T
Theories of Development
Mario Coccia
CNR – National Research Council of Italy,
Torino, Italy
Yale University School of Medicine & Yale New
Haven Hospital, New Haven, CT, USA
Synonyms
Development economics; Economic develop-
ment; Economic growth; Human development;
Social progress
Definition
Development is a process of disproportionate
growth of systems. In economics, development
is a multidimensional process that generates eco-
nomic, technological, social and institutional
change to support wealth of nations and a com-
prehensive wellbeing of people in society.
Introduction
Economic development is a process that generates
economic, social and technical progress of
nations. The fundamental elements of develop-
ment in society are: the improvement of health,
© Springer Nature Switzerland AG 2019
A. Farazmand (ed.), Global Encyclopedia of Public Administration, Public Policy, and Governance,
https://doi.org/10.1007/978-3-319-31816-5_939-1
the growth of wealth, the creation of new knowl-
edge and technology, etc. Economic development
is fostered in appropriate social systems with high
democracy and culture, good economic gover-
nance, efficient higher education system, and
high innovative outputs (Coccia 2010, 2014,
2014b, 2018a). Economic development can be
explained with different theories that are
discussed in next sections (Fig. 1).
Theories of Development in Economics
The study of economic development is one of
the most important research fields in economics,
political economy, and other social sciences
(Nafziger 2005). The schools of classical and
neoclassical economics analyze the development
in terms of the efficient allocation of scarce pro-
ductive resources to support optimal growth, pro-
duce and expand the range of goods and services.
Instead, new economic approaches explain the
development with socioeconomic, political, and
institutional factors that accelerate economic
growth, improve the levels of living, and reduce
poverty of population, income inequality between
people, and violent crime in society (cf., Todaro
and Smith 2003; Coccia 2017). A traditional eco-
nomic measure of development is given by gross
domestic product (GDP): the sum of gross value
added by all resident producers in the economy
plus any product taxes and minus any subsidies
2 Theories of Development

Classical Theories of Development

 Linear stages theory

-Rostow’s stage of growth
-Harrod-Domar growth model

 Structural-change models
-The Lewis theory of development
-Empirical patterns of development

 The international-dependence models

-The neocolonial dependence model
-The dualistic-development model
THEORIES OF DEVELOPMENT

-The false-paradigm model

THEORIES OF NATIONAL DEVELOPMENT  The neoclassical counter-revolution

-Solow neoclassical model of growth
-Public-choice theory

Contemporary Theories of Development

 Endogenous growth theory (Romer model)

 Approaches based on complementarities and

coordination failure

 Approach of multiple equilibria

 The Big Push model

 Kremer’s O-Ring theory

THEORIES OF REGIONAL DEVELOPMENT  Growth pole theory (studies by Perroux,

Aydalot, Boudeville, etc.)

Theories of Development, Fig. 1 Theories of Development in Economics

not included in the value of the products. Contem- In this context, theories of development can be
porary studies and theories have added noneco- divided in two macro categories (cf., Fig. 1):
nomic indicators for measuring development in
society, such as Human Development Index • Theories of development of national systems
(HDI): • Theories of regional development
a summary measure of average achievement in key
dimensions of human development: a long and
Theories of Development of National Systems
healthy life, being knowledgeable and have a
decent standard of living. . . The health dimension
is assessed by life expectancy at birth, the education Classical Theories of Economic Development
dimension is measured by mean of years of school- • Linear stages theories are: Rostow’s stages of
ing for adults aged 25 years and more and expected
growth and the Harrod-Domar growth model
years of schooling for children of school entering
age. The standard of living dimension is measured (cf., Todaro and Smith 2003). The theory of
by gross national income per capita (Human stage of growth suggests that more saving and
Development Reports 2018).
Theories of Development
investment can accelerate the rates of eco-
nomic growth. However, the theory of stages
does not clarify the economic development of
poor nations, because suggested drivers (e.g.,
physical capital) are necessary but not suffi-
cient factors for supporting economic growth.
In fact, high investments of physical capital in
many developing nations have not generated
historical paths of economic development
because of lack of other socioeconomic fac-
tors, such as, an efficient higher education sys-
tem and good economic governance. European
countries after World War II, by contrast,
increased physical capital in a context with
good institutions and high-skilled human
resources, generating long-run economic
growth.
• Structural change models. This approach
focuses on mechanisms that transform eco-
nomic structure of nations from traditional
agriculture to industrial and service system.
In particular, structural change approach is
based on theories of neoclassical price and
resource allocation. Two main approaches
are: the model of two-sector surplus labor by
Lewis (1954) and econometric analysis of the
patterns of development by Chenery and col-
leagues (1975). The model of Lewis (1954)
considers a process of modern sector self-
sustaining growth and employment expansion
that are assumed to continue until all surplus of
rural labor is absorbed in new industrial sectors
of urban areas. However, a limitation of the
model by Lewis (1954) is the assumption of
diminishing returns in industrial sector,
whereas empirical evidence shows increasing
returns in that sector (Todaro and Smith 2003).
Empirical patterns of development consider
the steady accumulation of physical and
human capital, the change in consumer
demand from food and basic necessities to
manufactured goods and services, the growth
of cities and firms associated with migration of
people from farms and small towns to large
cities, decline of family size and of overall
rate of growth of population. However, eco-
nomic policies based on this approach have
3
not, in many cases, generated pathways of
development within and between countries.
• The international-dependence models consider
developing countries in a relationship of
dependence with developed countries. Major
approaches are: neocolonial-dependence,
false-paradigm, and dualistic models. These
approaches reject neoclassical theory of devel-
opment designed to accelerate growth of
gross national product; they also reject the
empirical results by Chenery about some char-
acteristics of development that poor countries
should pursue (cf., Todaro and Smith 2003).
These international-dependence models stress
the imbalance of socioeconomic power
between rich and poor nations. According to
the American sociologist Immanuel Maurice
Wallerstein, the world system has core and
periphery regions, in which powerful and
wealthy core societies dominate and exploit
weak and poor peripheral societies. In particu-
lar, the strong nations reinforce and increase
the flow of surplus because their governments
provide economic assistance to capitalist clas-
ses on world market. The major weakness of
this approach is the actual experience of Least
Developed Countries (LCDs) that have had
nationalization of firms and state-run produc-
tion with negative effects on long-run patterns
of economic growth.
• Neoclassical counterrevolution considers
underdevelopment of LCDs as internally
induced phenomena caused by government
intervention and bad economic policies.
Neoclassical counterrevolution’s approach
suggests that market price and resource alloca-
tion usually produces better results than state
intervention. Moreover, the liberalization of
national markets generates additional domestic
and foreign investments that increase the rate
of capital accumulation. In this context, the
neoclassical growth model by Solow (1956)
expanded the Harrod-Domar model, adding to
growth equation a second factor, labor, and
inserting a third independent variable, technol-
ogy. Solow’s model shows diminishing returns
to labor and capital separately and constant
returns to both factors jointly. In this theoretical
4 Theories of Development
framework, technological progress is the resid-
ual factor that explains long-run economic
growth (cf., Coccia 2011, 2018a, 2018b). The
output growth is due to increases in labor quan-
tity and quality (population growth and educa-
tion), increases in capital (through saving
and investment), and improvements in technol-
ogy. Closed economies grow more slowly,
whereas open economies have an income
convergence at higher levels because capital
flows from rich countries to poor countries
where capital-labor ratios are lower and returns
on investments are higher. However, free mar-
kets and open economies may also increase
income inequality, violence, and public debts
that may reduce the well-being of people in the
long run (Coccia 2017, 2017a).
Contemporary Models of Development (cf.,
Todaro and Smith 2003)
• Endogenous growth theory argues that the
growth of Gross Domestic Product (GDP) is
determined by production processes within
economic system, rather than by forces
outside that system. This theoretical frame-
work has been developed by Kenneth Arrow
in 1962, Hirofumi Uzawa in 1965, Paul Romer
in 1986, Robert Lucas in 1988, and Sergio
Rebelo in 1991. Subsequently, Paul Romer in
1987, Philip Aghion and Peter Howitt in 1992,
and Gene M. Grossman and Elhanan Helpman
in 1991 incorporated imperfect markets and
Research and Development (R&D) to endoge-
nous growth model. This new growth theory
endeavors to explain different growth rates
across countries and factors associated with
the rate of growth of GDP that are left
unexplained and exogenously determined in
the Solow neoclassical model of growth (i.e.,
residual factor; cf., Solow, 1956). In general,
investments in human capital generate external
economies and productivity improvements that
offset to explain the existence of increasing
returns to scale. Endogenous growth models
also explain anomalous international flows of
capital that generate wealth inequalities
between rich and poor nations. However, eco-
nomic literature shows that high rates of return
on investment within developing economies
(with low capital-labor ratios) are eroded by
low levels of investments in education, infra-
structure, and R&D (cf., Coccia 2011, 2018b).
Especially, new growth theory depends on neo-
classical premises that are inappropriate for
LCDs. Finally, empirical studies provide a lim-
ited support to the predictions of endogenous
growth theory (Todaro and Smith 2003).
• New theory of economic development stresses
complementarities between several factors
necessary for successful development of
nations. Investments have to be done by
many agents to produce results for any individ-
ual agent. When complementarities are pre-
sent, an action taken by one firm, worker,
organization, or government, it increases the
incentives for other agents to take similar
actions. In particular, complementarities
involve investments whose returns depend on
investments done by other agents. In this
context, the model of Big Push suggests that
production decisions by modern-sector firms
are mutually reinforcing (cf., Todaro and
Smith 2003). Another model in this theoretical
framework is the Kremer’s O-ring model
(1993). This approach focuses on a production
function with many tasks, which must be
proficiency all completed to have a full value
of product. Mistakes during the process of
production can be extremely costly, reducing
the product’s value (the name O-ring comes
from the accident of the space
shuttle Challenger that exploded because one
of the components, the O-rings, failed).
Underdevelopment of countries can be also
due to a coordination failure: agents have
inability to coordinate their behavior
(choices), generating frictional factors for pat-
terns of economic growth.
Theories of Regional Development
Geoeconomic space with regional disparities can
generate poverty, unemployment, social issues,
income inequality, violent crime, etc. (Coccia
2009, 2017). The goal of the theory of regional
development is to reduce regional disparities
within a country to support a general development
of nation as a whole system. In this context,
Theories of Development
development was defined by Perroux (1955,
p. 308) as “a selective, cumulative process which
does not appear everywhere at the same time but
becomes manifest at certain points in space with
variable intensity.” Perroux (1955, p. 309) also
argues that the growth does not appear every-
where at the same time and with the same inten-
sity; it appears at specific spatial points or poles of
growth with varying intensity of socioeconomic
interaction; after that, it these poles spread eco-
nomic activities along various channels, generat-
ing different effects on growth of regional and
national economic systems. Growth pole theory
was proposed for solving inequalities in economic
growth of regions within nation. A critical factor
of this approach is the concept of growth pole: a
large cluster of firms and/or industries strongly
related through input-output linkages to a leading
industry (or propulsive) firm and/or industry. Pro-
pulsive industry and interrelated industries inno-
vate and grow faster than other industries external
to the pole, generating economic development in
specific areas by their capacity to stimulate differ-
ent forces within socioeconomic system.
The concept of growth pole was subsequently
developed by Jacques Raoul Boudeville consid-
ering a set of expanding industries located in an
urban area that induces the development of
economic activitis throughout zones of influence.
The essence of growth pole analysis is that spatial
concentration of economic activities and agglom-
eration of population are the most efficient factors
to support economic growth of regional systems.
Although agglomeration of industries is a key
element in spatial organizational efficiency,
of course, it is not the sole force supporting
regional growth (Coccia 2009). Other factors,
supporting economic growth associated with pro-
pulsive industry, are an efficient higher education
system, low corruption and criminality, good eco-
nomic governance, high innovative outputs and
new technology in democratic contexts, etc. (cf.,
Coccia 2010, 2014, 2015a, 2015b, 2018a, 2018c,
2018d, 2019). Moreover, the growth pole has to
be created in spatial areas with at least 250,000
people before the above mechanisms work within
geoeconomic space for supporting regional
5
growth. From the viewpoint of policymakers, the
major advantage of these approaches is the oppor-
tunity for integrating industrial policy, physical
planning, and inter-regional and intra-regional
economic planning.
Sustainable Development and
Conclusions
The global and industrial society, driven by new
technology, is generating economic growth rather
than a sustainable development of nations (Coccia
2015). Scholars assert that one of the main effects
of development on environment is pollution,
which started with the Industrial Revolution in
Europe and North America, driven by technical
and economic change of steam engine, internal
combustion engine, and other new technology
(Coccia 2015). In general, economic development
of the last decades is causing demographic, envi-
ronmental, and climate change. In particular,
European, North American, and Chinese develop-
ment is generating socioeconomic progress and
well-being of people but also the diffusion of
some mutagens and genotoxic carcinogens from
industrialization processes (e.g., pollutants, pesti-
cides in agriculture, several chemicals, asbestos,
processed or chemically preserved food, etc.;
Coccia 2015). Hence, development of nations
generates economic growth but also a general
pollution that has negative consequences on envi-
ronment, health (e.g., cancers), and food safety in
society (cf., Coccia 2015, p. 62; Coccia 2013,
2014a, 2016).
Overall, then, the concept of development is
driven by the expanding content of human life
interests, using new technology and science
advances (Coccia 2019, Coccia and Wang,
2016). Human society should focus on patterns
of sustainable development, rather than economic
growth, for improving long-run environmental
and social factors, and health of people. However,
development is also affected by economic, social,
psychological, anthropological, and perhaps bio-
logical factors that can generate uncertain and
unknown long-term effects in environment and
society.
6 Theories of Development
Cross-References
▶ Comparative Institutional Changes
▶ Comparative World System Theories
▶ Revolutions and Evolutions
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