed of expansion depends on the rate of industrial investment and capital accumulation in the industrial sector. • ii. The self-sustaining growth and employment expansion process continues until all surplus labor is exhausted.

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