DEVELOPMENT ECONOMICS

Vu Hoang Nam
Faculty of International Economics
Email: namvh@ftu.edu.vn

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 Course structure
1. Chapter 1: Introduction to developing
countries
2. Chapter 2: Development economics: basic
concepts and theoretical framework
3. Chapter 3: Economic growth theories
4. Chapter 4: Economic structure and models
of changes in industrial structure
5. Chapter 5: Human welfare and development

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- Total: 15 class hours
- 12 lecturing hours
- 3 presentation hours

Total grade: 100

- Assignment: 30

- Participation: 10
- Final exam: 60

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Assignment
-Group: max 5 students

-… students: about 16 groups

-Presenting group: volunteer 6 groups

-Presenting group: bonus points

- Same grade of assignment is given to all

members
Presentation of required papers
-A randomly selected group to present a paper

-Anybody from the selected group can present the

paper
-Same grade of participation is given to all
members HQ-AP FTU
Topics

1. …….
2. ………..
3. ……………..
4. …………….
5. ……………….
6. ……………..
7. …………………
8. ………………….

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Requirement of assignment
-Max: 15 pages
-Deadline for group + topic: 5th class hour
-Deadline: 12th class hour

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Presentation time
- Presentation: 30 min

- Q&A and comments: 30 min

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What will be commented:
- Content

- Format

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Studying material

- Text books
- Reading materials

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Chapter 1:

Introductions

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 Contents
1. Global income distribution
2. Classification of countries
3. Characteristics of developing countries
4. Developing countries in comparison
with developed countries in earlier
stages of development
5. Approach to development economics

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 Which country is the richest – highest
GNI per capita in 2017?

1. USA
2. Switzerland
3. Luxembourg

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 Which country is the poorest- lowest
GNI per capita in 2017?

1. Uganda
2. Congo, Dem. Rep
3. Zimbabwe

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 What do citizens of these country
have?
Congo Switz

GNI per capita (current; Atlas) - 2017 450 80.560

Gross domestic savings (%GDP) – 2016 9 34
School enrollment, primary (%) – 2016 108 104
Repeater, primary - 2016 10 1
Access to electricity (%) - 2016 17 100
Life expectancy at birth - 2016 59.6 82.8
Birth rate/1000 - 2016 42 11
Health expenditure per capita - 2015 19.8 9818
Infant mortality rate/1000 - 2016 72 4

Source: WDI (2018)

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 Table 1: Global income distribution

World High income Medium &

low income
Absolute Absolute % Absolute %
value value world value world
GDP (USD bn) in 2008 60,587 43,189 71.3 17,398 28.7

Population (millions) in 6,692 1,068 16.0 5,624 84.0

2008
GNI per capita (current; 8,613 39,345 3,094
atlas) in 2008
GNI per capita (current; 40,136 4,450
atlas) in 2017
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Source: WB (2010)
Table 2: GNI per capita in 2017
(USD; current; Atlas)

Low income 744

Lower middle income 2118
Low & middle income 4450
Middle income 4939
Upper middle income 8191
High income 40136
East Asia & Pacific 10170
European Union 32777
World 10366

Source: WB (2018)

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 Table 3: GNI per capita in 2017

Country Atlas PPP Country Atlas PPP

method method
80560 65910 Thailand 5960 17090
Switzerland
Japan 45470 38550 Philippines 3660 10030

Germany 51760 43490 Vietnam 2170 6450

UK 43160 40530 Bangladesh 1470 4040
Singapore 90570 54530 Indonesia 3540 11900

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Assuming that population growth rates in Vietnam, Thailand,
and the USA are the same at 1%/year.
Assuming that from 2016, GNI growth rates of all countries
remain unchanged.
In how many years will Vietnam catch up with Thailand and
the USA in terms of GNI/capita?

Population (mil) GNI/capita GNI growth rate(%)

Vietnam 93 2050 6.2

Thailand 69 5640 3
USA 323 56180 1.6
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Vietnam catching up with Thailand: …. years
Vietnam catching up with the U.S.: …… years

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For whom is the world producing?
Source: WB website 2009

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The world is produce more than enough for
everyone

Basic education for all 6 b USD

Cosmetics in the US 8 b USD (2010)

Cosmetics in the UK 8,3 b Pounds (2010)

Cosmetics in the China 20,8 b USD (2011)

Cosmetics in the Vietnam 450 m USD (2011)

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The world produces more than enough for
everyone

Water and sanitation for all 9 b USD

Ice cream in Europe 11 b USD

Ice cream in USA 12,4 b USD

Ice cream in China 5,7 b USD

Ice cream in Vietnam 130 m USD

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The world produces more than enough for
everyone

Reproductive health for all women 12 b USD

Basic health and nutrition 13 b USD

Perfumes in Europe and US 12 b USD

Pet foods in Europe and US 17 b USD

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The world produces more than enough food to feed everyone

Inside story – food wasting

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Is the global income gap being narrowed or widened?
Income of the richest 20% /income of poorest 20%
(Source: Y.Hayami, 2006)

1960 30
1970 32

1980 45

1991 61

2000 70

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Is the global income gap being narrowed or widened?

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Why is the global income gap being widened?

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Is there income gap in all regions of the
world?

Is the income gap in developed countries

higher or lower?

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Income gap in regions

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Source: Knoema, 2019
 Income gap in regions

Record gap between the rich and the poor

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 Poverty exists in developed
countries

The incredible poverty in Japan

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Reasons for inequality in the North:

1. Trade with the South

2. FDI to the South
3. Immigration from the South
4. Bias of new technology
5. Deindustrialization of the North expels
labor to the tertiary sector
6. Flexible labor market  weaker Trade
Unions

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Reasons for inequality in the South:

1. Unevenness in growth (in sectors, in

regions, households), partly explained
by policies
2. Privatization and financial
liberalization (depend on institutions)
3. FDI from the North
4. Bias of new technology
5. Flexible labor market  weaker Trade
Unions
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What is WB poverty line?

What is WB extreme poverty line?

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improved poverty world wide

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Still a big problem

MA 37
 Part 2: Country classification
 WB
 UNDP (Human Development Report)
 UN-Economic and Social Council: LDCs
 IMF
 OECD

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 Country classification: why need?
 Concessional loans, grants (IBRD, IDA,
 WTO status, GSP
 International supports: tied aid, untied
aid

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 WB: by annual GNI per capita
(Source: WB website)
2005 2008 2013 2016 2019
Low < 875 < 975 < 1045 < 1,025 <1,025

Lower < 3465 < 3855 < 4125 < 4,035 < 3,995
middle
Upper < 10725 < 11905 < 12746 <12,475 < 12,375
middle
High > 10725 >11905 >12746 >12,476 >12,375

Vietnam 630 920 1,730 1,980 2,400

MA 40
 Low-income economies
(43 in 2008; 36 in 2011; 34 in 2013; 31 in 2019)

Afghanistan Guinea-Bissau Sierra Leone

Benin Haiti Somalia
Korea, Dem. People's
Burkina Faso South Sudan
Rep.
Burundi Liberia Syrian Arab Republic
Central African
Madagascar Tajikistan
Republic
Chad Malawi Tanzania
Congo, Dem. Rep Mali Togo
Eritrea Mozambique Uganda
Ethiopia Nepal Yemen, Rep.
Gambia, The Niger  
Guinea Rwanda MA   41
 Lower-middle-income economies
(55 in 2008; 54 in 2011; 50 in 2013; 47 in 2019)
Angola Indonesia Philippines
Bangladesh Kenya São Tomé and Principe
Bhutan Kiribati Senegal
Bolivia Kyrgyz Republic Solomon Islands
Cabo Verde Lao PDR Sudan
Cambodia Lesotho Swaziland
Cameroon Mauritania Timor-Leste
Comoros Micronesia, Fed. Sts. Tunisia
Congo, Rep. Moldova Ukraine
Côte d'Ivoire Mongolia Uzbekistan
Djibouti Morocco Vanuatu
Egypt, Arab Rep. Myanmar Vietnam
El Salvador Nicaragua West Bank and Gaza
Ghana Nigeria   Zambia
Honduras Pakistan   Zimbabwe
MA 42
India Papua New Guinea    
 Upper-middle-income economies
(46 in 2008; 54 in 2011; 55 in 2013; 60 in 2019)
Albania Fiji Montenegro
Algeria Gabon Namibia
American Samoa Georgia Nauru
Argentina Grenada Paraguay
Armenia Guatemala Peru  
Azerbaijan Guyana Romania
Belarus Iran, Islamic Rep. Russian Federation
Belize Iraq Samoa
Bosnia and Herzegovina Jamaica Serbia
Botswana Jordan Sri Lanka
Brazil Kazakhstan South Africa
Bulgaria Kosovo St. Lucia
China Lebanon St. Vincent and the Grenadines
Colombia Libya Suriname
Costa Rica Macedonia, FYR   Thailand
Cuba Malaysia Tonga
Dominica Maldives Turkey
Dominican Republic   Marshall Islands Turkmenistan
Equatorial Guinea Mauritius Tuvalu
MA 43
Ecuador Mexico Venezuela, RB
High-income economies (66 in 2008; 70 in 2011; 75 in 2013; 80 in
2019)
Andorra Gibraltar Palau
Antigua and Barbuda Greece Panama
Aruba Greenland Poland
Australia Guam Portugal
Austria Hong Kong SAR, China Puerto Rico
Bahamas, The Hungary Qatar
Bahrain Iceland San Marino
Barbados Ireland Saudi Arabia
Belgium Isle of Man Seychelles
Bermuda Israel Singapore
British Virgin Islands Italy Sint Maarten (Dutch part)
Brunei Darussalam Japan Slovak Republic
Canada Korea, Rep. Slovenia
Cayman Islands Kuwait Spain
Channel Islands Latvia St. Kitts and Nevis
Chile Liechtenstein St. Martin (French part)
Croatia Lithuania Sweden
Curaçao Luxembourg Switzerland
Cyprus Macao SAR, China Taiwan, China
Czech Republic Malta Trinidad and Tobago
Denmark Monaco Turks and Caicos Islands
Estonia Netherlands United Arab Emirates
Faroe Islands New Caledonia United Kingdom
Finland New Zealand United States
France Northern Mariana Islands Uruguay
French Polynesia Norway Virgin Islands (U.S.)
Germany Oman MA 44
 Move of countries from 2010 to 2011
Economy July 2010 Classification July 2011 Classification
China Lower middle Upper middle
Curaçao .. High
Ecuador Lower middle Upper middle
Fiji Upper middle Lower middle
Ghana Low Lower middle
Jordan Lower middle Upper middle
Lao PDR Low Lower middle
Latvia High Upper middle
Maldives Lower middle Upper middle
Mauritania Low Lower middle
Netherlands Antilles High ..
Sint Maarten (Dutch part) .. High
Solomon Islands Low Lower middle
St. Martin (French part) .. High
Thailand Lower middle Upper middle
Tunisia Lower middle Upper middle
MA 45
Zambia Low Lower middle
 The story of Botswana
and Mauritius

The story of Brunei

and Singapore

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 High-income OECD members
( 27 in 2008 and 31 in 2013- Estonia, Isarel, Poland)
Australia Hungary Poland
Austria Iceland Portugal
Belgium Ireland Slovak Republic
Canada Italy Slovenia
Czech Republic Israel Spain
Denmark Japan Sweden
Estonia Korea, Rep. Switzerland
Finland Luxembourg United Kingdom
France Netherlands United States
Germany New Zealand  
Greece Norway  
MA 47
 UN classification: by HDI
Human Development Index (HDI) is a summary
measure of human development. It measures the
average achievements in a country in three basic
dimensions of human development:
 A long and healthy life (health);
 Access to knowledge (education): and
 A decent standard of living (income).

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 The HDI uses a scale from 0-1.

 The index is divided into 4 categories: Very high

(>0.811), High (0.728-0.811), Medium (0.578-0.728),
and Low (<0.578).

 Developed countries: in the first quartile

 Rank of HDI

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 Is it possible that HDI rank > than
GDP/GNI per capita rank?

 What does it mean?

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HDI in 2018

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 What does HDI not measure?

The index is not a comprehensive measure of human

development. It does not, for example, include
important indicators such as gender or income
inequality and more difficult to measure indicators
like respect for human rights and political freedoms

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 Developing countries and
developed countries

- Various ways to classify

- Classification is intended for statistical

convenience
- Classification does not necessarily
express a judgment about the stage
reached by a particular country in its
development process

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 Developing countries and
developed countries
 WB classification: In Bank reports, the term
"developing economies" has been used to
denote the set of low and middle income
economies.
 UN classification: Sometimes countries with
Medium and Low HDI are called developing
countries
 WTO rule: missing train from Paris to Geneve –
Korea and Singapore

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 UN

- Least developed countries (UN:

http://www.unohrlls.org/en/ldc/25/): 48
countries

- Land locked developing countries (UN:

http://www.unohrlls.org/en/lldc/31/)

- Small island developing states

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 Least developed countries - a subgroup
of developing world
Having the following characteristics
 Low Income Country
 Weak human assets (defined by a Human Assets Index)
 Poor nutrition – per capita caloric intake

 Poor health – child mortality rate

 Poor access to education

 Poor literacy – adult literacy rate

 Economic vulnerability
 Instability in agricultural production

 Instability in exports of goods and services

 Limited economic importance of non-traditional activities

(manufacturing and modern services)
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 IMF
- Transition economies (IMF): South Eastern
Europe and Former Soviet Union (USSR)

- Newly industrialized economies or Emerging

economies

- Advanced economies (IMF) – Asian tigers and new

Euro countries

- Others: FTSE advanced emerging…

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OECD

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 Other groups
- First (NATO), Second (Soviet Union), Third World
nations

- BRIC (expected to take over G7 in 2027) then BRICS

(South Africa), BRICK (Korea), BRIMC(Mexico),
BRICA (Arab countries)… are emerging markets.

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 Country classification: a comparison
- Similarity: small group of developed countries and large
group of developing countries

- Advanced economies in by IMF = Developed countries by

UNDP – 7 (Barbados, Brunei, Estonia, Hungary, Poland,
Qatar, UAE)

- High-income countries by WB – 8 = advanced economies or

developed countries

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 Part 3: Characteristics of developing
countries

3.1 Common characteristics

3.2 Diversity

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3.1 Common characteristics

 Low levels of living

 Low productivity
 High rate of population growth high
dependency burden
 Relatively high dependence on agricultural
production and export of primary-products
 Market failures
 Economic vulnerability

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 high dependency burden

Birthrates is sufficiently high as

compared to death rates children
under 15 make up 40% in developing
countries as opposed to 20% in
developed countries overall
dependency is 45% in developing
countries as opposed to 33% in
developed world (Todaro M.P, (2006))

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 3.1.1. Low levels of living
(Source: Learning materials, MDE (NEU), 2007)

SOME MEASURES OF LIVING STANDARDS

CHILD
GNI PER LIFE LITERACY
MORTALITY
Country Group CAPITA EXPECTANCY
(per 1000)
RATE
(2003) (2003) (2000)
(2003)
Least Developed 310 51 150 52

Low Income 440 58 123 58

Lower-middle Income 1,490 69 39 90

Upper-middle Income 5,160 74 22 91

High-income non-OECD 16,060 77 7 99

High-income OECD 27,220 79 5 99

World 5,130 67 86 79

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What is the most important
determinant of low level of living?

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3.1.2 Low levels of productivity
(Source: UN MDGs report, 2011)

Output per worker (1000, constant 2005 PPP adjusted dollars

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 4.1.3 High Rate of Population Growth

Few developing countries have completed the

demographic transition (permanently low
natural population growth rates) (Source: Learning
materials, MDE (NEU), 2007)

Rate of Population
COUNTRY GROUP Growth
(2001)
Least Developed 2.2
Low income 1.8
Lower middle income 0.9
Upper middle income 1.3
High income nonOECD 1.9
High income OECD 0.7
World 1.3
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3.1.4 Persistent dependence on agriculture
and primary export products
(Source: Learning materials, MDE (NEU), 2007)

Value Added in Employment in

Agriculture Agriculture
COUNTRY GROUP
as % of GDP as % of total
(2000) (1995)
Least Developed 35.6 --

Low income 24.7 57.3

Lower middle income 12.7 42.9

Upper middle income 6.2 20.5

High income nonOECD 1.3 --

High income OECD 1.9 4.8

World 3.9 38.5

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What are the disadvantages of being
dependent too heavily on the
agricultural sector?

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 Disadvantages of being dependent too
heavily on the agricultural sector?

- Limited land
- Limited room for technology application
- Low productivity & income
- Dependence on natural conditions
- Unemployment
- Disadvantages in international trade
- Environmental problems

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What are the disadvantages of
primary export?

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 3.1.5 Market failures

Imperfect markets: limited institutional development in areas

such as:
 Banking and insurance
 Law and enforcement
 Standard setting institutions (engineering, medicine
etc.)
 Information gathering and dissemination 
information asymmetries
 high transaction costs (what are transaction costs?)

Non-existent markets that are commonplace in developed

economies (bond markets, mortgage markets)

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3.1.6 Dominance, Dependence and Vulnerability

 Dominance
 These countries are small or weak economically and have
limited bargaining power in international community
 Dependence
 These countries remain in rather subservient relationships
with former colonial powers
 Often dependent on aid transfers and other historical
economic and cultural linkages
 Vulnerability
 Limited ability to mitigate against financial and economic
crises and more natural disasters etc.
 Suffering from “brain drain”

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What are the disadvantages of
attribute 3.1.6 for developing
countries?

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 Suggested answers:
Economic dependence leads to:
 dependence in other aspects
 Low negotiation power in the global markets or
in any cooperation, which in turn, re-enforce the
economic dependence or disadvantageous
economic order
 Failure to attain sustainability in development

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3.2 The diversity of developing countries

 The fact that these countries are all “less

developed” in some sense means that they all
face a common challenge of “development”
 However, this is by no means a homogeneous
group of countries and the nature of the
challenges will vary with the structural
attributes  diversity come shortly

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The differences between developing countries can be seen
in various aspects, including:
 Income

 Country size

 Historical background

 Resource endowment

 Ethnic and religious composition

 Public-private structure

 Industrial structure

 Political and institutional structures

 Openness of the economy

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3.2.1. Income

 Low income
 Middle income

 NICs

 Some oil-exporting countries (Kuwait, Qatar,

Saudi Arabia, UAE)

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3.2.2 Size differentials
(Source: Learning materials, MDE (NEU), 2007)

Country Population Surface GDP GNI/

(million) area (1000 (bn $) capita
sq.km) ($)
China 1,318 9,598.1 3,205.5 2370
India 1,124.8 3,287 1,176.9 950
Brazil 191.6 8,514.9 1,313.4 5860
Nigeria 148 923.8 165.5 920
Ethiopia 79 1,104.3 19.4 220
Nepal 28.1 147.2 10.3 350
Chad 10.8 1284 7.1 540
Paraguay 6.1 406.8 12.2 1710
Fiji 0.8 18.3 3.4 3750
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Historical Experience: Communism

Communism in Eastern Europe and

Central Asia (as well as parts of Asia)
meant:
 The removal of basic institutions of
capitalism (private property, private banking
etc.)
 Development of centrally planned economies
 Extremely large (and dominant) public
sectors

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 3.2.3 Resource Endowment

Mineral Exporters
 Oil Exporting Countries: Saudi Arabia, Venezuela
 Other Mineral exporters: Chile, Angola, Congo
Land Endowment
Some countries are blessed with large tracts of fertile land
while others have either limited or poor land resources,
such as: Argentina

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Human Capital Endowment
 Highly educated and skilled labor force

India, Chile, Thailand

 A large population

China, India, Indonesia

 little of either

Ethiopia, Chad

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3.2.4 Public and Private Sectors

Various combinations of public and private sectors and

different degree of foreign ownership due to
historical circumstances and political ideology:

 Large public sectors: Sri Lanka, Vietnam,

Cuba, Tanzania
 Large private sectors: : Chile, South Africa,
Colombia

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3.2.5 Ethnic and Religious Diversity

Ethnic and religious diversity “might” make it

more difficult to develop a national consensus
and, at a larger extent, development
 Religious diversity: India

 Ethnic diversity: Kenya, Malaysia

 Both ethnic and religious diversity: Nigeria,

Indonesia
 Low ethnic and religious diversity: Norway,
Sweden, Netherlands, Japan, Austria.

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3.2.6 Industrial Structure

- Asia
- OPEC and mineral exporting countries
- Africa

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 3.2.7 Political and Institutional Structures

 Vary from well functioning democracies (the

Philippines) to repressive (Myanmar)
 Institutional endowment may vary from relatively
efficient legal, administrative and financial systems
to anarchy (such as Somali, Zimbabwe)

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3.2.8 Dependence on external economic
and political forces
Large countries
 More diverse (resources, ethnicity, religion…) 
more likely to have ethnic and religious conflicts;
 More self sufficiency
 Less trade openness and dependence;

Small countries
 More uniform
 Less self-sufficient
 More trade openness and dependence (necessary
condition for development)
 Less economic diversity and greater vulnerability

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Trade openness index (WB, 2016)

  2000 2005 2010 2014

Australia 40.9 38.9 39.9 42.3
Brunei Darussalam 103.2 97.5 114.3 106.6
Canada 83.2 70.0 60.0 64.1
China 39.4 62.9 49.3 41.5
Germany 61.4 70.4 79.3 84.7
United Kingdom 54.5 54.0 59.9 58.6
Hong Kong SAR, China 279.1 377.1 432.9 439.2
Indonesia 71.4 64.0 46.7 48.2
India 26.4 41.3 48.3 48.7
Japan 20.3 27.2 29.1 38.6
Cambodia 111.6 136.8 113.6 129.0
Lao PDR 74.3 80.7 73.5 90.1
Malaysia 220.4 203.9 157.9 138.5
Philippines 104.7 97.9 71.4 61.1
Singapore 366.1 422.3 372.1 350.9
Thailand 121.3 137.9 126.8 131.8
United States 25.0 25.5 28.2 29.9
Vietnam 103.2 130.7 152.2 169.5
World 49.8 53.7 55.9 59.2
90
MA
To conclude: How severe is the poverty
and malaise in developing countries?

The common challenges that

developing countries are facing can
be described as “a vicious circle of
poverty” from both demand and
supply sides

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 From supply side....

Low investment

Limited savings Low

productivity

Low income per

capita

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 From demand side....
Limited size of
markets

Low productivity Potential investors

Low income are not encouraged

No incremental
investment

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 Vicious circle of poverty
Low
productivity

Low nutrition, Limited access

weak health to education

Low Low
High savings
birth rate income

Un- Low
High investment
employment Low labor
population Increased labor demand
supply

Imported technology to Imported capital-

reduce mortality intensive technology
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4. Contemporary developing countries
today

4.1 How has the world been changing?

4.2 How are developing countries today

compared to developed countries in
their earlier stages?

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4.1. The world has been changing
dramatically

Increased globalization

“Globalization is the integration of national

economies into the international economy
through trade in goods and services, direct
foreign investment, short-term capital flows,
international movement of people and flow of
technology” (Perkins, 2006, p.9)

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4.1. The world has been changing
dramatically

European spaghetti bowl ,1995

MA 97
4.1. The world has been changing
dramatically

East Asia noodle bowl , 2006

MA 98
 Of which important trends include:
 Advancement in transportation & communication
technology  costs fell sharply;
 Global trade increased rapidly;
 Global production networks emerged  higher extent
of division of labor and increased interdependence
among countries; 　 (Link between global production
networks & trade policies and RTAs-PTAs?)
 Capital moves more quickly and easily;
 Labor moves more easily;
 More bilateral and multilateral institutions/agreements
to facilitate globalization of the world economy;

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MA 100
 Developing countries today are facing
with both opportunities and challenges

 More bilateral and multilateral institutions/

agreements
 Free trade of goods and services
 Free movement of production factors
 Free movement of information
 International /Regional production networks
 Global/regional public goods

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4.2 How are developing countries compared
to developed countries in their earlier
stages?

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Differences are in following aspects
 Resource endowments
 Ever increasing globalization of economic
activities
 Climate differences
 Population size, distribution and growth
 The historical role of migration
 Basic scientific and technological research
and development capability
 Stability and flexibility of political and social
institutions
 Efficacy of economic institutions

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4.2.1 Resource Endowments

 Developing countries today have less

natural resources as compared to
developed countries when they began
their rapid economic growth.
 Relatively less capital given capital-
intensive technology
 Relatively less human capital given
knowledge based economy

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4.2.2. Ever increasing globalization of economic
activities

 More interdependent world, more “free areas”

 less economic independence
 Free movement of production factors versus
higher non-tariff measures applied by
developed countries
 “Soft border” or border of economics
 International production networks

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4.2.3. Climate change

 Agricultural production
 Environmental problems or global
public goods

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4.2.4 Population size, distribution and growth

 Relatively higher population growth (2,5 to 3%

as compared to less than 2% for developed
countries in the past).
 More importantly, population growth in
developing countries nowadays is exogenous,
while in developed countries it was
endogenous
 Population concentration means low person to
land ratios  low labour productivity
 Relatively bigger population size

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 4.2.5 Role of international migration

 Developing countries today can not

relieve high population density through
international migration due to restrictive
immigration law in developed.
 At the same time, they face “brain drain”

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4.2.6 Basic scientific and technological research
and development capacity

 Previously, in developed countries: mass

application of technological innovations 
high productivity  economic growth 
investment in further R&D  more techno.
innovations
 Present developing countries: (1) low
financial resources for investment in R&D and
(2) dependence on rich countries for
technologies that do not match their resource
endowments

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4.2.7 Social and political institutions

 Previously, developed countries:

independent, politically unified
societies, fully devoted to economic
development
 Present developing countries: being
either distracted by internal wars or
externally influenced, no full
concentration on economic growth

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4.2.8 Efficacy of domestic eco. institution

 Previously, developed countries: institutions

are more transparent; ensure property rights,
low cost, effective and rapid access to dispute
resolution such as contract enforcement
through courts
 Present developing countries: unclear
institutions, outdated institutions imposed by
former colonizers, and difficult to change 
discourage business development and
innovations; result in low investment and
high transaction costs

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Can historical economic growth
experience of developed
nations in their earlier stage be
applied in developing countries
today? Why or why not?

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5. Approach to development economics

1. Emergence of development economics

2. Major issues in DE
3. Approach

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5.1. Emergence of development economics

 A.Smith & D.Ricardo

 Colonial economics:
- Politically: political independence of the
emerging countries of Asia, Africa, Latin
America and Caribbean
- Development of economic theories: Keynes,
Rosenstein Rodan
- Development of former Soviet Union

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 5. 2. Major issues in development
economics

M.P.Todaro (USA): Development economics is the

economics of contemporary poor, underdeveloped
nations. Besides being concerned with efficient
allocation of existing scare (or idle) productive
resources with their sustained growth over time,
development economics also deals with the economic,
social, political and institutional mechanisms
necessary to bring about rapid and large-scale
improvements in levels of living for the peoples of
Africa, Asia, Latin America and the former socialist
transition economies.

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D. Hunt: The focus of development economics is
twofold: firstly, the causes of the relative poverty of
underdeveloped countries and secondly, the potential
way forward for these economies, the specification
of the route to economic progress in these pre
industrial regions.

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Y. Hayami: The major task of development
economics is to explore the possibility
of escaping from poverty. The ultimate
goal of development economics is to
obtain an answer to the question How
can low- income countries today can be
set on the track of sustained economic
development for the intermediate goal of
reducing poverty and the long-run goal
of catching up to the wealth of
developed economies

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K. Otsuka: study all aspects to help
developing countries richer

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Development economics is more than orthodox economics

 Focused countries
 Marginal and significant changes: markets
 Different assumptions
 Related with cultural, social, political aspects

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5.3. Approach
 Situation in developing countries
 Experience of the developed
 Theories and models of economic
development
 Lessons for developing countries

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