This topic covers the basic concepts and theories of development economics, including understanding the differences between developed and developing countries, key measures of development, and the importance of economic growth for improving living standards.
Introduction to Development Economics
Key concepts, objectives, and analytical tools for understanding how economies grow and improve living standards.
| Aspect | Description |
|---|---|
| Definition | The branch of economics that studies the process of economic development, the factors that promote or hinder it, and policies that can improve welfare in low‑ and middle‑income countries. |
| Scope | • Income growth and poverty reduction • Structural transformation (agriculture → industry → services) • Human development (health, education, gender equity) • Institutional quality (property rights, governance) • Environmental sustainability |
| Distinct from | Traditional “growth” economics (focuses mainly on GDP). Development economics adds distributional issues, social welfare, and the role of institutions. |
| Theory | Main Idea | Policy Implication |
|---|---|---|
| Classical/Neoclassical Growth (Solow) | Long‑run growth driven by capital accumulation, labor, and exogenous technological progress. | Emphasize savings/investment and openness to technology. |
| Harrod‑Domar Model | Growth depends on the savings rate and the productivity of capital (incremental capital-output ratio). | High savings & investment are necessary for rapid growth. |
| Lewis Dual‑Sector Model | Traditional (agriculture) sector supplies surplus labor to a modern (industrial) sector, which drives growth. | Promote industrialization and labor migration. |
| Endogenous Growth (Romer, Lucas) | Technological change is generated within the economy via R&D, human capital, and knowledge spillovers. | Invest in education, research, and innovation systems. |
| Structural Change Theories (Kuznets, Harris‑Todaro) | Development involves reallocation of resources across sectors and urban‑rural migration. | Support infrastructure, urban planning, and rural development. |
| Institutional Economics (North, Acemoglu) | Institutions shape incentives and thus economic outcomes. | Reform property rights, reduce corruption, improve governance. |
| New‑Economic‑Geography | Spatial concentration of economic activity creates agglomeration economies. | Invest in transport, connectivity, and balanced regional policies. |
| Category | Common Indicators |
|---|---|
| Income | GDP per capita (PPP), GNI per capita, median household income |
| Poverty | Poverty headcount ratio, poverty gap, multidimensional poverty index (MPI) |
| Inequality | Gini coefficient, income shares of top/bottom quintiles |
| Human Development | Life expectancy, literacy rate, school enrollment, HDI |
| Health | Infant mortality, maternal mortality, disease prevalence |
| Infrastructure | Access to electricity, clean water, road density, internet penetration |
| Institutional Quality | Rule of |