Theories of Economic Development

Theory Concept of Development

Underdevelopment is mainly
caused by domestic issues brought
about by poor economic policies and
resource allocation, as well as
Neoclassical Theory government corruption. Development
arises due to the promotion of free
markets and reduction of
government control over the
economy.
Underdevelopment is due to
the slow transmission of technology
to developing countries. Knowledge
New Growth Theory (Endogenous
and technology are vital to
Growth Theory)
development, thus investment in
education and research and
development are encouraged. Quarter 1 Week 2- A
Underdevelopment is caused The learners examine the utility and application of
by uncoordinated activities in the Applied Economics to solve economic issues and problems.
market. To foster development, a
“big push” is implemented wherein a
Republic Act 8293, section 176 states that: No copyright shall subsist in any
Theory of Coordination Failure public led investment program
work of the Government of the Philippines. However, prior approval of the government
focuses on certain economic sectors agency or office wherein the work is created shall be necessary for exploitation of such
and coordinates market activities to work for profit. Such agency or office may, among other things, impose as a condition the
bring about growth. payment of royalties.
This ABMPackage is published to be utilized by the Schools Division of Iloilo.
ALL RIGHTS RESERVED. No part of this learning resource maybe reproduced
Development is the result of or transmitted in any form or by any means electronic or mechanical without written
efficient production wherein similarly permission from the Schools Division of Iloilo.
skilled workers work together to
O-ring Theory
accomplish task. High wages and Writer: IMELDA E. EMBOLTORIO
investment in human capital are Graphic Artist: PATRICK T. LOMIGO
essential. Layout Artist: KRISHEA MAE P. JARUDA
Division Quality Assurance: Dr. KIM S. ARCEÑA
Answer the question below. Write your answer in your notebook. YLEM I. CAGURIN, MATM
EPS I - Mathematics: Dr. KIM S. ARCEÑA
Given the theories/models of development which do you think is applicable to Management Team:
our country today if we want to address unemployment and negative growth . Dr. Roel F. Bermejo, Dr. Nordy D. Siason, Jr.
Dr. Lilibeth T. Estoque, Dr. Azucena T. Falales
References: Ruben S. Libutaque, Lilibeth E. Larupay, Dr. Kim S. Arceña
Manapat,C. (2018).Applied Economics for Senior High School.C&E Publishing Inc.

Schools Division of Iloilo

 GENERALIZATION
Theories of Economic Development
The theories of Economic development will discuss the nature of
development and describe the tools and strategies that the lead to
development. These theories focus on the following factors in determining
the state of economic growth:
Level of Production – Economic Growth is measured by the increase in a
country’s Gross Domestic Product, which is often juxtaposed with the
population. This indicator, however mainly focuses on material wealth. It has
been noted that an increase in GDP, among other indicators of economic
growth, does not necessarily translate to concrete improvements in the lives
of citizens.
Quality of Life – This variable considers aspects such as health, nutrition,
education, environment, and income distribution in analyzing development.
Development is defined as a significant change in the quality of life of
individuals such as less poverty, improved health and nutrition, better
education, clean environment, greater freedom and more opportunities and a
richer culture.
Sustainable Development – This factor considers the impact of human activities on
the environment and believes that environmental degradation has significant
economic impact. The implementation of sound and environmentally responsible
economic policies can contribute to addressing environmental problems.
The earliest economic theories equated economic development
with prosperity. Capitalism, advocated free trade, private property, and
competition as forces that will bring about economic development. Marxism
focused on the root causes of economic inequality and criticized capitalism as a
contributing factor to inequality and underdevelopment. Contemporary economics
emerged at the end of Second World War and tackle the role of governments in
spurring economic growth. Today, economic theories emphasize the role of
technology and skills in improving economic processes and over-all production.
The theories of economic development prose various models of
economic development, which identify the ideal conditions that make development
possible and outline the stages an economy goes through as it achieves
development. These theories also pay attention to underdevelopment, which is an
economic condition characterized by low production and standard of living. Several
Theories are discussed below:
Theories of Development

Analyse the data below and answer the questions that follow. Write your answers Theory Concept of Development
in your notebook.
Economic development is a process
Philippines Per Capita – Historical Data
which follows a sequence of historical
Linear Stages of Growth stages: 1.Traditional society, 2.
Year GNP Per Capita Annual Growth Rate preconditions to take-off, 3. take-off, 4.
maturity, and 5. high mass consumption

2018 Php 3,252 4.13% Development is defined as the

reallocation of labor from agriculture to
the industrial sector. A countries
Structural Change Models
2017 Php 3,123 1.61% development is also defined by factors
such as income level and comparative
advantage.
2016 Php 3,074 2.42%
The dominance of developed
Source: macotrends.net/countries/philippines/gdp-per-capita countries and multinational corporations
over developing countries leads to
1. Based on the data, how would you describe the trend in the Phil. Per capita International Dependence dependence and underdevelopment.
growth? Dependence can be ended by abandoning
2. What do you think is the reason for the current rate of growth of the Phil.? unequal relationships developed and
3. What can be done to improve this? developing countries .
Health and Quality of Life

The most significant issues regarding health and nutrition in the

country involve access to health services, malnutrition, maternal mortality, and
family planning. The increasing rate of HIV infections in the country is also a
concern. One factor which contributes to these health concerns is the limited
spending on heath by local government units.
Adequate shelter is another important concern for many Filipinos.
There are approximately 1.5M informal settler families nationwide, with 39%
living in Metro Manila. As of 2016, the government has a housing backlog of 2.02
million. The country also has a steadily increasing rate of urbanization , with 44%
of the country’s population currently living in urban areas.
The Phil. Is considered to be in the first phase of demographic
transition which means that a large portion of the population is below 15 years
old, giving rise to households with a large dependency burden. Fertility rates in
the country are among the highest in Southeast Asia, with poor and less-educated
women having more children. Another factor in the population increase is the rise
of teen-age pregnancies- from 6% in 2002 to 13.6% in 2013. Despite the efforts
of the government to implement the reproductive Health Law, there are still
various barriers to its full implementation. Quarter 1 Week 2- B

Education The learners examine the utility and application of

The major objective of the current educational reforms being Applied Economics to solve economic issues and problems.
implemented are to expand people skills set , improve people’s awareness of
intellectual property, and foster research and development in the country. The Republic Act 8293, section 176 states that: No copyright shall subsist in any
2017 development report notes an increase in enrollment in basic education. work of the Government of the Philippines. However, prior approval of the government
However, improving quality education is still a challenge because of lack of agency or office wherein the work is created shall be necessary for exploitation of such
competent teachers, high student-teacher ratios, and lack of facilites and work for profit. Such agency or office may, among other things, impose as a condition the
classrooms. Drop out rates declined, but boys more likely to stop attending school payment of royalties.
This ABMPackage is published to be utilized by the Schools Division of Iloilo.
than girls.
ALL RIGHTS RESERVED. No part of this learning resource maybe reproduced
or transmitted in any form or by any means electronic or mechanical without written
Government, Peace and Security
permission from the Schools Division of Iloilo.
• Attained improvements in governance, particulary in accountability
• Corruption is prevalent
• Should foster greater involvement of public in governance Writer: IMELDA E. EMBOLTORIO
• Government data is available online Graphic Artist: PATRICK T. LOMIGO
• Government seeks to improve financial management of local government units Layout Artist: KRISHEA MAE P. JARUDA
• Taken various steps to ensure peace and security Division Quality Assurance: Dr. KIM S. ARCEÑA
• Issue about Spratly Island is a major concern YLEM I. CAGURIN, MATM
EPS I - Mathematics: Dr. KIM S. ARCEÑA
Management Team:
Dr. Roel F. Bermejo, Dr. Nordy D. Siason, Jr.
Dr. Lilibeth T. Estoque, Dr. Azucena T. Falales
References: Ruben S. Libutaque, Lilibeth E. Larupay, Dr. Kim S. Arceña
Manapat,C. (2018).Applied Economics for Senior High School.C&E Publishing Inc.

Schools Division of Iloilo

 GENERALIZATION
Challenges to Philippine Socioeconomic Development
The Philippine Development Plan 2017 outlines several challenges to
the economic development in the Philippines. The following are the most
significant issues that impact the Philippine Economic Development.
Poverty, Inequality, Unemployment
Though it has been observe that poverty rates have been declining,
from 26% in 2009 to 21% in 2015, poverty and inequality still remain a threat
to several vulnerable groups such as the poor, children, women, persons with
disabilities, indigenous people, older persons, overseas Filipinos and their
families, and workers. Workers in the informal sector often experience
substandard pay and hazardous conditions, while workers in the formal sector
are often at risk due to contractualization, retrenchment, and firm closures. The
effects of poverty are further worsened by global and domestic economic
instability, natural disasters, political disruptions, and other unexpected events
that cause loss of income or assets. Underemployment remains, especially in
agriculture. Workers often suffer from in adequate income. Women have low
participation in the labor force. Additionally, the limited employment
opportunities force workers to seek job overseas.
The State of Agriculture Industry
There is a primary concern regarding the state of agriculture, fisheries,
and forestry industries. Growth in these industries is generally weak. Agriculture,
forestry, and fisheries low productivity compared to other industries and
services sector. Production in agriculture has been affected by typhoons and the
El Ñiño phenomenon. However, high value commodities such as banana,
pineapple, and mango prosper. Fisheries was also affected by typhoons and
declining marine resource. On the other hand, livestock and poultry experience
gains due to favorable market condition. Forestry experienced a decline due to
laws that provided for a moratorium on the cutting and harvesting of timber.
One factor which contributed to the weak performance of these
industries is the lack of diversification, particularly agriculture. This industry
concentrates mainly on the three crops- rice, corn, and coconut. Smaller areas
are devoted to high-value crops such banana, sugarcane, and rubber. Farmers
and fisherfolk has limited access to capital. They cannot easily access loans and
they are not provided insurance to safeguard their production in case of loss due
to disasters. Farm production is also affected by inadequate technology and
facilities such as post harvest equipment. Adequate irrigation also remain a
challenge. As of 2015, only 57% of agricultural land is irrigated. There is also
limited advancement n research and development which intended to identify
effective farming and fishing practices and develop technologies to improve
production. Agriculture is also affected by inefficient logistics system. The lack of
roads affect the transport of products from farm to markets, while the inefficient
transport of agricultural exports often lead to these products being rejected by the
importing countries. The growing population is expected to put pressure on
agricultural production. Another significant challenge is the conversion of large
tracts of agricultural land for housing settlement.
Competiveness of Philippine Business
Development in the Philippine business are hampered by
restrictions of foreign investment and participation, as well as cumbersome
requirements for business registration and licensing. Also, the Philippine banking
sector is characterized by low savings, with the BSP estimating that only 22% of
adults have formal saving account.
The Philippine business and trade are vulnerable to uncertainties
in the global market. This is because Philippine exports are limited to certain
products and markets. Competition within the markets is limited by the existence
of monopolies and preferential treatment of government -owned-and controlled
corporations (GOCCs). Though we have large labor force, the labor market is
characterized by a mismatch of skills and the need of the market. The result in the
out-migration of skilled workers, unemployment, and slow absorption of labor.
Industry and production lag behind in terms of technology and
innovation. The country’s weakness in innovation and competitiveness could be
traced to the general lack of awareness and interest in science, technology, and
research. There is a small number of professionals engaged in research and
development, research facilities are inadequate, and the government gives little
support for innovation.
Infrastructure
Issues related to infrastructure includes quality of roads.
Improvements of public transport and traffic in urban areas. The water resources
in the country also needs improvement. About three million families still have no
access to safe water, and 6% of household do not have basic sanitary toilet
facilities. The energy infrastructure of the country is still unable to meet growing
demand as it relies heavily on coal-powered plants for energy production. This
results in some parts of the country still lacking sufficient electricity. Among
countries in Asia, Philippines has the highest electricity rates. The countries
Information and Communication Technology (ICT) infrastructure remains
inadequate, leading to lack of internet access and slow internet speeds.
Do the following. Write your answers in your notebook.

1. If 7.3 million is unemployed in April 2020, what is the total Filipino

working force? Show your solution.
2. Could these employed Filipinos able to sustain the economy of the
whole country? Why?
3. What else do you think are the appropriate measures of the
government if unemployment problem will not be solved due to
permanent shutdown and retrenchment of numerous companies?
4. Aside from COVID 19 pandemic, do you agree that lack of quality
graduates, job – skill mismatch among Filipino graduates, and
discrimination and unreasonable job requirements are one of the
causes of unemployment? Support your answer.

References:
http://www.psa.gov.ph/content/employment-situation-april-2020
Macalinao, Eloisa M. Applied Economics For Senior High School.
Intramuros Manila: Unlimited Books Library Services & Publishing Inc.,
2016.
Quarter 1 Week 2 -C
The learners examine the utility and application of
Applied Economics to solve economic issues and problems.
Republic Act 8293, section 176 states that: No copyright shall subsist in any
work of the Government of the Philippines. However, prior approval of the government
agency or office wherein the work is created shall be necessary for exploitation of such
work for profit. Such agency or office may, among other things, impose as a condition the
payment of royalties.
This ABMPackage is published to be utilized by the Schools Division of Iloilo.
ALL RIGHTS RESERVED. No part of this learning resource maybe reproduced
or transmitted in any form or by any means electronic or mechanical without written
permission from the Schools Division of Iloilo.

Writer: IMELDA E. EMBOLTORIO

Graphic Artist: PATRICK T. LOMIGO
Layout Artist: KRISHEA MAE P. JARUDA
Division Quality Assurance: Dr. KIM S. ARCEÑA
YLEM I. CAGURIN, MATM
EPS I - Mathematics: Dr. KIM S. ARCEÑA
Management Team:
Dr. Roel F. Bermejo, Dr. Nordy D. Siason, Jr.
Dr. Lilibeth T. Estoque, Dr. Azucena T. Falales
Ruben S. Libutaque, Lilibeth E. Larupay, Dr. Kim S. Arceña

Schools Division of Iloilo

 GENERALIZATION LET’S CHECK OUR UNDERSTANDING
Basic Economic Problems of the Country

Read the article below that discusses the 2020 Labor Force Survey.
Write a (√) mark if the statement could help alleviate the problem
Unemployment of poverty and (X) if otherwise. Write your answers in your notebook.

Employment Situation in April 2020
Reference Number: 2020-102
Release Date: Friday, June 5, 2020
Highlights of the April 2020 Labor Force Survey
a. Unemployment rate rose to 17.7 percent accounting to 7.3 million unemployed
Filipinos in the labor force in April 2020. This is a record high in the
unemployment rate reflecting the effects of Corona virus disease 2019
(COVID-19) economic shutdown to the Philippine labor
market. Unemployment rate in January 2020 was 5.3 percent while in April
2019, it was recorded at 5.1 percent.
b. Labor force participation rate among Filipinos 15 years and older is estimated at
55.6 percent in April 2020, the lowest in the history of Philippine labor market.
c. Employment rate in April 2020 fell to 82.3 percent from 94.7 percent
in January 2020. In April 2019, it is posted at 94.9 percent. This translates to
33.8 million employed persons in April 2020 from 41.8 million in April 2019.
d. Average number of hours worked per week also fell to 35.0 in April 2020, a
drop from 41.8 hours per week in April 2019.
e. Employed persons with job but not at work is reported at 38.4 percent or 13.0
million of the total employed.
f. All regions reported double-digit unemployment rates. The highest
unemployment rate was in Bangsamoro Autonomous Region in Muslim
Mindanao (BARRM) at 29.8 percent. It is followed by Region III (Central
Luzon) and Cordillera Administrative Region (CAR) with unemployment rates
recorded at 27.3 percent and 25.3 percent, respectively.
1. Resolution of the COVID-19 pandemic in the whole world. Our country
should strive or cooperate with other countries to develop vaccine for
this virus.
2. Appropriate economic policies for labor-intensive industries.
3. Improvement in the educational system of the country especially in the
rural areas.
4. Minimize rural-urban migration by improving the economic environment
in the rural areas.
5. Proper coordination between the government and the private sector to
solve the problem of job mismatch.
6. Decreasing the retirement age from 65 to 60 for public sector to give
chance to younger generation to enter the labor market but providing an
attractive well-defined benefit pensions and retiree health care for
retirees.
7. Slowing population growth. To improve standard of living of the Filipinos,
Philippine economic growth must increase faster than its population.
Solution.

LET’S DISCUSS
Answer the following questions. Write your answer in your notebook.
1. What the article is all about?
2. What will happen to our economy if the unemployment is high?
3. What can be done to solve unemployment problem?
 Quarter 1 Week 2 –D
The learners examine the utility and application of
Applied Economics to solve economic issues and problems.

References:
Macalinao, Eloisa M. Applied Economics For Senior High School. Intramuros
Manila: Unlimited Books Library Services & Publishing Inc., 2016.
Agcaoili , Lawrence, Philippines sinks into recession’ (The Philippine Star ) -
June 28, 2020 - 12:00am
Republic Act 8293, section 176 states that: No copyright shall subsist in any
work of the Government of the Philippines. However, prior approval of the government
agency or office wherein the work is created shall be necessary for exploitation of such
work for profit. Such agency or office may, among other things, impose as a condition the
payment of royalties.
This ABMPackage is published to be utilized by the Schools Division of Iloilo.
ALL RIGHTS RESERVED. No part of this learning resource maybe reproduced
or transmitted in any form or by any means electronic or mechanical without written
permission from the Schools Division of Iloilo.

tradingeconomics.com Writer: IMELDA E. EMBOLTORIO

Graphic Artist: PATRICK T. LOMIGO
Layout Artist: KRISHEA MAE P. JARUDA
Division Quality Assurance: Dr. KIM S. ARCEÑA
YLEM I. CAGURIN, MATM
EPS I - Mathematics: Dr. KIM S. ARCEÑA
Management Team:
Dr. Roel F. Bermejo, Dr. Nordy D. Siason, Jr.
Dr. Lilibeth T. Estoque, Dr. Azucena T. Falales
Ruben S. Libutaque, Lilibeth E. Larupay, Dr. Kim S. Arceña

Schools Division of Iloilo

 GENERALIZATION
Poverty
Economic managers through the Development Budget Coordination
Committee (DBCC) expect GDP to contract by two to 3.4 percent this year from
a growth of six percent last year. This would end more than two decades of
growth as the GDP last contracted by 0.5 percent in 1998 during the height of
the Asian financial crisis.
The S&P Global Ratings announced a deeper GDP contraction of three
percent instead of 0.2 percent this year after the Philippines implemented one of
the world’s longest tight lockdowns to combat COVID-19. (The Philippine Star -
June 28, 2020 )
Population: 106.6 million
GDP (PPP):
Php 952.6 billion
6.2% growth
6.4% 5-year compound annual growth
Php 8,936 per capita
Unemployment: 2.5%
More than a quarter of the Philippines' 105.7 million people live in dire
poverty. The reasons are many: rapid population growth, inadequate social
infrastructure, slow growth of rural productivity and lack of access to credit.
The gross domestic product (GDP) measures of national income and
output for a given country's economy. The gross domestic product (GDP) is
equal to the total expenditures for all final goods and services produced within
the country in a stipulated period of time.
The Gross Domestic Product (GDP) in Philippines was worth 376.80 billion
US dollars in 2019, according to official data from the World Bank. The GDP
value of Philippines represents 0.31 percent of the world economy.
(tradingeconomics.com)
EXAMPLES
What can be done to solve poverty problem?
1. Reduce unemployment.
2. Appropriate policy on labor income.
3. Promote economic growth to improve the standard of living.
4. Provision of unemployment benefits for those who will be unemployed
due to natural and man-made calamities.
5. Increasing social services like education, health care and food subsidies
leads to sustainable poverty reduction. (Macalinao, E.)
6. economic growth must increase faster than its population.
EXERCISES
Do the following: Write your answers in your notebook.
I. Answer the questions below.
1. Could you consider your community under poverty? Why?
2. It is said that in the Philippines poverty is uniquely endemic. What do
you think are the reasons?
II. Write TRUE if the statement is correct and FALSE if it is incorrect.
a. Foreign investors can resolve poverty problem of our country.
b. Gross domestic product is the market value of final products, both
sold and unsold, produced by the resources of the economy in a given
period.
c. The population growth is the basic economic problem which can be
connected to the issue of scarcity.
d. Scarcity is the condition where there are sufficient resources to satisfy
all the need and wants of the population.
e. The free college education program of the government is also leading
to sustainable poverty reduction.