MDGS GOAL
1. Eradicate extreme poverty and hunger
2. Achieve universal primary education
3. Promote gender equality and empower women
4. Reduce child mortality 5. Improve maternal health
6. Combat HIV/AIDS, malaria, and other diseases
7. Ensure environmental sustainability
8. Develop a global partnership for development
SDGS GOAL
1. No poverty 2. Zero hunger
3. Good health and well-being
4. Quality Education 5. Gender equality
6. Clean water and sanitation
7. Affordable and clean energy
8. Decent work and economic growth
9. Industry, innovation and infrastructure
10. Reduced inequalities
11. Sustainable cities and economies
12. Responsible consumption and production
13. Climate action 14. Life below water
15. Life on land
16. Peace, justice and strong institutions
17. Partnership for the goals
THE BIG PUSH
The Big Push is a development strategy which emphasizes that the
simultaneous and coordinated investment in various sectors of an
economy helps to overcome such a scenario where several sectors
are underdeveloped. Its objective is to build self-sustaining cycles
of economic growth through removing constraints to development.
The main hypothesis behind this approach is that by investing in several
sectors simultaneously, more significant and sustainable economic
development can occur as positive externalities and synergies emerge.
The Big Push concept has been used to justify large-scale investment
programs in infrastructure, education, healthcare, and industry in developing countries.
ASSUMPTIONS (A Graphical Model, 6 assumptions)
1. One factor of production 2. Two sectors
3. Same production function for each sector
4. Consumers spend an equal amount on each good
5. Closed economy 6. Perfect competition with traditional firms
operating, limit pricing monopolist with a modern firm operating
CRITICSM:
Critics argue that the model doesn't account for issues such as inefficiencies
in government-led initiatives, corruption, or the complexities of global markets.
2.5 How Low-Income Countries Today Differ from Developed
Countries in Their Earlier Stages:
Physical and Human Resource Endowments
●Most less developed countries are poorly endowed (especially Asia).
Also parts of Africa and Latin America require
heavy investment to exploit the resources
●The difference in skilled human resource endowments is even more pronounced
Relative Levels of Per Capita Income and GDP
●Living standards of now developed were not great during
industrialization, but they certainly weren’t economically
debilitating as they are now for developing countries
Climatic Differences
●Economically most successful countries are located in the temperate zone –
this dichotomy cannot be ignored, although the effects of climate might
be explanatorily limiting on the greater scheme of inequality etc.
Population Size, Distribution, and Growth
●Before and during their early growth years, Western nations experienced
a very slow rise in population growth – this is not the case for
most developing countries now.
The Historical Role for International Migration
●International migration was a major outlet for excess rural population
in the 19th and early 20th century – home governments were relieved
of costs of providing for the unemployed, plus a not insignificant
portion of foreign earnings were being sent back home
●Mass emigration has very little scope for reducing pressures
of overpopulation in developing countries now
●Also many of the people who immigrate are the ones that are
most needed by the home countries, aka the educated and skilled
– they move permanently = “brain drain” → loss of valuable human resources
The Growth Stimulus of International Trade
●Non-oil exporting developing countries are unable to generate rapid
economic growth through world trade – their terms of trade have declined
over years (price received for exports relative to price to be paid for imports)
●When developing countries become lower-cost producers of competitive
products with developed countries, the latter set up barriers to trade (tariff and non)
Q. Are Living Standards of Developing and Developed Nations Converging?
Divergence: A tendency for per capita income (or output) to grow faster in
higher-income countries than in lower-income countries so that the income
gap widens across countries over time (as was seen in the
two centuries after industrialization began).
Convergence: The tendency for per capita income (or output) to grow faster
in lower-income countries than in higher-income countries so that lower-income
countries are “catching up” over time. When countries are hypothesized to
converge not in all cases but other things being equal (particularly savings rates,
labor force growth, and production technologies), then the term
conditional convergence is used.
Evidence of unconditional convergence in Living Standards of Developing
and Developed Nations is hard to find but there is increasing evidence
of “per capita income convergence,” weighting changes in per capita
income by population size
MALTHUS MODEL:
The Causes of High Fertility in Developing Countries:
The Malthusian and Household Models:
The Malthusian Population Trap:
• Malthus connected diminishing returns to population growth and
therefore economic development. o “a universal tendency for the
population of a country, unless checked by food shortages, to double
every 30-40 years. Because of diminishing returns to the fixed
factors (land, food,) could only grow at arithmetic rates.
• He proposed that the only way to not fall in chronic low levels
of living + poverty, we had to “morally restrain” ourselves and limit reproduction.
• Malthusian population trap also called the low level equilibrium
population trap. o It can be graphed as a concave down curve,
where percentages can be negative or positive.
When it is 0 – population growth is stable.
Criticisms of the Malthusian Model
• First: ignores the huge impact of technological progress in offsetting the
growth-inhibiting forces of rapid population increases. o Malthus didn’t
predict how technology could augment availability of land by rasing its
quality even if quantity remained the same. o Technology is represented
as an upward shift of the income growth TP curve so that all levels of
per-capita income are vertically higher than population growth curve.
• Second: assumption that national rates of population increase are
directly positively related to the level of per capita income.
• We reject the Malthusian and neo-malthusian theories:
1. They don’t take into account technological progress o
2. Based on a hypothesis about a macro-relationship between
population growth adnd levels of per capita income o
Focus on the wrong variable (per capita income) as the main
determinant of population growth rates.
Multiple Equilibria: A Diagrammatic Approach
Multiple equilibria – a condition in which more than one equilibrium exists.
These equilibria may sometimes be ranked, in the sense hat one is
preferred to another, but the unaided market will not move the
economy to the preferred outcome.
• In this model, one invests based on his expectation of
the average level of investment.
• D1 represents a stable equilibrium with a coordination failure,
D2 an unstable equilibrium, D3 a stable equilibrium with a
higher level of investments; the equilibrium is stable when
the Scurve intersects from above.
• The S-shaped curved simply explains the positive relationship
between the benefits of an agent depending on the actions of
other agents; it is the privately rational decision function.
• The general idea of an equilibrium in such case, is one in which
participants are doing what is the best for them, given what they
expect others to do, which in turn matches what others are actually doing.
• The curve does not rise quickly first because of the lack of coordination
and inaccurate expectations. But after enough investment, many agents
begin to provide spill over benefits to neighbouring agents, and the curve
increases at a much faster rate. Finally after most potential investors
have been positively affected and the most important gains
have been realized, the rate of increase starts to slow down.
• Changing expectations may not be sufficient if it is
more profitable for a firm to wait for others to
invest rather that to be a pioneer investor.
• Market forces can generally bring us to one of the
equilibria, but they are not sufficient to ensure that
the best equilibrium will be achieved, and they
offer no mechanism to become unstuck from a bad
equilibrium and move toward a better one.
• When jointly profitable investments may not be made without
coordination, equilibria may exist in which the same individuals
with access to the same resources and technologies could
find themselves in either a good or a bad situation
Harris-Todaro model:
An equilibrium version of the Todaro model that predicts
that expected incomes will be equated across rural and urban
sectors when taking into account informal-sector activities and
outright employment. Migration proceeds in response to
urban-rural differences in expected income rather than actual
earnings. The fundamental premise is that migrants consider the
various labor market opportunities available to them in the rural
and urban sectors and choose the one that maximizes their expected
gains from migration. In deciding to migrate, the individual must
balance the probabilities and risks of being unemployed or
underemployed for a considerable period of time against the
positive urban-rural real income differential. The demand for
labor in agriculture is given by the negatively sloped line AA.
Labor demand in manufacturing is given by MM’. The total
labor force is given by line OaOm. In a neoclassical, flexible-wage,
full employment market economy, the equilibrium wage would be
established at Wa*Wm*, with OaLa* workers in agriculture
and OmLm workers employed in urban manufacturing.
LM
WA = (WM )
LUS
Shows the probability of urban job success necessary to equate
agricultural income Wa with urban expected income. The locus
of such points of indifference is given by the qq’ curve. The new
unemployment equilibrium occur at point Z, where the urban-rural
actual wage fap is.
