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51 Cards in this Set
- Front
- Back
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Stages-of-growth model of development |
A theory of economic development, associated with the American economic historian Walt W. Rostow, according to which a country passes through sequential stages in achieving development. P. 111 |
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Harrod-Domar growth model |
A functional economic relationship in which the growth rate of gross domestic product (g) depends directly on the national net savings rate (s) and inversely on the national capital-output ratio (c). P. 111 |
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Capital-output ratio |
A ratio that shows the units of capital required to produce a unit of output over a given period of time (k). P. 112 |
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Net savings ratio |
Savings expressed as a proportion of disposable income over some period of time (s). P. 112 |
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Necessary condition |
A condition that must be present, although it need not be in itself sufficient, for an event to occur. For example, capital formation may be a necessary condition for sustained economic growth (before growth in output can occur, there must be tools to produce it). But for this growth to continue, social, institutional, and attitudinal changes may have to occur. P. 114 |
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Sufficient condition |
A condition that when present causes or guarantees that an event will or can occur; in economic models, a condition that logically requires that a statement must be true (or a result must hold) given other assumptions. P. 114 |
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Structural-change theory |
The hypothesis that underdevelopment is due to underutilization of resources arising from structural or institutional factors that have their origins in both domestic and international dualism. Development therefore requires more than just accelerated capital formation. P. 115 |
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Structural transformation |
The process of transforming an economy in such a way that the contribution to national income by the manufacturing sector eventually surpasses the contribution by the agricultural sector. More generally, a major alteration in the industrial composition of any economy. P. 115 |
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Lewis two-sector model |
A theory of development in which surplus labor from the traditional agricultural sector is transferred to the modern industrial sector, the growth of which absorbs the surplus labor, promotes industrialization, and stimulates sustained development. P. 115 |
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Surplus labor |
The excess supply of labor over and above the quantity demanded at the going free-market wage rate. In the Lewis two-sector model of economic development, surplus labor refers to the portion of the rural labor force whose marginal productivity is zero or negative. P. 115 |
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Production function |
A technological or engineering relationship between the quantity of a good produced and the quantity of inputs required to produce it. P. 116 |
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Average product |
Total output or product divided by total factor input (e.g., the average product of labor is equal to total output divided by the total amount of labor used to produce that output). |
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Marginal product |
The increase total output resulting from the use of one additional unit of a variable factor of production (such as labor or capital). In the Lewis two-sector model, surplus labor is defined as workers whose marginal product is zero. P. 117 |
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Self-sustaining growth |
Economic growth that continues over the long run based on saving, investment, and complementary private and public activities. P. 118 |
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Patterns-of-development analysis |
An attempt to identify characteristic features of the internal process of structural transformation that a "typical" developing economy undergoes as it generates and sustains modern economic growth and development. P. 120 |
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Dependence |
The reliance of developing countries on developed-country economic policies to stimulate their own economic growth. Dependence can also mean that the developing countries adopt developed-country education systems, technology, economic and political systems, attitudes, consumption patterns, dress, etc. P. 122 |
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Dominance |
In international affairs, a situation in which the developed countries have much greater power than the less developed countries in decisions affecting important international economic issues, such as the prices of agricultural commodities and raw materials in world markets. P. 122 |
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Neoclassical dependence model |
A model whose main proposition is that underdevelopment exists because of continuing exploitative economic, political, and cultural policies of former colonial rulers toward less developed countries. P. 122 |
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Underdevelopment |
An economic situation characterized by persistent low levels of living in conjunction with absolute poverty, low income per capita, low rates of economic growth, low consumption, poor health services, high death rates, high birth rates, dependence on foreign economies, and limited freedom to choose among activities that satisfy human wants. P. 122 |
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Center |
In dependence theory, the economically developed world. P. 122 |
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Periphery |
In dependence theory, the developing countries. P. 122 |
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Comprador group |
In dependence theory, local elites who act as fronts for foreign investors. P. 123 |
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False-paradigm model |
The proposition that developing countries have failed to develop because their development strategies (usually given to them by Western economists) have been based on an incorrect model of development, one that, for example, overstressed capital accumulation or market liberalization without giving due consideration to needed social and institutional change. P. 124 |
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Dualism |
The coexistence of two situations or phenomena (one desirable and the other not) that are mutually exclusive to different groups of society; for example, extreme poverty and affluence, modern and traditional economic sectors, growth and stagnation, and higher education among a few amid large-scale illiteracy. P. 124 |
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Autarky |
A closed economy that attempts to be completely self-reliant. P. 126 |
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Neoclassical counterrevolution |
The 1980s resurgence of neoclassical free-market orientation toward development problems and policies, counter to the interventionist dependence revolution of the 1970s. P. 126 |
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Free markets |
The system whereby prices of commodities or services freely rise or fall when the buyer's demand for them rises or falls or the seller's supply of them decreases or increases. P. 127 |
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Free-market analysis |
Theoretical analysis of the properties of an economic system operating with free markets, often under the assumption that an unregulated market performs better than one with government regulation. P. 127 |
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Public-choice theory (new political economy approach) |
The theory that self-interest guides all individual behavior and that governments are inefficient and corrupt because people use government to pursue their own agendas. P. 128 |
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Market-friendly approach |
The notion historically promulgated by the World Bank that successful development policy requires governments to create an environment in which markets can operate efficiently and to intervene only selectively in the economy in areas where the market is inefficient. P. 128 |
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Market failure |
A market's inability to deliver its theoretical benefits due to the existence of market imperfections such as monopoly of power, lack of factor mobility, significant externalities, or lack of knowledge. Market failure often provides the justification for government intervention to alter the working of the free market. P. 128 |
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Capital-labor ratio |
The number of units of capital per unit of labor (K/L). P. 128 |
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Solow neoclassical growth model |
Growth model in which there are diminishing returns to each factor of production but constant returns to scale. Exogenous technological change generates longterm economic growth. P. 128 |
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Closed economy |
An economy in which there are no foreign trade transactions or other economic contracts with the rest of the world. P. 129 |
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Open economy |
An economy that practices foreign trade and has extensive financial and non financial contacts with the rest of the world. P. 129 |
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Capital accumulation |
Increasing a country's stock of real capital (net investment in fixed assets). To increase the production of capital goods necessitates a reduction in the production of consumer goods. P. 140 |
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Capital stock |
The total amount of physical goods existing at a particular time that have been produced for use in the production of other goods and services. P. 140 |
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Economic infrastructure |
The amount of physical and financial capital embodied in roads, railways, waterways, airways, and other transportation and communications plus other facilities such as water supplies, financial institutions, electricity, and public services such as health and education. P. 140 |
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Human capital |
Productive investments embodied in human persons, including skills, location, and health. P. 141 |
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Production possibility curve |
A curve on a graph indicating alternative combinations of two commodities or categories of commodities (e.g., agricultural and manufactured goods) that can be produced when all the available factors of production are efficiently employed. Given available resources and technology, the curve sets the boundary between the attainable and the unobtainable. P. 141 |
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Technological progress |
Increased application of new scientific knowledge in the form of inventions and innovations with regard to both physical and human capital. P. 142 |
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Neutral technological progress |
Higher output levels achieved with the same quantity or combination of all factor inputs. P. 143 |
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Laborsaving technological progress |
The achievement of higher output using an unchanged quantity of labor inputs as a result of some invention (e.g., the computer) or innovation (such as assembly-line production). P. 143 |
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Capital-saving technological progress |
Technological progress that results from some invention or innovation that facilitates the achievement of higher output levels using the same quantity of inputs of capital. P. 143 |
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Labor-augmenting technological progress |
Technological progress that raises the productivity of an existing quantity of labor by general education, on-the-job training programs, etc. P. 144 |
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Capital-augmenting technological progress |
Technological progress that raises the productivity of capital by innovation and inventions. P. 144 |
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Solow residual |
The proportion of long-term economic growth not explained by growth in labor or capital and therefore assigned primarily to exogenous technological change. P. 150 |
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Endogenous growth theory (new growth theory) |
Economic growth generated by factors within the production process (e.g., increasing returns or induced technological change) that are studied as part of a growth model. P. 150 |
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Complimentary investments |
Investments that complement and facilitate other productive factors. P. 151 |
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Romer endogenous growth model |
An endogenous growth model in which technological spillovers are present; the economy wide capital stock positively affects output at the industry level, so there may be increasing returns to scale at the economy wide level. P. 152 |
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Public good |
An entity that provides benefits to all individuals simultaneously and whose enjoyment by one person in no way diminishes that of anyone else. P. 152 |
