UNIVERSITY OF MAKATI

J. P. Rizal Ext., West Rembo, Makati City

COLLEGE OF BUSINESS AND FINANCIAL SCIENCE
Department of Human Resource Development Management
Course Title Title
Module No. 4 CONTEMPORARY MODELS OF
DEVELOPMENT AND UNDER DEVELOPMENT
ECONOMIC
DEVELOPMENT Module Leader DR. ERICSON Z. MATIAS

Module Contributors

Timeframe: Students are expected to finish all the activities, assignments, and
assessments of this module in one week.

Students are expected to:

How to Complete 1. Read the Topic Lesson
this module? 2. View video lecture
a. Overview Contemporary Models of Development and
Underdevelopment
https://www.youtube.com/watch?v=XhVvhBkms6Q
b. Third World vs. First World Countries
https://www.youtube.com/watch?v=1yKvwOydZFw
c. Theories of Development – Modernization Theory
https://www.youtube.com/watch?v=om5so5znk-o
3. Participate in this week’s discussion
4. Answer the Performance Task No.
a. Internet Research
b. Overview in Contemporary Models of Development and Under
development.
c. Reflection Paper

Teaching 1. Read topic notes / PPT presentation.

Strategies 2. Discussion/ Recitation via Google Meet.

Introduction/Overview.

After more than a half century of experience with attempting to encourage modern
development, we have learned that development is both possible and extremely difficult to
achieve. Thus, an improved understanding of impediments and catalysts of development is of
INTRODUCTION

the utmost importance. Since the late 1980s, significant strides have been made in the
analysis of economic development and underdevelopment. In some cases, ideas of the
classic theories reviewed in Chapter 3 have been formalized, and in the process, their logical
structure and their significance for policy have been clarified and refined.

At the same time, the analysis has also led to entirely new insights into what makes
development so hard to achieve (as witnessed in sub-Saharan Africa) but also possible to
achieve (as witnessed in East Asia).

In this chapter, we review a sample of some of the most influential of the new models of
economic development, But greater understanding itself improvements in developing strategy.

By the end of this module, student will be able to:

OUTCOMES
LEARNING

1. Defining the Contemporary Models of Development and Under development.

2. Understand the Underdevelopment as a Coordination Failure
3. Identify the Multiple Equilibria: A Diagrammatic Approach
4. Explain the Starting Economic Development: The Big Push.
CONTEMPORARY MODELS OF DEVELOPMENT AND UNDER DEVELOPMENT AND ITS
RELEVANCE

Credit to: Market Business News

• Watch Video, Making Sense of Economic Development

An Overview to Contemporary Models of Development and Underdevelopment

https://www.youtube.com/watch?v=XhVvhBkms6Q

Underdevelopment as a Coordination Failure

• A newer school of thought on problems of economic development

• Coordination failures occur when agents’ inability to coordinate their actions leads to an
outcome that makes all agents worse off.
• This can occur when actions are complementary, i.e.,
• Actions taken by one agent reinforces incentives for others to take similar actions
• Often, these models can be diagrammed by graphing an S-shaped function and the 45º
line
• Equilibria are
• Stable: function crosses the 45º line from above
• Unstable: function crosses the 45º line from below

Starting Economic Development: The Big Push

• Sometimes market failures lead to a need for public policy intervention

• The Big Push: A Graphical Model, 6 assumptions
– One factor of production
– Two sectors
– Same production function for each sector
– Consumers spend an equal amount on each good
– Closed economy
– Perfect competition with traditional firms operating, limit pricing monopolist with a
modern firm operating
 POST-EVALUATION

1. What role do you think international trade and foreign investment can play in solving some
of the problems identified in the big push model? In the O-ring model? What limitations to your
arguments can you think of?
2. The word trap suggests that there may be a way to escape. Do you think developing
ASSIGNMENT

countries can escape all of the traps described in this chapter? Which ones would be most
difficult to escape? How could the developed world be of assistance in these cases? Could
developed countries do more?
3. Why might high levels of inequality lead to lower rates of growth and development? Why
might it be difficult to get out of this kind of trap?
4. Why is the government sometimes a part of the problem of coordination failure rather than
the solution? Does this make the problem hopeless? What could be done in this case?
5. One of the characteristics of some developing economies is the relatively low level of trust
of
people outside one’s extended family. How might the models explored in this chapter shed
light on this problem?
6. Can you think of an example of O-ring production from everyday life? Do you think your
example is a good metaphor for development problems?

IDENTIFICATION

____________1. A positive or negative spillover effect on a firm’s production function through

some means other than market exchange.
____________2. A positive or negative spillover effect on an agent’s costs or revenues.
____________3. A situation in which one or more persons may be made better off without
making anyone worse off.
____________4. The opposite of a complementarity; an action taken by one agent that
decreases the incentives for other agents to take similar actions.
ASSESSMENT

____________5. A poverty trap at the regional or national level in which underdevelopment

tends to perpetuate itself over time.
____________6. A concerted, economy-wide, and typically public policy–led effort to initiate
or accelerate economic development across a broad spectrum of new industries and skills.
_______________7. An economic actor—usually a firm, worker, consumer, or government official
— that chooses actions so as to maximize an objective; often referred to as “agents.”
____________8. An economic model in which production functions exhibit strong
complementarities among inputs and which has broader implications for impediments to
achieving economic development.
____________9. A government policy that can move the economy to a preferred equilibrium
or even to a higher permanent rate of growth, which can then be self-sustaining so that the
policy need no longer be enforced because the better equilibrium will then prevail without
further intervention.
____________10. An economic actor—usually a firm, worker, consumer, or government
official— that chooses actions so as to maximize an objective; often referred to as “agents.”
REFERENCES

Economic Development 8th edition by Michael P. Tadaro and Stephen C. Smith

Other References:

1. https://www.investopedia.com/terms/d/developed-economy.asp