Economic development can be describe as the development of economic wealth of

countries or regions for the well-being of their inhabitants such as the improvement and innovation
on the political, economic, and social of its people. Economic development and growth are totally
different in terms which are used in economics. Economic development refers to economic growth
which accompanied by changes in economic structure and output distribution.

Advantages

 Economic growth will decreases famine, starvation, infant mortality, and death; gives us
greater leisure; can enhance art, music, and philosophy; and gives us the resources to be
humanitarian.
 Economic growth will especially benefit to societies in which political desire exceed the
resources, because it may prevent what might otherwise prove to be social tension that
people can’t take it. However, without economic growth, the desires of one group can be
met when others expense on it.
 Lastly, economic growth can help newly independent countries in mobilizing resources to
increase the power of a nation.

Economic Growth Theory of Development

Economic development theories seek to explain and predict how economies develop (or not) over
time, also barriers to growth can be identified and overcome and how government can induce
(start), sustain and accelerate growth with appropriate development polices. Economic growth is
measured by varying economic indicators (BOP, GDP, GNP etc.)
These economic indicators have a huge impact on an economies market. The Economic growth
theory of development argues that development of an individual, a community, a country or an
economy solely depends on the improvement of the countries/individuals economic indicators.

Advantages of Economic growth Theory of Development

 The Economic growth theory allows for a countries improvement on her comparative
advantage - concentration of a country on manufacturing a product at a relatively lower
cost than another country or economy.
 This theory also allows for improvement in an economies Balance of Trade, Balance of
Payment, Gross Domestic Product, Gross National Product, etc.
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 Economic Development Theories

Absolute advantage Occurs when a country or region can create more of a product with the same factor
inputs.

Comparative advantage -The basis of standard free trade theory. First introduced by David Ricardo in
1817. Ricardo predicts all countries gain if they specialize and trade the goods in which they have a
comparative advantage. Comparative advantage exists when a country has a margin of superiority in the
production of a good or service i.e. where the opportunity cost of production is lower. This is true even if
one of the trading nations is more productive in all traded goods (has an absolute advantage) compared
to the other country.

The Rostow Linear Stages Model

This is a linear theory of development. It argues that to achieve? Modernity? All countries pass through
the same stages of development Economies can be divided into primary, secondary, and tertiary sectors.
The history of developed countries suggests a common pattern of structural change:

The Harrod-Domar Savings Model The Harrod-Domar model developed in the l930s suggests that a
population’s savings provide the funds, which are borrowed for investment purposes. Higher rates of
savings can be transferred into higher rates of investment to generate self-sustaining economic growth.

The Lewis Dual Sector Model -The Lewis model is structural change model that explains how labor
transfers in a dual economy. For Lewis growth of the industrial sector drives economic growth.

The Solow Growth Model Economic growth is depends on the quantity and quality of resources and
technology.

Dependency Theory - Dependency refers to over reliance on another nation. Dependency theory uses
political and economic theory to explain how the process of international trade and domestic
development makes some LDCs ever more economically dependent on developed countries

Balanced Growth Theory Balanced growth (or the big push) theory argues that as a large number of
industries develop simultaneously, each generates a market for one another.

Unbalanced Growth Theory Unbalanced growth theorists argue that sufficient resources cannot be
mobilized by government to promote widespread, coordinated investments in all industries. Therefore,
government planning or market intervention is required in a few strategic industries. Those with the
greatest number of backward and forward links to other industries are prioritized.

The Tobin Tax on foreign exchange transactions to reduce speculation and raise revenue for development

The Trickle Down Theory Here the initial benefits of growth go the rich, but eventually trickle down to
the poor. For example, rich families buy local produce and employ servants, etc

The Washington Consensus A set of liberalization polices advocated by free market economists to
encourage growth.

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