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Midterm October 15 Fall 2017, questions and answers

Economic Development (Park University)

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Marquel Harris
Professor Bell
EC309 Midterm

1. (75 pts.) For all of their diversity, less-developed countries are linked by a range of
common problems. What are these problems? Which do you think are the most
important? Why?

Lower developed countries share the common problems of lower levels of living

and productivity, lower levels of human capital, higher levels of inequality and absolute

poverty, higher population growth rates, social fractionalization, larger rural populations

but rapid rural-to-urban migration, lower levels of industrialization, Adverse geography,

Underdeveloped financial and other markets, lingering colonial impacts such as poor

institutions and often external dependence. The one’s that one should consider most

important is the lower levels of living, inequality, and lower levels of human capital,

because these can be seen to be the factors that mostly affect the Human Development

Index. The Human Development Index is the unit of measure used based upon a country's

health care, education, and infrastructure, which are the sole elements for economic

growth and development. Any element such as high illiteracy rates (may affect

education), inequality (could affect health, education, systematic infrastructure), or etc,

that may lead to the Human Development Index for a country to drop in ranks, shows the

negative impact upon that country's development.

2. (75 pts.) Explain the essential distinctions among the stages-of- growth theory of
development, the structural change models of Lewis and Chenery, and the theory of

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international dependence in both its neo-Marxist and false-paradigm conceptualizations.

Which model do you think provides the best explanation of the situation in most
developing nations? Why?
a. Rostow's stages of growth

i. Within this theory, the development process is divided into 5 stages: first

the phase of the traditional economy, with per capita income is low,

second are the pre-conditions of the take-off stage, where preconditions of

the growth stage are pending; thirds is the phase take-off, which is where

economic growth begins to build; onto the fourth stage of maturity,

towards an economic base; fifth is the high mass consumption stage,

where the stage has entered a stage of development with the industry.

b. The Harrod- Domar growth model

i. This theory focuses on the natural growth rate along with production

factors of labor. It’s a functional economic relationship which the growth

rate of GDP (g) depends directly on the national net savings rate (s) and

inversely on the national capital-output ratio

c. The structural change of model of Lewis and Chenery

i. The Lewis Model observes the increasing population developing countries

with. This goes towards the surplus transfer from the agricultural sector to

the modern capitalist sector of surplus industry profits. There is a

sustainable development if the modern industrial surplus labor is higher

than the agricultural sector.

ii. The Chenery model looks at processes and progresses of changes in the

economy, along with industrial structures of emerging ones. The structure

changes involve functions, like transforming goods into consumer

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demand, urbanization, international trade, distribution, and growth in

population

d. Neocolonial Dependence Model

i. This model is in accordance to Marxism, for which this focuses on the

gaping relationship between developed (central) states and developing

(periphery) states. Based on old colonial rule of a country, along with

militarization, pacts, tribe customs, etc, this theory explains through the

course of history for a country to systematically have such a gap for

developing and developed worlds.

e. False paradigm Model

i. This model revolves around how developing third world countries are

caused by faults of international aid agencies like the International Labor

Organization (ILO), United Nations and Development Program (UNDP),

United Nations Conference on Trade and Development (UNCTAD). The

fact that the model describes an entity controlling votes of these

organizations to take control and achieve individual or personal tasks

instead of the collectivistic well being of the country (public choice

theory).

Out of all the models, the Neocolonial Dependence Model would make the most sense for most

developing nations because all the other elements are based upon just the economic drive of the

nation. The Neocolonial dependence theory describes nations rules back then on how things

should operate and be gapped, which explains the systems how developed countries rarely do

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much to underdeveloped or developing countries to catch up. Developing countries are in a stage

heavily dependent on developed centralized countries through agricultural sectors to drive

revenue, in trade of technological advances.

3. (50 pts.) What are the principal economic characteristics of poverty groups? What do
these characteristics tell us about the possible nature of a poverty-focused development
strategy?

High poverty groups contain rural poverty, women and children, ethnic minorities, and

indigenous populations.

Rural poverty results in fewer capita income, along with limited education, health, and other

opportunities than urban areas based on lack of exposure to industrialization. Women in

particular are seen to have less education from the stigma of having to take care of the house and

family, resulting in less jobs as well. Ethnic minorities and Indigenous population not only leads

to overpopulation in groups, but also prejudice.

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