CH.I.

GENERAL CONSIDERATIONS ON ECONOMICS DEVELOPMENT

I.1. Evolution of the concept of economics development (dvp)

I.2. Definition of economics of development

I.3. Typology of countries

I.4. Some features of LDC

I.1. Evolution of conceptions in economics of development

The economics of development was born from a set of analyses after the WW II
(World War II). Before 1940, the economics of development was limited to the
study and the explanation of economic cycles (oscillation). After this year,
however have appeared some new problems of poor countries that fail to
integrate the world economy.

The analyses wonder about the future of former colonies or territories still under
colonization. These questions are consecutive to intellectual mutations that the
World war caused; they are characterized notably by aspiration to freedom and
improvement of life conditions.

All these questions contributed to the specification of the field of economics of

development. But we can associate the origin of this field to the writings of
BOEKE consecrated to the problem Nederland Indies and who was the first to
raise the problem of dualism; i.e. the coexistence in these regions of a traditional
sector and a modern sector. However, it is necessary to note that development
is a very old reality. Indeed, economic development is as old as the earth.

Patrick GUILLAUMOND ascertains that questions of development where raised

since Genesis (Gn 1, 1-28). God told Adam and Eve to be fertile and work the
earth. This question of development also was raised during the Neolithic
revolution when man begins to sharpen instruments (stones) in order to respond
to some of their needs. It appeared again in the 13 th century when monks clear
Europe. In effect, it is the monks who started to settle Europe.

During the industrial revolution which occurred in the second half of the 18 th
century, the problem of development was at the heart of capitalists concerns.

Today when we have to deal with a people, make live a city like Brasilia, Paris,
New York, Kigali, etc…the problem of development occurs.

So, each modern country nowadays has its own policy of development.
Development concerns have pushed modern countries to become Providence
States or better mixed economies. For instances, nowadays many policies have
been set up in Rwanda such as EDPRS, VUP Umurenge, One cow per family as
well as the program bye bye Nyakatsi.

Coming to development knowing that underdevelopment is disequilibrium, we

have to produce ideologies of freedom and equality. It is not by random that it is
after the 2nd World War those ideas on economics of development emerge. The
process of development starts with the reject of servitude and its demystification.

Today, the concept development and underdevelopment as well as related

activities expanded for the reasons below (reasons of passion for UDC):

-Economic and social interests: Rich countries cannot exchange in a profitable

way with very poor partners.

-The share of the poor, their number, their resources and the geographical
situation: there is a group of people who live in developed countries who need
assistance.

Indeed, underdeveloped countries will occupy almost ¾ of the world population.

Around the year 2025, based on expect actions; developing countries will count
85% of the world population.
According to Mc LUHAN, the world has become a planetary village.

Migratory flows are today much accentuated in poor countries. This migration is
done toward rich countries. This is called free movement of people and goods
towards industrialized countries from poor countries; we have to find the
adequate means to stabilize people of LDC in their countries.

-The planetary conscience of common destiny. Today, our planet seems smaller
because of the development of means of communication. The danger of the
propagation of epidemies by viruses and travelers raises the consciousness of
the solidarity that should exist among the world population.

I.2. Definition of economic development

Before providing any definition of economics of development, it proves necessary

to precise the concept development. Francois PERROUX defines development
as the combination of mental and social changes of a people that makes it able
to grow cumulatively and durably its real global product. For him, a developed
economy is the one where costs of human status of life may be covered by and
for everyone (all).

In a developed economy, there must be a durable economic difference for all and
whose fruits are fairly distributed. In the definition provided by F.PERROUX,
there are two key aspects:

1. In the notion of development, there is an important quantitative variable such

as GNP/inhabitant.

2. Development is a qualitative phenomenon, social and cultural, that implies

mental and social changes inside a people.

But it is necessary to note that there may be economic growth without

development. Besides, it is worth mentioning that development constitutes also
an objective. This approach of development is widespread by NGOs such as UN,
World Bank, UNDP, etc. These organizations define development with
complementary objectives:

-Human development: this aims to satisfy fundamental needs ie human costs

covering. For F. PERROUX, a developed economy must cover expenses that
allow humans to live a physical and mental normal life, ie satisfy basic
psychological human needs. Furthermore, development must reach the whole
population , it must be universal and incompatible with poverty.

-Sustainable development: this kind of development preserves the environment.

A development is sustainable when the economic growth is compatible with the
environment safeguard. Sustainable development mustn`t damage the natural
property.

Jacques BRASSEUL defines economics of development as being the economic

analysis applied to the development process and to the study of developing
countries. To the question of knowing if the economics of development is a new
branch of economic sciences, Philippe HUGON asserts that it is only the
objective of the economics of development that bears a conceptual and
methodological autonomy.

Economics development favors researches on the difference between developed

countries and developing counties. The centre of interest is therefore duality
analyses: developed countries and developing counties.

In 1954, Alfred SAUVY invents the concept third word in order to characterize
poor countries that fail to connect on both blocs (capitalists-communists).

Thus, we can define economics of development as a part of economics that

studies the case of developing countries, the problems of economic growth,
wealth distribution, population welfare, work market, education, health, capital
nutrition, saving, investment of monetary and tax policy, international economic
relations, agriculture, industry, natural resources, environment, etc.

In this way, economics of development is an economic analysis applied to the

development process and to the study of developing countries.

I.3. Countries typology

There exist 3 categories of countries:

1. Developed countries: Canada, EU, Japan, the USA, etc.

2. Countries with emerging economies: China, South Korea, India, Brazil,
South Africa, etc.
3. Less advanced countries: majority of sub-Saharan, central Asian and Latin
America countries.

I.4.Analysis based on centers and periphery

The distinction between the centre (capitalist development countries) and the
periphery (third world) was introduced by Raul PREBISH in 1950. This notion has
become famous around the world.

For this writer, the system of international economic relations is characterized by

this opposition centre-periphery where the former plays an active role and latter
the passive role. The periphery is made of majority of diverse countries that
produce and export raw materials. It is characterized by a heterogeneous social
structure. The periphery is equally influenced by fluctuations that appear in the
centre and finally its revenue is taxed by the centre.

There is a deterioration of exchange terms between these two types of countries.

I.5. Dominant features of underdevelopment

1. Poverty bcz of dissatisfaction of fundamental needs

Underdevelopment presents various forms but also great constants. Here are
some: poverty, dualism inequality and demography. Based on the classification
of the international Labor office (ILO), fundamental needs deal with goods and
services below;

-Clothing, accommodation and related items (furniture, household utensils),

food…

-Basic services: hearth, education, potable water, transport.

Fundamental needs have common characteristics according to Patrick

Guillaumond : their satisfaction may be measured thanks to social indicators and
it is able to grow human productivity. That is why development reduces
progressively and eventually malnutrition, diseases, illiteracy, misery,
underemployment and inequalities.

For Al Hag, we should take care of our GNP because it would take care of
poverty. On the opposite side, this proposition means that we have to deal with
poverty in order to increase GNP. In the view of CHENERY, redistribution of
world revenue would eliminate absolute poverty.

However, aid being limited for the moment at less than 0.35% of GNP of rich
countries, we are far to reach a level and reducing poverty will remain exclusively
part of national policy whose main means are the following:

-Public investment in collective service that helps the poor: education, health, etc.

By improving their conditions of life, we can expect to positive effects in the long
run as the growth of their productivity and commercialization.
-Policy of development more favorable to employment: the countries that have
better eliminated poverty (South Korea, Taiwan,Singapore) are also countries
with industrialization strategies that have favored activities of manpower.

-Redistribution of assets : It appears that the countries that have made reforms of
the kind (land reform) have obtained a better result in fighting poverty (South
Korea, Taiwan, Costa Rica);

-Redistribution of rights: social privileges, barriers in classes, access to education

reserved for some individuals will only increase poverty.

2. Dualism and assimilation

The notion of dualism introduced by BOEKE corresponds to an evident reality in

developing countries. That is the coexistence of a traditional society close to a
modern one.

We talk about assimilation in UDC since behavior in UDC is sometimes

influenced by behavior in Developed countries.

3. Inequalities

Inequalities are normally stronger in LDC than in developed countries with

market economy. In line with Simon KUZNET, there is opposition between
growth and use of revenues. There is an assumption according to which that
inequality would increases in the first steps of development (rich people are rich
and poor ones are poor). This means that in underdeveloped countries the
Lorenz curve is close to the 45 degree curve.

4. Demographic growth and dependency burden

It has been found that among the characteristics of developing countries, there is
strong demographic growth. In most of UDC we notice an increase of population
due notably to the decrease of mortality (death) rates and increase of birth rates.
We talk about dependency burden bcz according to TODARO Michael more than
45% of the population of UDC are old men and young depending on weak
income produced by people working and earning a very low income.

5. Low level of productivity

This low level is due to weaknesses noticed in the education and health sectors.

6. High and rising level of Unemployment

7. Substantial dependence on agriculture production and primary product export

8. Vulnerability in international relations

CHAP.II. INDICATORS OF DEVELOPMENT

II.1. Economic indicators

II.2. Social indicators

II.2.1. Education indicators

II.2.2. Health indicators

II.2.3. Environment indicators

II.3. Poverty indicators

II. 3.1. Problems of poverty

a. Relative poverty
b. Absolute poverty
c. Monetary poverty

II.3.2. Causes of poverty

a. Difference is resources
b. Inequality to access to changes to lift oneself
 c. People`s individual choice

II.1. Economic Indicators

a. Production

A country`s production is measured by the national accountancy aggregates,

such as GNP and GDP. They highlight its economic weight whereas the level of
life is evaluated by the product by inhabitant.

GDP measures the achieved added value inside a country in a given period
(after 1year).

GNP=GDP+ Foreign Net Contribution: Revenue of received factors –revenues of

sent factors. The weakness of revenues per inhabitant in poorest countries,
notably in Africa and Asia implies the predominance of rural population because
expenses will mostly be concerned with priority needs; i.e. first agricultural
products.

b. Saving

This is the difference between GDP (Income) and final consumption. This
consumption includes private consumption and public consumption. In general,
developing countries are characterized by poor savings because developing
countries do not sort out a capacity of financing due poor revenues.

c. Internal Gross Investment (IGI)

[Make sure you are able to define investment]

It is made of expenses destined to increase fixed assets of an economy. These

are durable goods whose life expectancy is estimated beyond a year and
therefore these goods are for production. For instance, machines and
equipments, buildings, roads, hospitals, schools, etc.

When Internal Gross Investment is weak, net investment is weak too.

d. Distribution of activities among 3 sectors

In developing countries, most of people are busy in the primary sector. This is
depicted in the table below.

Distribution of activities population (in %)

Agriculture Industry Service

Countries with 73 10 17
weak income
Countries with 51 20 29
medium income
Countries with 7 42 51
high income
This distribution of activities among 3 sectors has been created by Colin CLARK
and it is significant to the level of development.

This one is characterized by successive transfers of the active population of

agriculture to industry and then to services because of benefits of productivity
reached one by one these 3 sectors.

e. The rate of exchange

In most of underdeveloped countries we face money depreciation.

About the rate of exchange, we should distinguish between the real rates of
exchange and nominal rates of exchange. A nominal rate of exchange is the
relative cost between 2 countries. For instance (1$→583) certain method of
quotation of foreign currency with local currency. The opposite is called uncertain
method of quotation (1Fr=…$). However, the real rate of exchange is the relative
cost of goods between two countries and it is calculated in the following way.

Real rate of exchange= Rate of nominal changeXPrice of good inside the country

Price of a good abroad

E.g. Price of a car in USA 1 500US $

1Frw=0.00168 USA $

Price of a car in Rwanda 1,100,000 Frw

0,00168 X 1 100 000

Real rate of exchange (RRE) = =1,232
1500

When RRE is ¿1, this means that the good is expensive inside the country. The
Nominal Rate of Exchange NRE is an average annual rate of the official market
in terms of national currency compared to a foreign currency of reference , in
general US $.

Fluctuations of change are everywhere the characteristics of developing

countries (DC). There often exist currency fluctuations in most of LDC. It is the
case of Rwanda.

For several reasons, it happens that in DC, the real rate of exchange is very high
for some products. The outcome is this situation is that these goods are very
expensive inside the country compared to abroad. Therefore, DC are obliged to
import goods while they produce them. This strongly impacts on their commercial
balance and consequently on their balance of payment. The overall consequence
remains the decrease of the national demand.

f. Direct Foreign Investment and funds

Among the characteristics of DC, there are resort to foreign capitals; those
recourses go through

1. Direct foreign investment

For these countries, they must accept construction of companies whose capitals
are essentially from outside (abroad). It may be multinational enterprise branch
or their representation.

2. International borrowings

These borrowings are obtained in the context of bilateral or multilateral

cooperation. They involve the payment of principal of loans and interest (debt
services).

3. Portfolio investment

It happens that DC enterprises are obliged to sell shares or bonds in rich

countries with the objective of getting capitals able to allow facing their financial
needs.

g. Public assistance for development

It is made of financial flows from rich countries to poor countries and destined to
promote economic development and welfare. The consequence of these aids is
the economic and financial dependence. Bilateral aid is directly injected from
country to country and multilateral aid that goes via NGOs by international
financial institutions like the World Bank and International Monetary Fund (IMF).
Aid is often controversial but necessary. Indeed, aid may be linked; i.e. subject to
being spent in the donor country. It may also be specific; allocated to a précised
project. It may equally be in nature (food, urgent aid) or financial and in this case,
it takes the form of donations. Aids are built on different reasons: Certainly, there
are humanitarian and moral such as solidarity among people. Besides, there are
also more egoistic motives; which comprise the holding of a political zone of
influence and a military strategy or even economic interest.

II.2. Social indicators

II.2.1. Health indicators

Health constitutes one of the key social indicators. In order to confirm the
population health in a country, we consider their life expectancy, infant mortality,
the number of patients by medical doctor, the medium height of individuals, etc.
There exist other parameters to consider in these health indicators. Below are
illustrated some of them.

-Access to potable water: here are considered networks of official supply of water
as well as constructed equipments by the government or NGOs.

- Access to health care: here we see the proportion of the population that can
reach health centers and find a medical doctor and medicine. We also consider
the distance covered to reach health centers.

- The rate of vaccination: here we are interested in the vaccination of children

below a year against tuberculosis, polio, kwashiorkor, tetanus, beriberi, etc.

- The rate of assisted delivery by medical doctors, the number of medical staff,
nurses, etc.

- The rate of child mortality: this is the number of infants who die before they are
one year old over a thousand living births along a year. In DC, the rates of infant
mortality are often high.

- The rate of malnutrition prevalence: it is the number of children below 5 years

whose weight or height compared to the age are below the average.
- The rate of maternal mortality: it is the number of women who die during
pregnancy or during delivery over 1000 living births.

II.2.2. Indicators of education

These indicators are related to instruction in a nation. It is characterized by

-The rate of primary and secondary schooling and every higher learning

- The rate of illiteracy: this is the proportion of the population aged 15 and beyond
who can`t read, write and calculate.

- The number of students by teacher

- The percentage of female teachers

-The percentage of females among male students.

II.2.3. Indicators of sustainable development

Among the objectives of development, there is sustainable development that

necessarily obliges environment protection. That protection obliges:

-The absence of pollution: pollution creates negative consequences to the

environment, atmosphere;

-Poor density of population

-The rate of annual deforestation low

- Water reserves destined to domestic and industrial use.

II.3. Indicators of poverty

II.3.1. Problems of poverty

Poverty is defined as a state of deprivation to long run of the wellbeing

considered as adequate to live well. In economics, poverty means lack and it is
function of lack face to the identifiable needs. We can distinguish 3 concepts of
poverty:

a. Absolute, objective or existence poverty

In case of absolute poverty the minimum of requirements in terms of food,

clothing, health, etc. is not satisfied. The biological existence is threatened.

This is the level of poverty in which consequently threatens the individual`s

biological existence. We can determine the food poverty threshold that
constitutes the minimum that an individual should own. We say that an individual
biological existence is threatened when their nutrition is below the acceptable
growth. Indeed, a normal adult person must consume at least 3,600 calories/day
and a child 2,400/day.

b. Relative or subjective poverty

Here, poverty is considered as a level of poor resource causing the exclusion of

an individual or a household from the mode of minimal life allowing participation
to social life. It is about a moderate poverty bcz the minimum is satisfied but the
access to some assets is still low compared to the average of the population.
Some needs are not satisfied.

c. Monetary poverty

This kind of poverty is based on monetary availability observed during a given

period. Such poverty mostly shakes villages, who own a certain property but lack
cash.

In the case of monetary poverty, the individual is owner of some goods or assets
(farms, cows, goats, etc.) but he doesn’t have money.

II.3. 2. Other causes for poverty

In economics, there exist 3 other causes of poverty:

1. Unequal endowment of resources and factors of production:

There are people (and even countries) that are born poor. In effect, when one is
born in rich environment, he has chance to become rich. A country may have an
initial endowment in human and financial capital.

2. Individual choices of people

An individual may choose to allocate their time to leisure instead of working. The
latter is remunerated whereas leisure causes expenses that are often wasting.

2. Lack of entrepreneurship

In economies that are slightly behind their modern industrial counterparts,

entrepreneurship is often viewed as an important component in stimulating
economic growth, innovation, competitiveness, and even alleviating poverty for
these countries. However, before that is accomplished, there are several unique
features that affect entrepreneurship in developing countries. While some of the
distinct aspects of developing countries inhibit entrepreneurship, others enable
entrepreneurial activities and allow start-up businesses to be successful despite
great odds.

The first and perhaps most obvious factor affecting entrepreneurship in

developing countries is the lack of capital and financial innovation. Many people
in these countries have limited personal savings and lack the necessary capital
to start their own business. Entrepreneurs must then turn to external financing
where they are charged high interest rates due to the risky nature of new
business projects. With underdeveloped financial markets and expensive
borrowing rates, entrepreneurs in emerging economies often use informal
sources of finance to start their businesses and generate income from multiple
jobs or businesses. With that being said, this is where an advantage of
developing countries comes into play.

CHAP.III. DIVERSITY OF DEVELOPMENT STRATEGIES

III. 1. The model of industrializing industries

III.2. The model of imports substitution

III.3. The substitution model of exportations

III.4. Economic integration

III.5. Multinational enterprises

III.6. Demographic problem and local reform

III.1. The model of industrializing industries

The strategy here consists of creating industries that are able to supply raw
materials to other industries. This is, for the countries having adopted this
strategy, use a heavy industrial sector (motor) that can produce an effect of
driving. This type of development necessitates important financial resources for
acquiring technologies that must be imported.

III.2. The model of imports substitution

In this model, the industrialization in translated by the development of industrial

sector turned toward the production of goods that, in the past, were imported,
notably the goods of current consumption. This, this strategy follows two
objectives:

-Achieve progressively economic independence and avoid rely on international

market.
- The countries that have chosen this model are generally countries that do not
posses their own natural resources but have an abundant manpower and good
market.

Results and limits

The results are less mitigated. For example, Brazil famous in the use of
protectionist barriers for stimulating internal production. The investment rate has
strongly increased. However, the objective of independence was not reached a
100%.

In some NIC such like South Korea, we find that the biggest part of the industrial
equipment is imported. However, considering the protectionism implemented at
the start for protecting national industry, multinational companies have been
established in the same country. Thus, Brazil, the host country for foreign
capitals finds its productive system mostly controlled by American, Japanese and
German firms.

The model also faces some internal impediments. The internal market may be
quickly blocked due to insolvency of the population. Poor salaries notably
accelerate the weakness of internal demand. Among these countries we can
point at Brazil, Mexico, Indonesia and Ivory Coast. However, these countries
remain dependent on imported technology because they have continued to
import industrial equipment and even other goods which are not manufactured
locally. On the other side, this strategy facilitates the creation of enterprises,
notably for the production of current consumption goods.

The Japan industrialization was largely inspired by this principle after the 2nd WW.
The production of consumption necessitates, however, the resort to importation
for equipment goods and raw materials. The relation with outside is organized
whereas around the protection of internal market in what concerns current
products. Hence, some protective measures may be taken in order to favor
national products on local market and so limit the exit of currencies caused by
imports. The government conducts a policy of investments in infrastructures thus
holding the growth or development of local industry. The substitution model to
importations has as corollary a strategy of finding out channels. Indeed, the
productive system at the national level must not be limited to producing
consumption goods of current use. It must find out channels; i.e. produce itself
intermediary goods in addition to equipment goods imported in the first phase.

III.3. The substitution model of exportations

This model may be presented as a continuation of strategies for promoting

exportations or substitution to importations. A strategy of finding out industry (or
channels) allows the substitution of exportation of products of high added value
to that of the products of bad quality.

This mechanism necessitates the acquisition of technology mastery and the

elevation of the level of training the manpower. In this model, the exported
products are products that a manufactured from light industry (textile). The
imported products are industrial equipments and inputs. We find, however, that a
strong intervention of government in the planning of manpower. This model has
been often used particularly by NPI, notably South Korea, Hong Kong, Taiwan,
Singapore, that exists among the countries called “group of the first four Asian
Dragon”. Other countries joined the list such as Malaysia, Thailand, Indonesia.
These countries are part of Asian countries of the second generation. We should
note that in this model of substitution of exportations, the government has an
important role to play.

-It supports investments by favoring the research of prospect abroad but also the
implantation of multinational firms whose technology is necessary for it. By
leading an anti union trade policy, it keeps the low cost of manpower and
acquires positive means to make competitive exportation at the world market. As
we can note it, the substitution model of exportation is a model of liberal
inspiration that doesn`t exclude an active policy of the state. Despite its limits, the
strategy of exportations substitutions has allowed the presence of new actors on
the international market; that is the New Industrialized Countries (NIC)

Results and limits of the model

The birth of NIC generates a new International Division of Labor (IDL). Taking
benefit of the low cost of the Man Power (MP), it challenges industrialized
countries on products that were traditionally in their hands.

Beyond these important changes in the international exchanges, the economic

results of NIC are particularly spectacular at the point that Taiwan, Singapore,
Hong Kong and South Korea are sometimes qualified as New Japan. Despite
difficulties, these countries have acquired technological mastery that allows them
to compete with industrial great powers on the products of high added value.
Let`s remind that those NIC often meets some impediments:

-Work conditions and remuneration

-Protectionism in industrialized countries

-Penetration of foreign capitals

-Depts.

III.4. Economic integration

Integration is an important element of development strategies since more than 3

decades now. Its importance results in the need to lift constraints related to the
small size and the poverty of several states. Its importance is also considering
the fact that some countries are landlocked. Integration is the process that leads
several countries to make a unified economic space.

We should first note that there exist 5 steps in the process of economic
integration:

1.The creation of a free zone of exchange: this is characterized by the abolition

of customs rights (duties);

2.Customs union: this adds to the zone of free exchange of common external
tariffs;

3.Common market: this adds to customs union the free movement of factors of
production;

4.Economic union: this adds to the common market the coordination of economic
policies;

5.Total economic integration: this consists in adding to the economic union, the
unification of economic policies.

Objectives of economic integration are the following:

- To improve free movement of people, goods and production factors

- To face the small size of local market
- To improve competitiveness of national products
- To take profit of competitive advantages
- To improve commercial activities

III.5. Multinational firms

A multinational firm is a company having subsidiaries outside the country i.e.

whose the head office is localized in a developed country. It controls production
in more than one country.
Concerning multinational firms, several writers highlight the ambivalent attitude of
DC which at one hand, set up several means of control and restrictions on their
activities and on the other hand, try to attract their investments via varied
incitation.

This attitude only reflects fears vis-à-vis foreign investment inconveniences. But

equally, the possibility of important benefits for host countries. However, the 1980

century has experienced a change of attitudes of DC regarding multinationals

companies that appear much less as agents of imperialism coming to participate

to the exploitation of the third world but as necessary components(elements) of

an industrialization policy because of the resources they bring in: capital,

technology, access to world market. We can define a multinational firm as an

enterprise that has and controls productive activities in more than a country.

These foreign investments have positive and negative effects. Among the latter,

let us mention:

-the loss of economic independence

-the kind of investment that often does not correspond to real needs of DC

-the concentration of enterprises that may lead to the elimination of rivals and

repurchase (second buying).

The recapitalizations of DC (exit of capitals) delivered from investment often go

beyond their initial value and so impoverish DC by worsening their balance of

payment.
The positive effects are:

- Bringing in a new capital

-Increase of distributed real salaries
-Decrease of costs
-Improvement of products quality
-Growth of taxes
-Transportation of technologies
-Bringing in of capacities in terms of management and organization
-Building (formation) of manpower
-Infrastructure development
-Knowledge (discovery) of foreign markets
-Reduction of joblessness

III.6. Demographic problems and land reform

Births control is often considered as a precondition to any development policy.

We consider that the increase of population taxes out the benefit of growth,
particularly in the agricultural domain. This is Malthusian analysis: disproportion
between population growth and economic growth. This increase is opposed by
other anti-Malthusians. The latter believe that poverty in the third world is more a
question of quality of wealth distribution than a quantitative question of the
population. Esther BOSERUP ascertains that demographic pressure and thus
limitation of available land oblige farmers to modify their demand of production.

Thus, traditional agriculture that mostly practices an extensive culture must move
to an intensive culture whereby on the same land, we produce more thanks to
improved techniques. A close theory supports that changes and innovations in
agricultural sector are caused by variations in the relation between costs and
factors of production depending on their relative scarcity. Thus, when the land
becomes scare in comparison with work, its relative cost increases. This actually
induces the adoption of procedures using less for the same production; ie some
more productive methods in order to increase the production.

This is the theory of induced institutional change that was developed by Hayani
and Ruttan.

Demographic growth entails:

- The weakness of the GNP/Capita

- The decrease of quality of life
- The weakness of land availability
Hence, in most of countries we advocate the reduction of births and an
intensive agriculture with more productive methods