Economic Development, 13th Edition By Michael Todaro, Stephen Smith [PDF] [eBook]

Title Page Copyright Page Brief Contents Contents Case Studies and Boxes Figures and Tables Preface 1 Introducing Economic Development: A Global Perspective 1.1 Introduction to Some of the World's Biggest Questio ...

Title Page Copyright Page Brief Contents Contents Case Studies and Boxes Figures and Tables Preface 1 Introducing Economic Development: A Global Perspective 1.1 Introduction to Some of the World's Biggest Questions 1.2 How Living Levels Differ Around the World 1.3 How Countries Are Classified by Their Average Levels of Development: A First Look 1.4 Economics and Development Studies 1.4.1 Wider Scope of Study 1.4.2 The Central Role of Women 1.5 The Meaning of Development: Amartya Sen's "Capability" Approach 1.6 Happiness and Development 1.7 The Sustainable Development Goals: A Shared Development Mission 1.7.1 Seventeen Goals 1.7.2 The Millennium Development Goals, 2000–2015 1.7.3 Implementing the Sustainable Development Goals 1.8 Some Critical Questions for the Study of Development Economics Case Study 1: Comparative Economic Development: Pakistan and Bangladesh 2 Comparative Economic Development 2.1 An Introduction 2.2 What is the Developing World? Classifying Levels of National Economic Development 2.2.1 Conventional Comparisons of Average National Income 2.2.2 Adjusting for Purchasing Power Parity 2.2.3 Other Common Country Classifications 2.3 Comparing Countries by Health and Education, and the Human Development Index 2.3.1 Comparing Health and Education Levels 2.3.2 Introducing the Human Development Index 2.3.3 Human Development Index Ranking: How Does it Differ from Income Rankings? 2.3.4 Human Development Index: Alternative Formulations 2.4 Key Similarities and Differences Among Developing Countries 2.4.1 Levels of Income and Productivity 2.4.2 Human Capital Attainments 2.4.3 Inequality and Absolute Poverty 2.4.4 Population Growth and Age Structure 2.4.5 Rural Economy and Rural-to-Urban Migration 2.4.6 Social Fractionalisation 2.4.7 Level of Industrialisation and Manufactured Exports 2.4.8 Geography and Natural Resource Endowments 2.4.9 Extent of Financial and Other Market Development 2.4.10 Quality of Institutions and External Dependence 2.5 Are Living Standards of Developing and Developed Nations Converging? 2.5.1 The Great Divergence 2.5.2 Two Major Reasons to Expect Convergence 2.5.3 Perspectives on Income Convergence 2.6 Long-Run Causes of Comparative Development 2.7 Concluding Observations Case Study 2: Institutions, Colonial Legacies, and Economic Development: Ghana and Cote d'Ivoire Appendix 2.1 The Traditional Human Development Index (HDI) Appendix 2.2 How Low-Income Countries Today Differ from Developed Countries in Their Earlier Stages 3 Classic Theories of Economic Growth and Development 3.1 Classic Theories of Economic Development: Four Approaches 3.2 Development as Growth and the Linear-Stages Theories 3.2.1 Rostow's Stages of Growth 3.2.2 The Harrod-Domar Growth Model 3.2.3 Obstacles and Constraints 3.2.4 Necessary Versus Sufficient Conditions: Some Criticisms of the Stages Model 3.3 Structural-Change Models 3.3.1 The Lewis Theory of Economic Development 3.3.2 Structural Change and Patterns of Development 3.3.3 Conclusions and Implications 3.4 The International-Dependence Revolution 3.4.1 The Neocolonial Dependence Model 3.4.2 The False-Paradigm Model 3.4.3 The Dualistic-Development Thesis 3.4.4 Conclusions and Implications 3.5 The Neoclassical Counter-Revolution: Market Fundamentalism 3.5.1 Challenging the Statist Model: Free Markets, Public Choice, and Market-Friendly Approaches 3.5.2 Traditional Neoclassical Growth Theory 3.5.3 Conclusions and Implications 3.6 Classic Theories of Development: Reconciling the Differences Case Study 3: Classic Schools of Thought in Context: South Korea and Argentina Appendix 3.1 Components of Economic Growth Appendix 3.2 The Solow Neoclassical Growth Model Appendix 3.3 Endogenous Growth Theory 4 Contemporary Models of Development and Underdevelopment 4.1 Underdevelopment as a Coordination Failure 4.2 Multiple Equilibria: A Diagrammatic Approach 4.3 Starting Economic Development: The Big Push 4.3.1 The Big Push: A Graphical Model 4.3.2 Other Cases in Which a Big Push May Be Necessary 4.3.3 Why the Problem Cannot Be Solved by a Super-Entrepreneur 4.4 Further Problems of Multiple Equilibria 4.4.1 Inefficient Advantages of Incumbency 4.4.2 Behaviour and Norms 4.4.3 Linkages 4.4.4 Inequality, Multiple Equilibria, and Growth 4.5 Michael Kremer's O-Ring Theory of Economic Development 4.5.1 The O-Ring Model 4.5.2 Implications of the O-Ring Theory 4.6 Economic Development as Self-Discovery 4.7 The Hausmann-Rodrik-Velasco Growth Diagnostics Framework 4.8 Conclusions Case Study 4: China: Understanding a Development "Miracle" 5 Poverty, Inequality, and Development 5.1 Measuring Inequality 5.1.1 Size Distributions 5.1.2 Lorenz Curves 5.1.3 Gini Coefficients and Aggregate Measures of Inequality 5.1.4 The Ahluwalia-Chenery Welfare Index (ACWI) 5.2 Measuring Absolute Poverty 5.2.1 Income Poverty 5.2.2 Multidimensional Poverty Measurement 5.3 Poverty, Inequality, and Social Welfare 5.3.1 What is it About Extreme Inequality That's So Harmful to Economic Development? 5.3.2 Dualistic Development and Shifting Lorenz Curves: Some Stylised Typologies 5.3.3 Kuznets's Inverted-U Hypothesis 5.3.4 Growth and Inequality 5.4 Absolute Poverty: Extent and Magnitude 5.4.1 The Multidimensional Poverty Index (MPI) 5.5 Economic Characteristics of High-Poverty Groups 5.5.1 Children and Poverty 5.5.2 Women and Poverty 5.5.3 Ethnic Minorities, Indigenous Populations, and Poverty 5.6 Growth and Poverty 5.7 Labour, the Functional Distribution of Income, and Inclusive Development 5.7.1 The Functional Distribution 5.7.2 Labour and Inclusive Development 5.8 Policy Options on Income Inequality and Poverty: Some Basic Considerations 5.8.1 Areas of Intervention 5.8.2 Altering the Functional Distribution of Income Through Relative Factor Prices: Minimum Wage an 5.8.3 Modifying the Size Distribution Through Increasing Assets of the Poor 5.8.4 Progressive Income and Wealth Taxes 5.8.5 Direct Transfer Payments and the Public Provision of Goods and Services 5.8.6 Applying Insights from Behavioural Economics to Address Poverty 5.9 Summary and Conclusions: The Need for a Package of Policies Case Study 5: India: Complex Challenges and Compelling Opportunities Appendix 5.1 Appropriate Technology and Employment Generation: The Price Incentive Model Appendix 5.2 The Ahluwalia-Chenery Welfare Index 6 Population Growth and Economic Development: Causes, Consequences, and Controversies 6.1 The Basic Issue: Population Growth and the Quality of Life 6.2 Population Growth: Past, Present, and Future 6.2.1 World Population Growth Throughout History 6.2.2 Structure of the World's Population 6.2.3 Demographic Structure and the Hidden Momentum of Population Growth 6.3 Demographic Structure and the Demographic Transition 6.4 The Causes of High Fertility in Developing Countries: The Malthusian and Household Models 6.4.1 The Malthusian Population Trap 6.4.2 Criticisms of the Malthusian Model 6.4.3 The Microeconomic Household Theory of Fertility 6.4.4 The Demand for Children in Developing Countries 6.4.5 Implications for Development and Fertility 6.5 The Consequences of High Fertility: Some Conflicting Perspectives 6.5.1 It's Not a Real Problem 6.5.2 It's a Deliberately Contrived False Issue 6.5.3 It's a Desirable Phenomenon 6.5.4 It Is a Real Problem 6.5.5 Goals and Objectives: Toward a Consensus 6.6 Some Policy Approaches 6.6.1 What Developing Countries Can Do 6.6.2 What the Developed Countries Can Do 6.6.3 How Developed Countries Can Help Developing Countries with Their Population Programmes 6.6.4 Policy for Still-Developing Countries Facing Population Declines Case Study 6: "Twins" Growing Apart: Burundi and Rwanda 7 Urbanisation and Rural–Urban Migration: Theory and Policy 7.1 Urbanisation: Trends and Living Conditions 7.2 The Role of Cities 7.2.1 Industrial Districts 7.2.2 Efficient Urban Scale 7.3 Understanding Urban Giants: Causes and Consequences 7.3.1 First-City Bias 7.3.2 The Political Economy of Urban Giants 7.4 The Urban Informal Sector 7.4.1 Policies for the Urban Informal Sector 7.4.2 Women in the Informal Sector 7.5 Migration and Development 7.6 Toward an Economic Theory of Rural–Urban Migration 7.6.1 A Verbal Description of the Todaro Model 7.6.2 A Diagrammatic Presentation 7.6.3 Policy Implications 7.7 Conclusion: A Comprehensive Urbanisation, Migration, and Employment Strategy Case Study 7: Rural–Urban Migration and Urbanisation in Developing Countries: India and Botswana Appendix 7.1 A Mathematical Formulation of the Todaro Migration Model 8 Human Capital: Education and Health in Economic Development 8.1 The Central Roles of Education and Health 8.1.1 Education and Health as Joint Investments for Development 8.1.2 Improving Health and Education: Why Increasing Income Is Not Sufficient 8.2 Investing in Education and Health: The Human Capital Approach 8.2.1 Social Versus Private Benefits and Costs 8.3 Child Labour 8.4 The Gender Gap: Discrimination in Education and Health 8.4.1 Education and Gender 8.4.2 Health and Gender 8.4.3 Consequences of Gender Bias in Health and Education 8.5 Educational Systems and Development 8.5.1 The Political Economy of Educational Supply and Demand: The Relationship Between Employment Op 8.5.2 Distribution of Education 8.6 Health Measurement and Disease Burden 8.6.1 HIV/AIDS 8.6.2 Malaria 8.6.3 Parasitic Worms and Other "Neglected Tropical Diseases" 8.7 Behavioural Economics Insights for Designing Health Policies and Programmes 8.8 Health, Productivity, and Policy 8.8.1 Productivity 8.8.2 Health Systems Policy Case Study 8: Pathways Out of Poverty: Progresa/Oportunidades in Mexico 9 Agricultural Transformation and Rural Development 9.1 The Imperative of Agricultural Progress and Rural Development 9.2 Agricultural Growth: Past Progress and Current Challenges 9.2.1 Trends in Agricultural Productivity 9.2.2 Market Failures and the Need for Government Policy 9.2.3 Agricultural Extension 9.3 The Structure of Agrarian Systems in the Developing World 9.3.1 Three Systems of Agriculture 9.3.2 Traditional and Peasant Agriculture in Latin America, Asia, and Africa 9.3.3 Agrarian Patterns in Latin America: Progress and Remaining Poverty Challenges 9.3.4 Transforming Economies: Problems of Fragmentation and Subdivision of Peasant Land in Asia 9.3.5 Subsistence Agriculture and Extensive Cultivation in Africa 9.4 The Important Role of Women 9.5 The Microeconomics of Farmer Behaviour and Agricultural Development 9.5.1 The Transition from Traditional Subsistence to Specialised Commercial Farming 9.5.2 Subsistence Farming: Risk Aversion, Uncertainty, and Survival 9.5.3 The Economics of Sharecropping and Interlocking Factor Markets 9.5.4 Intermediate Steps to Mixed or Diversified Farming 9.5.5 From Divergence to Specialisation: Modern Commercial Farming 9.6 Core Requirements of a Strategy of Agricultural and Rural Development 9.6.1 Improving Small-Scale Agriculture 9.6.2 Institutional and Pricing Policies: Providing the Necessary Economic Incentives 9.6.3 Conditions for Rural Development Case Study 9: The Need to Improve Agricultural Extension for Women Farmers: Kenya and Uganda 10 The Environment and Development 10.1 Environment and Development: The Basic Issues 10.1.1 Economics and the Environment 10.1.2 Sustainable Development and Environmental Accounting 10.1.3 Environment Relationships to Population, Poverty, and Economic Growth 10.1.4 Environment and Rural and Urban Development 10.1.5 The Global Environment and Economy 10.1.6 Natural Resource–Based Livelihoods as a Pathway Out of Poverty: Promise and Limitation 10.1.7 The Scope of Domestic-Origin Environmental Degradation 10.1.8 Rural Development and the Environment: A Tale of Two Villages 10.1.9 Environmental Deterioration in Villages 10.2 Global Warming and Climate Change: Scope, Mitigation, and Adaptation 10.2.1 Scope of the Problem 10.2.2 Mitigation 10.2.3 Adaptation 10.3 Economic Models of Environmental Issues 10.3.1 Privately Owned Resources 10.3.2 Common Property Resources 10.3.3 Public Goods and Bads: Regional Environmental Degradation and the Free-Rider Problem 10.3.4 Limitations of the Public-Good Framework 10.4 Urban Development and the Environment 10.4.1 Environmental Problems of Urban Slums 10.4.2 Industrialisation and Urban Air Pollution 10.4.3 Problems of Congestion, Clean Water, and Sanitation 10.5 The Local and Global Costs of Rain Forest Destruction 10.6 Policy Options in Developing and Developed Countries 10.6.1 What Developing Countries Can Do 10.6.2 How Developed Countries Can Help Developing Countries 10.6.3 What Developed Countries Can Do for the Global Environment Case Study 10: A World of Contrasts on One Island: Haiti and the Dominican Republic 11 Development Policymaking and the Roles of Market, State, and Civil Society 11.1 A Question of Balance 11.2 Development Planning: Concepts and Rationale 11.2.1 The Planning Mystique 11.2.2 The Nature of Development Planning 11.2.3 Planning in Mixed Developing Economies 11.2.4 The Rationale for Development Planning 11.3 The Development Planning Process: Some Basic Models 11.3.1 Three Stages of Planning 11.3.2 Aggregate Growth Models: Projecting Macro Variables 11.3.3 Multisector Models and Sectoral Projections 11.3.4 Project Appraisal and Social Cost–Benefit Analysis 11.4 Government Failure and Preferences for Markets Over Planning 11.4.1 Problems of Plan Implementation and Plan Failure 11.4.2 The 1980s Policy Shift Toward Free Markets 11.4.3 Government Failure 11.5 The Market Economy 11.5.1 Sociocultural Preconditions and Economic Requirements 11.6 The Washington Consensus on the Role of the State in Development and Its Subsequent Evolution 11.6.1 Toward a New Consensus 11.7 Development Political Economy: Theories of Policy Formulation and Reform 11.7.1 Understanding Voting Patterns on Policy Reform 11.7.2 Institutions and Path Dependency 11.7.3 Democracy Versus Autocracy: Which Facilitates Faster Growth? 11.8 Development Roles of NGOs and the Broader Citizen Sector 11.9 Trends In Governance and Reform 11.9.1 Tackling the Problem of Corruption 11.9.2 Decentralisation 11.9.3 Development Participation Case Study 11: The Role of Development NGOs: BRAC and the Grameen Bank 12 International Trade Theory and Development Strategy 12.1 Economic Globalisation: Meaning, Extent, and Limitations 12.2 International Trade: Some Key Issues 12.2.1 Five Basic Questions about Trade and Development 12.2.2 Importance of Exports to Different Developing Nations 12.2.3 Demand Elasticities and Export Earnings Instability 12.2.4 The Terms of Trade and the Prebisch-Singer Hypothesis 12.3 The Traditional Theory of International Trade 12.3.1 Comparative Advantage 12.3.2 Relative Factor Endowments and International Specialisation: The Neoclassical Model 12.3.3 Trade Theory and Development: The Traditional Arguments 12.4 The Critique of Traditional Free-Trade Theory in the Context of Developing-Country Experience 12.4.1 Fixed Resources, Full Employment, and the International Immobility of Capital and Skilled Lab 12.4.2 Fixed, Freely Available Technology and Consumer Sovereignty 12.4.3 Internal Factor Mobility, Perfect Competition, and Uncertainty: Increasing Returns, Imperfect 12.4.4 The Absence of National Governments in Trading Relations 12.4.5 Balanced Trade and International Price Adjustments 12.4.6 Trade Gains Accruing to Nationals 12.4.7 Some Conclusions on Trade Theory and Economic Development Strategy 12.5 Traditional Trade Strategies and Policy Mechanisms for Development: Export Promotion Versus Imp 12.5.1 Export Promotion: Looking Outward and Seeing Trade Barriers 12.5.2 Import Substitution: Looking Inward but Still Paying Outward 12.5.3 Tariffs, Infant Industries, and the Theory of Protection 12.5.4 The IS Industrialisation Strategy and Results 12.5.5 Foreign-Exchange Rates, Exchange Controls, and the Devaluation Decision 12.5.6 Trade Optimists and Trade Pessimists: Summarising the Traditional Debate 12.6 The Industrialisation Strategy Approach to Export Policy 12.6.1 Export-Oriented Industrialisation Strategy 12.6.2 The New Firm-Level International Trade Research and the Developing Countries 12.7 South–South Trade and Economic Integration 12.7.1 Economic Integration and Development Strategy 12.7.2 Regional Trading Blocs and Prospects for South–South Cooperation Case Study 12: Pioneers in Development Success through Trade and Industrialisation Strategy: South K 13 Balance of Payments, Debt, Financial Crises, and Sustainable Recovery: Principles, Cases and Poli 13.1 Introduction 13.2 The Balance of Payments Account 13.2.1 General Considerations 13.2.2 A Hypothetical Illustration: Deficits and Debts 13.3 The Issue of Payments Deficits 13.3.1 Some Initial Policy Issues 13.3.2 Trends in the Balance of Payments 13.4 Accumulation of Debt and Developing-Country Crises: The 1980s Debt Crisis, and its Resolutions 13.4.1 External Debt Accumulation and Crisis: The Basic Transfer Framework 13.4.2 The 1980s Crisis: Background and Analysis 13.4.3 Attempts at Alleviation: Classic IMF Stabilisation Policies, and Strategies for Debt Relief 13.5 The 2000s Global Financial Crisis: Economic Development Impacts and Lessons 13.5.1 Causes of the Crisis and Challenges to Lasting Recovery 13.5.2 Economic Impacts on Developing Countries 13.5.3 Differing Impacts across Regions and Developing Country Groups 13.5.4 Conditions Affecting Prospects for Stability and Growth Case Study 13: Brazil: Meaningful Development or Middle-Income Trap? 14 Foreign Finance, Investment, Aid, and Conflict: Controversies and Opportunities 14.1 The International Flow of Financial Resources 14.2 Private Foreign Direct Investment and The Multinational Corporation 14.2.1 Private Foreign Investment: Some Pros and Cons for Development 14.2.2 Private Portfolio Investment: Benefits and Risks 14.3 The Role and Growth of Remittances 14.4 Foreign Aid: The Development Assistance Debate 14.4.1 Conceptual and Measurement Problems 14.4.2 Amounts and Allocations: Public Aid 14.4.3 Why Donors Give Aid 14.4.4 Why Recipient Countries Accept Aid 14.4.5 The Role of Nongovernmental Organisations in Aid 14.4.6 The Effects of Aid 14.5 Conflict and Development 14.5.1 The Scope of Violent Conflict and Conflict Risks 14.5.2 The Consequences of Armed Conflict 14.5.3 The Causes of Armed Conflict and Risk Factors for Conflict 14.5.4 The Resolution and Prevention of Armed Conflict Case Study 14: The Roots of Divergence Among Developing Countries: Costa Rica, Guatemala, and Hondur 15 Finance and Fiscal Policy for Development 15.1 The Role of the Financial System in Economic Development 15.1.1 Differences Between Developed- and Developing-Country Financial Systems 15.2 The Role of Central Banks and Alternative Arrangements 15.2.1 Functions of a Fully-Fledged Central Bank 15.2.2 The Role of Development Banking 15.3 Informal Finance and the Rise of Microfinance 15.3.1 Traditional Informal Finance 15.3.2 Microfinance Institutions: How They Work 15.3.3 MFIs: Three Current Policy Debates 15.3.4 Potential Limitations of Microfinance as a Development Strategy 15.4 Formal Financial Systems and Reforms 15.4.1 Financial Liberalisation, Real Interest Rates, Savings, and Investment 15.4.2 Financial Policy and the Role of the State 15.4.3 Debate on the Role of Stock Markets 15.5 Fiscal Policy for Development 15.5.1 Macrostability and Resource Mobilisation 15.5.2 Taxation: Direct and Indirect 15.6 State-Owned Enterprises and Privatisation 15.6.1 The Nature and Scope of SOEs 15.6.2 Improving the Performance of SOEs 15.6.3 Privatisation: Theory and Experience 15.7 Public Administration: The Scarcest Resource Case Study 15: How Two African Success Stories Have Addressed Challenges: Botswana and Mauritius Glossary Name Index