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Tutorial answers and theories GDS
Answers to all the tutorial questions (week 1-7) with notes from the tutorials and theories explained from the course Global Development Studies
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TUTORIAL QUESTIONS WEEK 1-7Theories:
1. Amartya Sen’s Capability Approach (lecture 1)
2. Dependency theory: focused on underdevelopment in terms of power relationships
(underdevelopment is external). It is up to the poorer country to make itself independent and to
become self-sufficient (autarky). However, in practice, this does not really help for development.
3. Lewis Model: movement from workers in low-productivity agriculture to higher productivity
industrial sector. See lecture 2.
4. Harrod Domar model: A functional economic relationship in which the growth rate of gross
domestic product (g) depends directly on the national net savings rate (s) and inversely on the
national capital-output ratio (c). Growth g = savings (s) divided by capital-output ratio (capital
output ratio, ‘c’ = K (capital)/y (output), this ration tells you how many capital stock you need to
generate 1 output)
s=15 and c=5 then g=15/5=3 percentage growth rate
first part: g = s/c – delta = (0.09/3) – 0.04 = - 0.01 so -1% growth
C=y/k
5. Solow growth model: starts that GDP growth (development growth) is driven by Labour input +
Capital input + Multifactor productivity (the productivity with which labour and capital are being
used)
6. Malthusian population trap: If population grows faster than income, moving to higher GDP per
capita is not possible. Solutions: lowering population growth might be a solution to raise income
per capita indeed, eg by one child policy. However, this is not beneficial for the country’s GDP as
a nation because that will not change much. Only because there are fewer people, the income
per capital might increase. More freedom for women because they will only have one child.
Counterarguments go of course in the Human Rights direction but also economic disadvantages
will occur (eg dependency of old people will become very high because there are more old
people than young/working people).
7. Kuznets curve: see lecture 4. The idea that as per capita income rises, pollution and other forms
of environmental degradation would first rise and then fall in an inverted U-pattern. This is the
case with industrialization: some local pollutants, such as air, sulfur dioxide and nitrogen oxides.
However, there are many cases for which this curve does not hold as there is no convincing
evidence that other environmental damage decreases with higher incomes (particularly with
global public goods, such as greenhouse gases). Also, pollution can be irreversible, eg with
nuclear waste and biodiversity.
8. Labor input: Human capital theory: Education improves skills, individually rational decision to
take it, based on benefits and opportunity costs.
9. Labor input: Screening theory: schooling is a signal of capability and trainability in later (working)
life.
10. Endogenous growth models: states that countries should heavily focus on investment in R&D,
since developing new technologies yourself is the only way to distance yourself from other
countries. The theory state that e.g. knowledge spillovers within your economy are a key aspect
which makes your economy more developed and increases your GDP/pc. If you invest in
technology, that is going to new technology which would result in growth. The same situation
accounts for education; if you invest in education as a country, you create a basis for future
sustained growth. Assumes that these resources are dynamic
11. Aggregate growth models: The first and most elementary planning model used in almost every
developing country is the aggregate growth model. It deals with the entire economy in terms of a
limited set of macroeconomic variables deemed most critical to the determination of levels and
, growth rates of national output: savings, investment, capital stocks, exports, imports, foreign
assistance, and so on. (From Harrod Domar) Aggregate growth models provide a convenient
method for forecasting output (and perhaps also employment) growth over a three- to five-year
period.
12. Input-output model: is also called interindustry model and is a formal model dividing the
economy into sectors and tracing the flow of interindustry purchases (inputs) and sales (outputs).
All industries are viewed both as producers of outputs and users of inputs from other industries.
The interindustry model can be used to determine intermediate material, import, labor, and
capital requirements with the result that a comprehensive economic plan with mutually
consistent production levels and resource requirements can, in theory, be constructed. It can
also facilitate the evaluation of for example development policy and its effect on the economy.
Weaknesses are that generally in theory it works better than it does in practice, among others
because it turns out that government failure happens more often than market failure. Other
weaknesses are deficiencies in plans and their implementation, insufficient and unreliable data,
unanticipated economic disturbances (external and internal), institutional weaknesses, lack of
political will and fragile states. Also, it is a mechanistic exercise as it does not show certain
economic dynamics.
13. Factor endowment trade theory: Countries should/will specialize in the production of
commodities that make use of the available (or abundant) resources (factors of production) in
the country. Each country has a different availability of factors of production, eg development
countries often have a lot of available land and cheap labor, while developed countries often
have a lot of capital.
14. Traditional Trade Theory: See lecture 6 doc. Everyone benefits from trade because of
comparative advantage. If all countries focus on what they are relatively best (=specialize in
there comparative advantage) in (neglecting absolute productivity), all countries would benefit
from trade since they achieve higher possible consumption levels. Specialize by looking at
relative factor endowments of your country compared to other countries (=the Neoclassical
model)
15. North-South trade models: Trade and development theories that focus on the unequal exchange
between the North developed countries and the South developing countries in an attempt to
explain why the South gains less from trade than the North. States that if the North keeps
focusing on its investment in R&D, it will foster/perpetuate its dominant position regarding the
South in terms of knowledge
16. Vent-for-surplus theory: This theory criticizes the traditional trade theory because the model of
that theory already assumes efficiency that might not yet be the case in a country. It says that a
country is already at an efficient point in the graph, while in reality there might be underutilized
resources (point V in the graph) and export opportunities, which means that there is additional
output if resources are being used more efficiently can be used for more export (to point B),
and then also room for import (point C).
INDICATORS RELATED TO SOURCES OF GROWTH
Education human capital
Savings accumulation of physical capital
Employment in agri potential for structural change
Youth dependency ration potential for demographic dividend
Property rights & rule-based government rating quality of institutions (how much
government contributes to development)
Relate sources of growth to theories/concept
, Tutorial questions week 1
Chapter 1 (chapters are always inclusive of case study)
1. Provide a definition of development economics. Justify your choice.
Development economics has a wider scope than political economics and traditional economics and
focuses on resources and all mechanisms necessary to bring about rapid and largescale improvements
in levels of living. Traditional economics is driven by assumptions of developed countries that are not
the case in poorer countries, such as a perfect market.
2. Is it possible that there could be growth of per capita income without achievement of other
objectives, such as poverty reduction and the growth of self-esteem?
Yes, if there is a lot of inequality in the country. For example, if the income of the richest people
increases, this also increases the per capita income as this is an average number. The poorer people do
not experience any benefit of this so their living conditions are not affected. An example would be
discovering resources or technological innovation; the benefits of that and the income is not spread
across all people.
3. Do you think it is in the material interests of high-income countries to help low-income countries
improve their economic performance? Why or why not?
Yes, because the low income countries can be or become trading partners of high income countries.
For these countries to function as sales market for high income countries, people will need spendable
income to consume these products from high income countries. Also low income countries attract
foreign direct investment because their prices are low. Besides, helping low income countries prevents
migration. (interdependent world).
4. How does the concept of “capabilities to function” help us gain insight into development goals and
achievements? Is money enough? Why or why not?
Money is not enough as there are also important social and cultural aspects connected to
development as indicated by the capabilities to function. Capabilities look at HOW someone spends
his/her income.
5. How is happiness related to development?
Greater happiness may expand an individual’s capability to function because they get more productive
and therefore get more income. The average level of happiness increases with a country’s average
income.
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