Economic Development

by Todaro, Michael P.; Smith, Stephen C.

• ISBN13: 9780201770513
• ISBN10: 0201770512
• Edition: 8th
• Format: Hardcover
• Copyright: 2003-01-01
• Publisher: Addison Wesley

Summary

This best-selling text offers a unique policy-oriented approach that uses models and concepts to illustrate real-world development problems. Retaining its hallmark accessibility throughout, the Eighth Edition uses the most current data, offering full coverage of recent advances in the field, and featuring a balanced presentation of opposing viewpoints on today's major policy debates. The authors have streamlined this edition and have included coverage of new and critical topics. The text includes extensive country-specific examples, updated Country Case Studies, and Comparative Case Studies that allow students to apply concepts to specific developing nations.

Table of Contents

List of Case Studies	vii
PART ONE PRINCIPLES AND CONCEPTS
Economics, Institutions, and Development: A Global Perspective	3	(30)
How the Other Three-Quarters Live	3	(5)
Economics and Development Studies	8	(6)
The Nature of Development Economics	8	(2)
Why Study Development Economics? Some Critical Questions	10	(2)
The Important Role of Values in Development Economics	12	(2)
Economies as Social Systems: The Need to Go Beyond Simple Economics	14	(1)
What Do We Mean by Development?	15	(8)
Traditional Economic Measures	15	(1)
The New Economic View of Development	16	(1)
Sen's ``Capabilities'' Approach	17	(3)
Three Core Values of Development	20	(2)
The Three Objectives of Development	22	(1)
Conclusions	23	(2)
Case Study: The Economy of Brazil	25	(8)
Concepts for Review	29	(4)
Questions for Discussion
Notes
Further Reading
Diverse Structures and Common Characteristics of Developing Nations	33	(45)
Defining the Developing World	34	(3)
The Structural Diversity of Developing Economies	37	(9)
Size and Income Level	40	(1)
Historical Background	40	(1)
Physical and Human Resources	41	(1)
Ethnic and Religious Composition	42	(1)
Relative Importance of the Public and Private Sectors	43	(1)
Industrial Structure	43	(1)
External Dependence: Economic, Political, and Cultural	44	(1)
Political Structure, Power, and interest Groups	45	(1)
Common Characteristics of Developing Nations	46	(25)
Low Levels of Living	46	(11)
A Holistic Measure of Living Levels: The Human Development Index	57	(6)
Low Levels of Productivity	63	(2)
High Rates of Population Growth and Dependency Burdens	65	(1)
Substantial Dependence on Agricultural Production and Primary-Product Exports	66	(3)
Prevalence of Imperfect Markets and incomplete Information	69	(1)
Dominance, Dependence, and Vulnerability in International Relations	70	(1)
Conclusion	71	(1)
Case Study: The Economy of Nigeria	72	(6)
Concepts for Review	74	(4)
Questions for Discussion
Notes
Further Reading
Historic Growth and Contemporary Development: Lessons and Controversies	78	(32)
The Growth Game	78	(1)
The Economics of Growth: Capital, Labor, and Technology	79	(6)
Capital Accumulation	79	(1)
Population and Labor Force Growth	80	(2)
Technological Progress	82	(2)
Conclusion	84	(1)
The Historical Record: Kuznets's Six Characteristics of Modern Economic Growth	85	(6)
High Rates of Per Capita Output and Population Growth	86	(1)
High Rates of Total Factor Productivity Increase	86	(2)
High Rates of Economic Structural Transformation	88	(1)
High Rates of Social and Ideological Transformation	88	(1)
International Economic Outreach	89	(1)
Limited international Spread of Economic Growth	89	(1)
Conclusions: The Interdependence of Growth Characteristics	90	(1)
The Limited Value of the Historical Growth Experience: Differing Initial Conditions	91	(12)
Physical and Human Resource Endowments	91	(1)
Relative Levels of Per Capita Income and GNP	92	(1)
Climatic Differences	92	(1)
Population Size, Distribution, and Growth	93	(1)
The Historical Role of International Migration	93	(3)
The Growth Stimulus of International Trade	96	(1)
Basic Scientific and Technological Research and Development Capabilities	97	(1)
Stability and Flexibility of Political and Social Institutions	97	(2)
Are Living Standards of Developing and Developed Countries Converging?	99	(2)
Conclusions	101	(2)
Case Study: The Economy of Malaysia	103	(7)
Concepts for Review	105	(5)
Questions for Discussion
Notes
Further Reading
Classic Theories of Development: A Comparative Analysis	110	(35)
Classic Theories of Economic Development: Four Approaches	111	(1)
Development as Growth, and the Linear-Stages Theories	112	(4)
Rostow's Stages of Growth	112	(1)
The Harrod-Domar Growth Model	113	(2)
Obstacles and Constraints	115	(1)
Necessary versus Sufficient Conditions: Some Criticisms of the Stages Model	116	(1)
Structural-Change Models	116	(7)
The Lewis Theory of Development	116	(5)
Structural Change and Patterns of Development	121	(1)
Conclusions and Implications	122	(1)
The International-Dependence Revolution	123	(5)
The Neocolonial Dependence Model	124	(1)
The False-Paradigm Model	125	(1)
The Dualistic-Development Thesis	126	(1)
Conclusions and Implications	126	(2)
The Neoclassical Counterrevolution: Market Fundamentalism	128	(4)
Challenging the Statist Model: Free Markets, Public Choice, and Market-Friendly Approaches	128	(2)
Traditional Neoclassical Growth Theory	130	(1)
Conclusions and Implications	131	(1)
Classic Theories of Development: Reconciling the Differences	132	(2)
Case Study: The Economy of Kenya	134	(7)
Concepts for Review	137	(4)
Questions for Discussion
Notes
Further Reading
Appendix 4.1 The Solow Neoclassical Growth Model	141	(4)
Contemporary Models of Development and Underdevelopment	145	(50)
The New Growth Theory: Endogenous Growth	146	(4)
Motivation for the New Growth Theory	146	(2)
The Romer Model	148	(2)
Criticisms of the New Growth Theory	150	(1)
Underdevelopment as a Coordination Failure	150	(3)
Multiple Equilibria: A Diagrammatic Approach	153	(4)
Starting Economic Development: The Big Push	157	(9)
The Big Push: A Graphical Model	159	(6)
Why the Problem Cannot Be Solved by a Super-entrepreneur	165	(1)
Further Problems of Multiple Equilibria	166	(4)
Kremer's O-Ring Theory of Economic Development	170	(5)
The O-Ring Model	170	(4)
Implications of the O-Ring Theory	174	(1)
Summary and Conclusions: Multiple Equilibria and Coordination Failures	175	(12)
Concepts for Review	178	(9)
Questions for Discussion
Notes
Further Reading
Comparative Case Study: South Korea and Argentina
Contributions of Alternative Approaches to Development	187	(5)
PART TWO PROBLEMS AND POLICIES: DOMESTIC
A Note to the Student	192	(3)
Poverty, Inequality, and Development	195	(64)
Measuring Inequality and Poverty	197	(12)
Measuring Inequality	197	(8)
Measuring Absolute Poverty	205	(4)
Poverty, Inequality, and Social Welfare	209	(12)
What's So Bad about Inequality?	209	(2)
Dualistic Development and Shifting Lorenz Curves: Some Stylized Typologies	211	(3)
Kuznets' Inverted-U Hypothesis	214	(5)
Growth and Inequality	219	(2)
Absolute Poverty: Extent and Magnitude	221	(8)
Growth and Poverty	224	(5)
Economic Characteristics of Poverty Groups	229	(6)
Rural Poverty	229	(1)
Women and Poverty	230	(4)
Ethnic Minorities, Indigenous Populations, and Poverty	234	(1)
The Range of Policy Options: Some Basic Considerations	235	(8)
Areas of Intervention	236	(1)
Policy Options	237	(5)
Summary and Conclusions: The Need for a Package of Policies	242	(1)
Case Study: The Economy of India	243	(9)
Concepts for Review	245	(7)
Questions for Discussion
Notes
Further Reading
Appendix 6.1 Appropriate Technology and Employment Generation: The Price-Incentive Model	252	(3)
Appendix 6.2 The Ahluwalia-Chenery Welfare Index	255	(4)
Population Growth and Economic Development: Causes, Consequences, and Controversies	259	(49)
The Basic Issue: Population Growth and the Quality of Life	260	(1)
A Review of Numbers: Population Growth-Past, Present, and Future	261	(11)
World Population Growth through History	261	(3)
Structure of the World's Population	264	(5)
The Hidden Momentum of Population Growth	269	(3)
The Demographic Transition	272	(3)
The Causes of High Fertility in Developing Countries: The Malthusian and Household Models	275	(10)
The Malthusian Population Trap	275	(2)
Criticisms of the Malthusian Model	277	(3)
The Microeconomic Household Theory of Fertility	280	(3)
The Demand for Children in Developing Countries	283	(1)
Some Empirical Evidence	284	(1)
Implications for Development and Fertility	284	(1)
The Consequences of High Fertility: Some Conflicting Opinions	285	(6)
Population Growth Is Not a Real Problem	285	(2)
A Deliberately Contrived False Issue	287	(1)
A Desirable Phenomenon	287	(1)
Population Growth Is a Real Problem	288	(2)
The Empirical Argument: Seven Negative Consequences of Population Growth	290	(1)
Goals and Objectives: Toward a Consensus	291	(2)
Some Policy Approaches	293	(7)
What Developing Countries Can Do	293	(4)
What the Developed Countries Can Do: Resources, Population, and the Global Environment	297	(1)
How Developed Countries Can Assist Developing Countries with Their Population Programs	298	(2)
Conclusion	300	(1)
Case Study: The Economy of China	300	(8)
Concepts for Review	303	(5)
Questions for Discussion
Notes
Further Reading
Urbanization and Rural-Urban Migration: Theory and Policy	308	(52)
The Migration and Urbanization Dilemma	308	(8)
Urbanization: Trends and Projections	309	(7)
The Role of Cities	316	(4)
Industrial Districts	317	(2)
Efficient Urban Scale	319	(1)
The Urban Giantism Problem	320	(4)
First City Bias	322	(1)
Causes of Urban Giantism	322	(2)
The Urban Informal Sector	324	(8)
Policies for the Urban Informal Sector	327	(4)
Women in the Informal Sector	331	(1)
Urban Unemployment	332	(2)
Migration and Development	334	(2)
Toward an Economic Theory of Rural-Urban Migration	336	(9)
A Verbal Description of the Todaro Model	337	(3)
A Diagrammatic Presentation	340	(2)
Five Policy Implications	342	(3)
Summary and Conclusions: The Shape of a Comprehensive Migration and Employment Strategy	345	(3)
Case Study: The Economy of Mexico	348	(9)
Concepts for Review	351	(6)
Questions for Discussion
Notes
Further Reading
Appendix 8.1 A Mathematical Formulation of the Todaro Migration Model	357	(3)
Human Capital: Education and Health in Economic Development	360	(58)
The Central Roles of Education and Health	360	(2)
Education and Health as Joint Investments for Development	362	(1)
International Trends and Convergence in Health and Education	363	(3)
Improving Health and Education: Why Increasing Income Is Not Sufficient	366	(3)
Investing in Education and Health: The Human Capital Approach	369	(3)
Child Labor	372	(4)
The Gender Gap: Women and Education	376	(3)
Consequences of Gender Bias in Health and Education	377	(2)
Educational Systems and Development	379	(13)
Educational Supply and Demand: The Relationship Between Employment Opportunities and Educational Demands	380	(2)
Social versus Private Benefits and Costs	382	(4)
Distribution of Education	386	(2)
Education, Inequality, and Poverty	388	(3)
Education, Internal Migration, and the Brain Drain	391	(1)
Health Systems and Development	392	(13)
Measurement and Distribution	392	(1)
Disease Burden	393	(3)
Malaria and Parasitic Worms	396	(1)
HIV and AIDS	397	(3)
Health and Productivity	400	(3)
Health Systems Policy	403	(2)
Policies for Health, Education, and Income Generation	405	(2)
Case Study: The Economy of Egypt	407	(11)
Concepts for Review	410	(8)
Questions for Discussion
Notes
Further Reading
Agricultural Transformation and Rural Development	418	(45)
The Imperative of Agricultural Progress and Rural Development	418	(2)
Agricultural Stagnation and Growth Since 1950	420	(4)
The Structure of Agrarian Systems in the Developing World	424	(13)
Two Kinds of World Agriculture	424	(2)
Peasant Agriculture in Latin America, Asia, and Africa	426	(11)
Conclusions	437	(1)
The Important Role of Women	437	(3)
The Economics of Agricultural Development: Transition from Peasant Subsistence to Specialized Commercial Farming	440	(9)
Subsistence Farming: Risk Aversion, Uncertainty, and Survival	441	(6)
The Transition to Mixed and Diversified Farming	447	(1)
From Divergence to Specialization: Modern Commercial Farming	448	(1)
Conclusions	449	(1)
Toward a Strategy of Agricultural and Rural Development: Some Main Requirements	449	(6)
Improving Small-Scale Agriculture	450	(2)
Conditions for Rural Development	452	(3)
Case Study: The Economy of Bangladesh	455	(8)
Concepts for Review	457	(6)
Questions for Discussion
Notes
Further Reading
The Environment and Development	463	(52)
Economics and the Environment	463	(1)
Environment and Development: The Basic Issues	464	(4)
Sustainable Development and Environmental Accounting	464	(2)
Population, Resources, and the Environment	466	(1)
Poverty and the Environment	466	(1)
Growth versus the Environment	466	(1)
Rural Development and the Environment	467	(1)
Urban Development and the Environment	467	(1)
The Global Environment	468	(1)
The Scope of Environmental Degradation: An Overview	468	(3)
Rural Development and the Environment: A Tale of Two Villages	471	(3)
Traditional Economic Models of the Environment	474	(6)
Privately Owned Resources	474	(2)
Common Property Resources	476	(2)
Public Goods and Bads: Regional Environmental Degradation and the Free-Rider Problem	478	(2)
Limitations of the Public-Good Framework	480	(1)
Urban Development and the Environment	480	(7)
The Ecology of Urban Slums	480	(2)
Industrialization and Urban Air Pollution	482	(3)
Problems of Congestion and the Availability of Clean Water and Sanitation	485	(2)
The Need for Policy Reform	487	(1)
The Global Environment: Rain Forest Destruction and Greenhouse Gases	488	(2)
Policy Options in Developing and Developed Countries	490	(7)
What Less Developed Countries Can Do	490	(2)
How Developed Countries Can Help LDCs	492	(2)
What Developed Countries Can Do for the Global Environment	494	(3)
Case Study: The Economy of Pakistan	497	(6)
Concepts for Review	499	(4)
Questions for Discussion
Notes
Further Reading
Comparative Case Study: Bangladesh and Nigeria
Poverty Policy	503	(7)
PART THREE PROBLEMS AND POLICIES: INTERNATIONAL
Globalization: An Introduction to Part Three	510	(5)
Trade Theory and Development Experience	515	(40)
International Trade and Finance: Some Key Issues	515	(3)
Five Basic Questions about Trade and Development	518	(4)
Importance of Exports to Different Developing Nations	520	(1)
Demand Elasticities and Export Earnings Instability	520	(2)
The Terms of Trade and the Prebisch-Singer Thesis	522	(3)
The Traditional Theory of International Trade	525	(7)
Comparative Advantage	526	(1)
Relative Factor Endowments and International Specialization: The Neoclassical Model	527	(4)
Trade Theory and Development: The Traditional Arguments	531	(1)
Some Criticisms of Traditional Free-Trade Theory in the Context of Developing-Country Experience	532	(11)
Fixed Resources, Full Employment, and the International Immobility of Capital and Skilled Labor	533	(4)
Fixed, Freely Available Technology and Consumer Sovereignty	537	(1)
Internal Factor Mobility and Perfect Competition: Increasing Returns, Imperfect Competition, and Controlled Markets	538	(2)
The Absence of National Governments in Trading Relations	540	(2)
Balanced Trade and International Price Adjustments	542	(1)
Trade Gains Accruing to Nationals	542	(1)
Some Conclusions on Trade and Economic Development: The Limits of Theory	543	(5)
Case Study: The Economy of Taiwan	548	(7)
Concepts for Review	550	(5)
Questions for Discussion
Notes
Further Reading
The Trade Policy Debate: Export Promotion, Import Substitution, and Economic Integration	555	(42)
Trade Strategies for Development: Export Promotion versus Import Substitution	556	(19)
Export Promotion: Looking Outward and Seeing Trade Barriers	557	(5)
Import Substitution: Looking Inward but Still Paying Outward	562	(2)
The IS Industrialization Strategy and Results	564	(7)
Foreign-Exchange Rates, Exchange Controls, and the Devaluation Decision	571	(4)
Summary and Conclusions: Trade Optimists and Trade Pessimists	575	(2)
Trade Pessimist Arguments	575	(1)
Trade Optimist Arguments	576	(1)
Reconciling the Arguments: The Data and the Consensus	577	(1)
South-South Trade and Economic Integration: Looking Outward and Inward	578	(5)
The Growth of Trade among Developing Countries	578	(1)
Economic Integration: Theory and Practice	579	(2)
Regional Trading Blocs and the Globalization of Trade	581	(2)
Trade Policies of Developed Countries: The Need for Reform	583	(6)
Rich-Nation Tariff and Nontariff Trade Barriers and the 1995 Uruguay Round GATT Agreement	584	(3)
The Problem of Adjustment Assistance	587	(1)
Domestic Economic Policies	588	(1)
Case Study: The Economy of South Korea	589	(8)
Concepts for Review	592	(5)
Questions for Discussion
Notes
Further Reading
Balance of Payments, Developing-Country Debt, and the Macroeconomic Stabilization Controversy	597	(37)
The Balance of Payments Account	598	(4)
General Considerations	598	(2)
A Hypothetical Illustration: Deficits and Debts	600	(2)
Financing and Reducing Payments Deficits	602	(3)
Some Initial Policy Issues	602	(2)
Recent Trends in LDC Balance of Payments	604	(1)
The 1980s' Debt Crisis	605	(8)
Background and Analysis	604	(4)
Origins of the Debt Crisis	608	(5)
Attempts at Alleviation: Macroeconomic Instability, IMF Stabilization Policies, and Their Critics	613	(5)
The IMF Stabilization Program	613	(2)
Tactics for Debt Relief	615	(2)
Has the Debt Problem Disappeared? Winners and Losers	617	(1)
Conclusions	618	(2)
Case Study: The Economy of Venezuela	620	(6)
Concepts for Review	622	(4)
Questions for Discussion
Notes
Further Reading
Appendix 14.1 A Brief History and Analysis of the International Monetary Fund and the World Bank	626	(8)
Foreign Finance, Investment, and Aid: Controversies and Opportunities	634	(45)
The International Flow of Financial Resources	634	(1)
Private Foreign Direct Investment and the Multinational Corporation	635	(9)
Multinational Corporations: Size, Patterns, and Trends	636	(2)
Private Foreign Investment: Some Pros and Cons for Development	638	(6)
Private Portfolio Investment: Boon or Bane for LDCs?	644	(3)
Foreign Aid: The Development Assistance Debate	647	(13)
Conceptual and Measurement Problems	647	(1)
Amounts and Allocations: Public Aid	648	(5)
Why Donors Give Aid	653	(4)
Why LDC Recipients Accept Aid	657	(1)
The Growing Role of Nongovernmental Organizations (NGOs)	658	(1)
The Effects of Aid	659	(1)
Conclusions: Toward a New View of Foreign Aid	660	(2)
Case Study: The Economy of Indonesia	662	(8)
Concepts for Review	665	(5)
Questions for Discussion
Notes
Further Reading
Comparative Case Study: Thailand and the Philippines
Trade Strategy	670	(9)
PART FOUR POSSIBILITIES AND PROSPECTS
Development Policymaking and the Role of the State	679	(53)
The Planning Mystique	680	(1)
The Nature of Development Planning	681	(1)
Basic Concepts	681	(1)
Planning in Mixed Developing Economies	681	(1)
The Rationale for Development Planning	682	(2)
The Planning Process: Some Basic Models	684	(8)
Aggregate Growth Models: Projecting Macro Variables	685	(2)
Multi-Sector Models and Sectoral Projections	687	(1)
Project Appraisal and Social Cost-Benefit Analysis	688	(4)
Conclusions: Planning Models and Plan Consistency	692	(1)
The Crisis in Planning: Problems of Implementation and Plan Failures	692	(4)
Theory versus Practice	693	(1)
Reasons for Plan Failures	694	(2)
Government Failure and the Resurgent Preference for Markets over Planning	696	(2)
The Market Economy	698	(4)
Sociocultural Preconditions and Economic Requirements	698	(2)
Role and Limitations of the Market in LDCs	700	(2)
The ``Washington Consensus'' on the State in Development and Its Limitations	702	(4)
Toward a New Consensus	704	(2)
Development Political Economy: Theories of Policy Formulation and Reform	706	(5)
Understanding Voting Patterns on Policy Reform	707	(2)
Institutions and Path Dependency	709	(1)
Democracy versus Autocracy: Which Facilitates Faster Growth?	710	(1)
Trends in Governance and Reform	711	(6)
Tackling the Problem of Corruption	711	(3)
Decentralization	714	(1)
Development Participation	715	(2)
Development Policy and the State: Concluding Observations	717	(3)
Case Study: The Economy of Ghana	720	(4)
Case Study: The Economy of the Philippines	724	(8)
Concepts for Review	726	(6)
Questions for Discussion
Notes
Further Reading
Finance and Fiscal Policy for Development	732	(55)
The Role of the Financial System	733	(1)
The Painful Road to Macroeconomic Stability	734	(11)
Differences between MDC and LDC Financial Systems	735	(3)
The Role of Central Banks	738	(3)
The Emergence of Development Banking	741	(1)
The Role of Informal Finance and Group Lending for Small-Scale Enterprise	742	(3)
Reforming Financial Systems	745	(6)
Financial Liberalization, Real Interest Rates, Savings, and Investment	745	(2)
Financial Policy and the Role of the State	747	(2)
Debate on the Role of the Stock Markets	749	(2)
Fiscal Policy for Development	751	(5)
Macrostability and Resource Mobilization	751	(1)
Taxation: Direct and Indirect	751	(5)
Public Administration: The Scarcest Resource	756	(2)
State-Owned Enterprises	758	(5)
Improving the Performance of SOEs	760	(1)
Privatization: Theory and Experience	761	(2)
Military Expenditures and Economic Development	763	(5)
Significance and Economic Impact	763	(3)
The End of the Cold War: Disarmament, Conflict Resolution, and Human Development	766	(2)
Case Study: The Economy of South Africa	768	(11)
Concepts for Review	772	(7)
Questions for Discussion
Notes
Further Reading
Comparative Case Study: Chile and Poland
Privatization: What, When, and to Whom?	779	(8)
Glossary	787	(28)
Name Index	815	(10)
Subject Index	825