Rizal Technological University Pasig-
Campus
ECONOMIC DEVELOPMENT
ROOTS
OF DEVELOPMENT AND
COMPARATIVE
ECONOMIC DEVELOPMENT
Dr. Velissa C. Rubaya
PCBEA-01-501E
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AGGARI, SANORIL, CANENCIA,
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OVERVIEW
ROOTS OF COMPARATIVE
DEVELOPMENT ECONOMIC
DEVELOPMENT
Historical Foundations of Structural Transformation and Dualistic Economies and Understanding Key Analyzing theories of
Development Theories Economic Growth Labor Markets concept of Comparative development disparity
Economic Development
• Historical Foundations of
Development Theories
ROOTS OF
• Structural Transformation
and Economic Growth
• Dualistic Economies and
DEVELOPMENT Labor Markets
Historical Foundations of Development Theories
Development theory
- is composed of research and theories
about economic and political development.
The Emergence of
Development Theory
“Development” - the term emerged in the United States in the 1940s
referring to national economic growth in association with a key
American foreign policy concern on how to shape the future of the
newly independent states in ways that would ensure that they would
not be drawn into the communist Soviet bloc.
Conceptions of Development
Development Governance
Development theory since 1945
Alexander Gerschenkron
- argued that the less developed the country is
at the outset of economic development
(relative to others), the more likely certain
conditions are to occur. Hence, all countries
do not progress similarly.
Theories of Modernization and Growth
Modernization theory
- emerged following World War II to address the
issue of how to shape the economies of states
emerging from European colonization. Its
implicit aim was to shape the development of
these countries along capitalist lines.
Dependency and World Systems Theories
- rejects the limited national focus of
modernization theory and emphasizes the
importance of understanding the
complexity of imperialism and its role in
shaping postcolonial states.
The neoclassical counterrevolution
a modification and further elaboration of
modernization theory. However, neoclassical theorists
see development as the outcome not of strategic state
action but of the action of market forces. The central
claim is that failure to develop is primarily the result
of too much government intervention and regulation
of the economy.
STRUCTURAL TRANSFORMATION AND ECONO
MIC GROWTH
-a research initiative funded by Foreign,
Commonwealth and Development Office
(FCDO) that aims to provide a better
understanding of structural change, productivity,
and growth in low- and middle-income countries.
Structural Transformation and Economic Growth
(STEG) programme
• Develop a strong body of evidence that will help country
governments, international development organisations,
NGOs, and the private sector to design and implement
strategies, policies, and programmes that better facilitate
structural change, productivity gains, and both sustained and
sustainable growth.
Structural Transformation and Economic Growth
(STEG) programme
• STEG aims to increase the quantity, quality, and
policy relevance of research in the field and
engage a greater number and more diverse group
of scholars in the research community.
Dualistic Economies and Labor Markets
A DUAL dualECONOMY
economy refers to the
coexistence of two distinct types of
economic segments within an economy—
divided by different levels of
development, technology, and different
patterns of demand.
Originally created by Julius Herman Boeke
In 1971, Doeringer and Piore provide the Classical
formulation of Dual Labor Market Theory
(1) There are two sectors of the economy:
(a) Traditional sector
(b) Modern sector
(2) There are the factors of production:
(a) Land (c) Capital
(b) Labour
The definition of labor market is the availability of jobs
and workers in relation to supply and demand. It is
important because all goods and services originate from
the labor market.
DUAL LABOR MARKET THEORY
Is one of the primary explanations for the gender
differences in earnings.
Asserts that the American labor market is sharply
divided between good jobs and bad jobs.
The labor market is divided into: the PRIMARY
and SECONDARY market/sector.
It shows that gender inequality and stereotypes lead to
employment of men and women in different segments of
the labor market and occupational gender segregation.
Also known as Segmented
Labor Market,
which are common to less
Developing Countries
PRIMARY/FORMAL SECTOR
Represents companies that are involved in
extracting natural resources and agriculture.
It is characterised by higher wages, security, and
prospects for advancement.
Primary Sector mostly consisted of Attracts natives workers
well-educated, blue and white-collar
professionals with native lineage
SECONDARY/INFORMAL SECTOR
Companies involved in manufacturing,
construction, and processing producing goods that
use the resources obtained from companies within
the primary sector.
"low skill levels, low earnings, easy Filled with migrant workers.
entry, job impermanence, and low
returns to education or experience."
COMPARATIVE
ECONOMIC
• Understanding Key concept of
Comparative Economic
Development
• Analyzing theories of
DEVELOPMENT development disparity
Comparative Economic Development
Comparative advantage is one of the most
important concepts in economics.
In classical economics, this idea explains
why people, countries, and businesses can
experience greater collective benefits
through trade and exchange than they can
produce alone.
Developing Countries
The most common way to define the
developing world is by Per
perCapita
capita
income.
Income
Basic Indicators of Development:
REAL INCOME
EDUCATION
HEALTH
REAL INCOME
Real income per capita adjusted for purchasing
power
HEALTH
As measured by life expectancy,
undernourishment, and child mortality;
EDUCATION
Educational attainments as measured by
literacy and schooling
Comparative Economic Systems is the study of
different types of economic approaches.
Allows researchers to determine how the institutional
structure and the economic principles of a particular
economy work together to create results.
Essentially, it provides a real
understanding of how
economic systems actually
function.
ANALYZING THEORIES OF DEVELOPMENT
DISPARITY
What is Disparity?
• According to Meriam-Webster, disparity is a kind of
"nonequality".
• used to describe a social or economic condition that's
considered unfairly unequal: a racial disparity in
hiring, a health disparity between the rich and the
poor, an income disparity between men and women,
and so on.
How Low-Income Countries Today Differ
from Developed Countries in Their
Earlier Stages
• Physical and human resource endowments
• Per capita incomes and levels of GDP in relation to the rest of the world
• Climate
• Population size, distribution, and growth
• Historical role of international migration
• International trade benefits
• Basic scientific and technological research and development capabilities
• Efficacy of domestic institutions
Physical and human resource endowments
• Contemporary developing countries today often lack
abundant natural resources, especially in Asia. Unlike, Africa
some have valuable resources, but struggle due to a lack of
skilled human resources.
• This gap in skills and knowledge is a key factor in the
development divide, which didn't exist in developed
countries before their industrialization.
Relative Levels of Per Capita Income and GDP
• People in low-income countries today often
have lower incomes than people in
developed countries in the 19th century.
• Second, at the beginning of their modern
growth era, today’s developed nations were
economically in advance of the rest of the
world.
Climate Differences
• Developing countries are often in hot and humid
climates, while economically successful nations
are usually in temperate zones.
Population Size, Distribution, and Growth
• At this point, it is sufficient to note that
population size, density, and growth
constitute another important difference
between less developed and developed
countries. Before and during their early
growth years, Western nations experienced
a very slow rise in population growth.
The Historical Role of International Migration
• Some of the educated and skilled people from poorer
countries are leaving, which is a problem for their home
countries. This kind of migration is different from the past,
and it's a complex issue.
The Growth Stimulus of International Trade
• In the 1900s, struggled with declining trade
conditions, and some faced trade barriers from
richer nations.
• Where developing countries are successful at
becoming lower-cost producers of competitive
products.
Basic Scientific and Technological Research and
Development Capabilities
• Scientific research and technology drive economic
growth in developed countries. They lead in
innovation due to wealth.
• Low income developing nations in particular are in
an extremely disadvantageous position vis-à-vis the
developed nations.
Efficacy of Domestic Institutions
• Developed countries had more inclusive rules for
entrepreneurs during their early development, while
many developing nations faced inequality and
institutions focused on wealth extraction.
• Developed countries also had greater political
stability and flexible social systems, while some
developing nations dealt with arbitrary colonial
borders, leading to postcolonial challenges like
"failed states."
Effect of Disparity in
Development
Disparity in regional development can slow down a country's economic
growth. Recognizing these differences is crucial for creating effective
economic policies that tackle obstacles to growth. The hidden economy,
which reflects economic weaknesses related to regional issues, is a related
concern. This study looks at how regional differences and the hidden
economy are connected in eight regions of the Republic of Macedonia from
2008-2015. It found that three regions performed much worse than the
national average, one did better, and the others were close to the national
average. Importantly, it highlights the need for coordinated policies to help
both regions and the entire country (Novkovska, 2017).
Disparity can cause
Development?
In 2007, William Easterly studied the idea that agricultural resources
influence income inequality, which, in turn, affects a country's development.
He found that high income inequality leads to lower income, worse
institutions, and reduced education. To establish causality, economists like
Easterly seek instrumental variables. He used land suitability for wheat vs.
sugarcane as an instrument for income inequality. Easterly research suggests
that addressing income inequality is crucial for improving prosperity,
institutional quality, and education in a country. This approach builds upon
earlier work by Engerman and Sokoloff and contributes to the ongoing
progress in the field of development economics.
References:
Torado M. & Smith S., Economic Development-11th Edition
Dual labor market. (n.d.). https://www.bamboohr.com/resources/hr-glossary/dual-labor-market
Pariona, A. (2017). What does comparative economic systems mean? WorldAtlas.
https://www.worldatlas.com/articles/what-does-comparative-economic-systems-mean.html
Halperin, S. (2013, April 1). Development theory | Economics, Political Science & Globalization. Encyclopedia
Britannica. https://www.britannica.com/money/topic/development-theory
About|STEG. (n.d.). STEG. https://steg.cepr.org/about
Novkovska, Blagica (2017) : Regional development disparities and their connection with hidden economy,
UTMS Journal of Economics, ISSN 1857-6982, University of Tourism and Management, Skopje, Vol. 8, Iss. 2,
pp. 151-158
Rizal Technological University Pasig-
Campus
ECONOMIC DEVELOPMENT
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Dr. Velissa C. Rubaya
PCBEA-01-501E
