Various Economic Development Models: Explained

Introduction

Economic development means overall increase the wellbeing of human capital over a period of time as compared to increase in national income. The only increase in the national income doesn't mean economic development. For that, economic development models used to observe the real effect.

Types of Models

Harrod-Domar growth model
Lewis Structural Change Model
Rostow's Model – the 5 Stages of Economic Development
Chenery's patterns of development
Neoclassical dependence model
The International Dependence Revolution (IDR)
Traditional Neoclassical Growth Theory

1) Harrod-Domar growth model

This model mainly depends on two factors:
Savings
Investment

In this model, the main strategy is a mobilisation of saving and to generate investment to increase economic growth.
It means investment leads to growth and it comes from saving.
Higher income means higher savings.
Economic growth measured by saving ratio and capital input-output ratio.

2) Lewis Structural Change Model

It is also called as DUEL-SECTOR model.
This model has two sectors:
Tradition sector

It has surplus of labour for i.e. Agriculture sector

Modern sector

Modern sector focuses on the transfer of surplus labour to the modern sector for i.e. Industrial sector

3) Rostow's Model – the 5 Stages of Economic Development

The American Economist, W.W.Rostow developed this theory by saying that nation passed through five stages of economic growth development.

The traditional society
The pre-conditions for off-take
The takeoff
The drive to maturity
The age of high mass consumption

4) Chenery's pattern of development

Chenery along with his colleagues examined patterns of development for countries at different per capita income levels.
Shift from agriculture to industrial production.
A steady accumulation of physical and human capital.
Change in consumer demands.
Increased urbanisation.
A decline in family size.
Demographic transition.

5) Neoclassical Dependence Model

This model is based on the condition, dependence is a condition by which one country's economic development depends on others.

6) The International Dependence Revolution (IDR)

This model opposes the tradition's emphasis on the GNP growth for the development.
It mainly emphasis on the international relations and policy reforms.
IDR model stated that developing countries as intercept by institutional, political, and economic rigidities in both domestic and international setup.

7) Traditional Neoclassical Growth Theory

This theory mainly depend on these three Output growth results
Increase in labor
Increase in capital
Changes in technology

Conclusion:

The open economy has higher levels of per capita income while the closed economy has low savings rates leads to lower per capita income.

RBI Grade B Online Classes by Ramandeep Singh - Join here

Oliveboard Test Series(Recommended)

Bank Exams Today Notes

Join 40,000+ readers and get free notes in your email

Let's block ads! (Why?)

- http://www.bankexamstoday.com/2017/07/various-economic-development-models.html