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Euromodel – DEVELOPMENT ECONOMICS

industrial product and the agricultural product. Clearly, the necessary condition for

industrialization to take place will be:

   

P P

   

I A

≥ = =

(a) (b) (3.1)

w w w w w p

   

I I

P P

   

A I

Where expression (a) simply says the purchasing power of the industrial wage in terms of

the agricultural product must be higher or equal than the quantity of food ( ) initially

w

consumed by the transferred workers.

The expression (b), obtained after very simple manipulations, is the result of

entrepreneurs’ behaviour, which want to keep the industrial wage as low as possible in

order to maximise profits. As the lowest diagram (graph (c)) in figure 5 clearly sows, in

the labour surplus phase industrialists will therefore set an industrial wage strictly equal

) times the agricultural terms of trade ( ),

to the real wage in agriculture (i.e. P P

w A I

henceforth simply p for brevity. The diagram (c) in figure 4 also shows two other

important points. First of all, it shows the industrial wage to be constant during the labour

surplus phase, as far as the agricultural wage stays constant as well. In the labour

w

surplus phase the average agricultural surplus will be constant (see the first segment of

diagram (b), figure 5), so that also the agricultural terms of trade will not be affected by

the labour shift from agriculture to industry. 19 of 43

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Graph (a) – The agricultural sector production function Y

A

AS A B w

L T C

A O

Graph (b) – The dynamic of the AAS

AAS

w A L

I

L

I

Graph (c) – The industrial wage

w

I Ad Bd

L L

Π Π

A B

wp W W

A B L

I

A B

Figure 5: the Lewis model of economic development

Secondly, diagram (c) identifies the engine of capital accumulation and industrial

expansion. Indeed, while W is the wage bill, the area П identifies the realised profits by

A A

local entrepreneurs. In the Lewis model, in a very neoclassical fashion, total profits are

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assumed to be automatically invested back into the industrial activities (there is not any

investment function), thus feeding industrialization. First, the realised profits allow

entrepreneurs to enlarge the capital stock so as to expand their production activities.

Then, due to the increase in capital stock and production activity, also the labour demand

Ad Bd

to L ). The industrial demand

from the industrial sector rises (it shifts up from L

therefore draws away new workers from agriculture: agricultural employment decreases

until point B (diagram (a)), while industrial employment rises until point B (diagram (c)).

At point B, the accumulation process continues. In fact, the amount of profits has risen

to (Π + Π ) and it is reinvested to buy new capital. The demand for labour rises

from Π A A B

even more and so on.

We also want to mention here that in the labour surplus phase of economic development

the industrialization process probably generates an increasingly unequal distribution of

aggregate income. As noted above, in the labour surplus phase new industrial labour is

forthcoming at the fixed real wage . Despite the fact that the marginal productivity of

w

labour in the industrial sector is increasing, the real wage earned by each worker remains

constant. In the labour surplus phase, therefore, the fruits of industrial expansion are not

equally distributed. Labour is becoming more and more productive but this only

-> Π + Π and so on). It is in any case worth stressing

translates into higher profits (Π A A B

here that this unpleasant distributive result of development at the very beginning of the

economic take off is seen by Lewis as an element that helps the economy grow and

industrialise faster. As already shown, in fact, industrialisation comes from capital

accumulation and capital accumulation comes from profits. Remembering that long run

income per capita growth depends mainly on the industrialization process, an initial

unequal income distribution facilitating initial industrialization may be desiderable for

long run development.

We can say something more on the linkages between ongoing industrialization and the

agricultural sector? Indeed, we can argue something very relevant on the importance of

labour productivity in the agricultural sector. In this regard, let us analyse what happens

when the economy comes out the labour surplus phase (T - B in diagram (a)) and enters

the disguised unemployment phase (B – C in diagram (a)).

Once entered the disguised unemployment phase, the average agricultural surplus begins

to decline, since total output goes down (the highest diagram (a)). Keeping constant the

, also the average agricultural surplus thus begins to decline (the

agricultural wage at w

middle diagram (b), figure 4). As one can reasonably aspect, therefore, since less

agricultural output is marketed, food (agriculture) price starts rising. From equation (3.1),

the increase in p pushes the industrial wage up, in order to make industrial workers able

units of food and hence maintaining the appropriate incentive to move to

to buy w

industry. However, at a closer inspection, even if the industrial workers are getting a

units of food. Actually,

higher industrial wage, it is simply impossible for them to buy w

there is not enough to go around. Indeed, from diagram (a), if also each industrial worker

, total agriculture production should be equal to OT; however, this is not the

bought w

case. It follows that, at the disguised unemployment phase, industrial workers will have

to consume a mix of industrial and agricultural products. This is exactly the turning point

for understanding the role of agricultural productivity on industrialization. Indeed, under

what conditions will the potential “migrants” continue to accept to move to industry?

is not too close to the subsistence level (if it were, it

Clearly, they will if and only if w 21 of 43

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Euromodel – DEVELOPMENT ECONOMICS

could not be reduced!). This is to say if and only if agriculture is sufficiently productive

to favour and keep alive the industrialisation process. In any case, potential “migrants”

will only accept an industrial wage higher than the one prevailing in the labour surplus

phase. This is clearly shown in diagram (c). When the labour demand crosses point B, the

industrial wage becomes an increasing function at the beginning of the disguised-

unemployment phase. Clearly, the increasing trends of the industrial wage will continue

also when the disguised unemployment phase comes to an end. Indeed, once point C is

region we will have . Agriculture,

reached in the upper diagram, in the >

CO MP w

L

therefore, is likely to become a fully capitalistic sector where wages are set according to

the profit-maximisation rule. It follows that as labour moves from agriculture to industry,

agricultural wage goes up, and the industrial wage (see the lowest diagram) must increase

even faster: it must not only compensate for higher terms of trade (p), but also for higher

incomes in the agricultural sector.

To summarise, the basic ideas of economic development behind the Lewis model are:

a) The engine of growth is industrialization and capital accumulation. Lewis does not

take into account any problem of demand. Indeed, in the Lewis model saving is

automatically reinvested and there are not Keynesian-type preoccupations about effective

demand and the realization of profits.

b) Capital accumulation and industrialization, however, are limited by the ability of the

economy to produce a surplus of food (the lower the surplus → the higher p → the higher

the industrial wage → the weaker the incentive to invest in the industrial sector). The

productivity level of the agricultural sector thus matters for making industrialization

viable

c) As development proceeds, there is a process of rural – urban migration and

urbanisation. Moreover, the agriculture good terms of trade p increase. Food prices rise

because a smaller and smaller number of farmers must support an increasing number of

industrial workers.

The policy implications of such a view are very controversial and hotly debated.

Consider, for instance, the role of agriculture. Even if we accept the residual role given to

agriculture in the Lewis framework (agriculture as a source of cheap labour and supplier

of a food surplus), the question is: how are these potentialities of agriculture best

exploited? By taxing agriculture, which would expand industrial labour supply (it is

easier to convince people to move away from agriculture when agriculture is taxed), or

by subsidising agriculture (for instance by helping farmers buy relevant inputs like water,

fertilisers, etc.), which would expand agricultural production and the available surplus of

food? And what happens when agriculture does not coincide with food production alone,

but it includes the production of non-food items as well? Again, provided that technical

progress in agriculture is good for growth and industrialisation (since it raises the surplus

of food), are we sure that in a poor economy there are the appropriate incentives to

introduce better agricultural techniques of production? In this respect, what is the role of

land reforms and land redistribution? How is the Lewis picture modified by the

introduction of international trade and globalisation? Is the kind of development process

depicted in the model necessarily associated with a worsening income distribution

(growth for whom?) or some more pleasant outcome may be envisaged? Once again, we

leave open these issues to stimulate an active debate amongst the readers. 22 of 43

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3.1.1 Technical Progress in agriculture

In the previous section, we underlined the importance of a sufficiently productive

agricultural sector for the feasibility of the process of industrialization. Let us therefore

analyse how technological progress in agriculture can have long run effects on

industrialization as well.

Technical progress, we know, is a way of producing more output with the same quantity

of labour. In principle, therefore, this should increase the average agricultural surplus and

moderate the upward pressure on the agricultural terms of trade associated with the

process of industrialisation. Actually, that is what really happens. Note that a larger

agricultural surplus will come out of technical advancement in any case, even if the

farmers consume all the fruits of technical progress. Indeed, see the following diagram to

get the point clearer:

Y α

A’(L)

α

AL

Lo La

Figure 6: technical progress in agriculture

In the diagram two very standard production functions for the agricultural sectors are

represented. One (Y’) is higher than the other (Y) due to technical progress. Formally, we

α α

and Y’ = A’L , with α positive but less than one and A’ > A. L is the

can write Y = AL a

available labour force in the economy. The agricultural average product of labour when

(α-1) with the less productive technology

everyone is employed in agriculture is Y/L = AL

(α-1) with the more advanced. Assume now that at least in the labour

and Y’/L = A’L '

( with the more advanced technique) even

surplus phase farmers receives wage rate w

w

when some of them start moving to the manufacturing sector. To be more precise, let

α α

− −

1 ' ' 1

= =

assume that the wage earned by the farmers is or depending on the

w AL w A L

a a

'

kind of technology in use. Clearly, : the fruits of technical progress are by

>

w w

assumption enjoyed by the farmers. Well, what is the agricultural surplus corresponding

people are employed in agriculture? It’s the difference between

to a situation where L

o

total production and the wage bill. Formally, we will have: 23 of 43

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Euromodel – DEVELOPMENT ECONOMICS

α α α α

− −

1 1

 

= − = − => in the case of the less productive techniques,

AS AL AL L A L L L

 

o a o o a 0

or α α α α

− −

' ' ' 1 ' 1

 

= − = − => in the case of the more productive

AS A L A L L A L L L

 

o a o o a 0

technique

Since A’ > A, we will have AS’ > AS. As sketched out before, even assuming that farmers

will fully enjoy the fruits of technical change, the technological progress will

undoubtedly increase the agricultural surplus as well. A higher agricultural surplus sold

in cities markets, in turn, will likely compensate the upward pressure on the agricultural

terms of trade provoked by the transfer of people in the course of the industrialisation

process. Following the mechanism of the Lewis model, there is therefore no doubt that

labour saving technical progress in agriculture is potentially very good for

industrialization and economic development.

The picture so far described, however, is not completely bright. Indeed, there are two

main problems to be emphasised, both of them concerning the feasibility of technological

progress in agriculture.

a) The effective nature of technological progress. Agricultural technical advancements

are not necessarily labour saving. On the contrary, they could be labour using and, if they

are, there will be a weak incentive at least for the smallholder producers to introduce

them. To see why, one has to think of Africa and look at Table 1:

Table 1: Non-agricultural to agricultural income ratio. Developing regions

1950-60 1960-70 1970-80 1980-1990

Africa 7.05 8.33 8.74 7.79

Asia 1.87 3.37 3.31 3.57

Latin America 2.42 3.00 2.81 2.51

Other 1.88 2.17 2.15 2.25

Source: UNCTAD, TDR 1998, p.140

It is clear from the table that the ratio of non-agricultural to agricultural value-added per

worker is much higher in Africa than elsewhere in the world. This differential is one of

the key indicators of “urban bias” in Africa, but it is ultimately based on lack of

investment in African agriculture and agricultural infrastructures. This differential

underlies the attractiveness to farm households of “straddling” between the agricultural

and non-agricultural sectors and may explain why labour using technical progress is not

adopted: “..to the extent that off-farm employment opportunities are available, there is a

continual pressure for productive labour to be diverted from agriculture. Under these

conditions, there may be little incentive to adopt high-yielding crop varieties, which can

require greater labour inputs [italics is ours]. Rather, the types of innovation which are

attractive are those which save households labour time and thus enable the diversion of

labour from the farm” (UNCTAD, Trade and Development Report, 1998).

b) The institutional regime prevailing in poor agrarian economies. The second problem

with agricultural technical progress is due to one of the most pervasive interlinked

contracts in poor countries, that between a farmer who is also a borrower and a landlord

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who is also a lender. Let assume the following “institutional framework”, as originally

conceived by Bhaduri (1973), to explain formally the point at hand.

Imagine a sharecropping contract between a farmer and a landlord. According to such

king of contract, the landlord claims as rent a given share α of the total production (x) the

farmer carries out each year. The remaining part of total production, i.e. (1-α), is kept by

the farmer so as to satisfy his consumption needs. Very often, however, the farmer is

unable to completely satisfy its consumption needs by itself. He has to ask the landlord

for a consumption credit (b) at the cost of the interest rate i. Now imagine the landlord

has the opportunity to introduce a technical innovation which can raise annual production

by ∆x. The decision of the landlord turns out to be controversial. On the one hand, the

increase in production means higher gains in the form of higher rents. On the other hand,

however, the increase in production can help the farmer to become less dependent on the

landlord for consumption credit. The landlord, therefore, may probably lose the interest

payments he gains from the consumption loans to the farmer. If the losses in terms of

lower interests’ earnings will be higher than the possible gains in terms of higher rents,

the landlord will clearly discourage and impede any form of technological progress. This

is exactly the situation represented by the following equation (3.2):

α

α ∆ <

∆ < (3.2) => x (ib ) /

x ib

On the left-hand-side of condition (3.2) there is the increase in rent earnings the landlord

can enjoy once the technological innovation has been introduced. On the right-hand-side

of condition (3.2), in turn, there is the loss in interests’ earnings the landlord may have to

support. Clearly, when the left-hand-side is lower than the right-hand-side, there will not

be any scope for the introduction of technological progress in agriculture. The following

figure 7 depicts the condition (3.2), clearly identifying the innovation-acceptance zone

and the innovation-rejection zone.

x Innovation acceptance

zone Innovation rejection

zone

i/α b

Figure 7 – Technical progress in agriculture: the case of farmer/borrower and the

landlord/lender contract

3.2 Migrations: The Harris-Todaro Model (1970)

According to the Lewis model, the process of industrialisation entails an “automatic”,

somewhat harmonious migration of people from the rural areas to the cities. Can we say

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more on this migration process? Can we add, on top of the agricultural and the

manufacturing sector, an urban informal sector to the picture? After all, in many poor

countries there is a large urban population engaged in an extremely diverse set of

activities outside the direct scrutiny of the State and not covered by labour unions. Is

creating new employment opportunities in the city always a good idea? Or is there the

risk of providing people the incentive to move too fast to the city, so as to create all the

problems inevitably associated with the concentration of a large mass of people in a

relatively small area? After all, many cities in Africa, Latin America and Asia are

growing at 5-7 per cent per year, which is likely to be above any realistic possibility of

giving these people a job.

These questions can be addresses through the help of the model developed Harris-Todaro

(1970). The key institutional assumptions of the model awkward with many highly

visible features of some developing countries:

- The rural labour market is competitive;

- The wage paid by modern firms in the city is fixed above the market clearing level,

either because unions’ activities or governmental legislation (for instance minimum wage

regulations) or efficiency wage considerations;

- There is an informal sector in which urban residents not otherwise employed can earn

their living out of activities outside the control of the state and performed using their

labour force alone.

Let L be the rural population, employed in agriculture on a fixed amount of land.

r ) and sold on a

Agricultural output is determined by the standard production function g(L

r

world market at a price normalised to unity. Since the rural labour market is assumed to

):

be competitive, rural wages will be equal to the marginal productivity of labour (g’(L

r

'

'

'

= <

(3.3) with

w g L

( ) g ( L ) 0

r r r

The urban population is either employed in manufacturing (L ) or working in the

m

). Total population is normalised to 1, so that L + L + L = 1. To

informal sector (L

u r m u

simplify, assume that the wage paid in the informal urban sector is equal to zero. The

. The manufacturing firms aim at

institutionally fixed manufacturing wage, instead, is w m

profit maximization, so that their demand for labour is implicitly determined by

'

'

'

= <

(3.4) with

w f ( L ) f ( L ) 0

m

m

m '

Where f(L ) is the manufacturing production function and is the marginal

f ( L )

m

m

productivity of manufacturing labour. The probability for an urban resident of getting a

job in the manufacturing sector is equal to the number of jobs divided by the number of

urban residents. The expected urban income, therefore, will be equal to this probability

multiplied by the manufacturing wage (remember that the wage of people employed in

E

the informal urban sector is zero!): w = [L (w )/(L (w ) + L )]w .

m m m m u m

Now, given this framework, what are the main forces leading to migrations? In the

Harris-Todaro model, migration is due to the arbitrage of people between the agricultural

wage and the expected urban wage. Indeed, migration will happen if the expected wage

one gets by moving to cities is higher than the wage rate gained being employed in

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agriculture sector. Moreover, people will keep on moving to cities until the following

equilibrium condition is reached:

L ( w ) E

m m + =

= = Or (EC)

w ( L L ) L w

w w

w r u

r m m m

m

+

L L ( w )

u m m

The following figure 8 depicts the labour demand in agriculture (equation (3.3)), the

labour demand in the modern sector (equation (3.4)), the equilibrium condition (EC), as

. Clearly, the equilibrium point E is given by the

well as the equilibrium point E Q Q

intersection between the equilibrium condition “EC” (which is represented as a

* *

rectangular hyperbola passing through the point ) and the labour demand in the

( w , L )

m m

agricultural sector.

Figure 8 also shows an example of the adjustment process towards the equilibrium point

. Imagine, for instance, that at the very beginning of the story the agricultural wage is

E

Q r0 m*

. At the same time, imagine that the modern sector wage is equal to w , the

equal to w m*

labour force employed in the modern sector is L and the urban population is equal to

m* +L . From figure 8, it appears clear that the equilibrium condition is not met. Quite

L u (L +L )<L w , i.e. the wage rate in agriculture is lower then the

the opposite, we have w r m u m m

E

expected wage in the city (w ). Clearly, People living in the rural areas decide to migrate

to the city. (3.4) (3.3)

E

*

w m E Q

*

w r C

0

w r * 0 * *

+ +

L L L L

m u m u

Figure 8: the adjustment towards the equilibrium in the Harris-Todaro model

Notwithstanding the migration flow towards the city, the manufacturing wage stays

constant, due to institutional rigidities. As consequence, also the formal employment L m

does not change. The new urban residents therefore simply increase the informal urban

, thus reducing the probability to get a well-paid formal job. At the same time,

sector L

u

the reduction of the rural labour force increases the agricultural marginal product and

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therefore the agricultural wage. Clearly, both these changes bring the system back to the

equilibrium point E, where migration flows stop and rural wage equates the expected

urban wage.

According to the Harris-Todaro model, the urban informality urban may represent a form

of subsistence for migrated peasants locked in urban unemployment (due to the rigidities

of the formal sector). Nevertheless, the existence of an informal sector has also some

negative, sometimes tremendously negative implications for the urban life, i.e.

congestion, slums degradation, lack of any kind of rights’ respect, a high crime rate, etc...

For this reason, it may happen that a government tries to favour the creation of job in the

urban formal sector, and to this purpose it can implement such measures as tax holidays

or better treatment in the credit market for the urban manufacturing firm. This way, a

government hopes to reduce the size of the informal sector and increase that of the formal

sector. But what is (could be) the final outcome of such a policy? Does the informal

sector really shrink? Actually, it might happen exactly the opposite, with the pool of

informal workers in the city actually increases due to new migration flows from the

countryside. Such an eventuality is graphically investigated in figure 9. Imagine, for

instance, a policy aiming to accelerate the rate of absorption of labour in the formal sector

by increasing the labour demand curve in the manufacturing sector (we may think to

government subsidies to manufacturing hiring new workers). In figure 9, the

governmental policy shifts up both the labour demand curve in the manufacturing sector

1 1

C ) to

(equation (3.4)), from (3.4.A) to (3.4.B), and the equilibrium locus (EC), from (E

2 2 Rd

(E C ). Assuming as the labour demand in the agricultural sector, it can be easily

L ) there will be more people employed in

checked that in the new equilibrium (point E

Q2

the urban formal sector (b > a). At the same time, less people will work in the agricultural

sector, (1-d) < (1-c), due to migration, earning a higher rural wage than before, r > q,

because of the increase in their marginal product. As to the urban informal sector, the

pool of workers will be now equal to d – b, rather than (c – a). The question is: is d – b <

c – a? Or, to put it differently: does the governmental policy succeed in shrinking the

pool of informal urban workers? 28 of 43

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Euromodel – DEVELOPMENT ECONOMICS w

(3.4.B)

w r

m (3.4.A) Rd

2

E L

1

E '

Rd

L

m E Q2 r

E

Q1 s q

2

C

1

C

a

o b c d e 1

Figure 9: a pro-urban/formal sector policy

A priori, we simply cannot answer to this question. But we can say something, notably

that the answer ultimately depends on the slope of the labour demand curve in the '

Rd

agricultural sector. Indeed, imagine that the relevant agricultural demand curve is ,

L

Rd

which is flatter than . In this case the effect of the governmental policy is to reduce

L

even more the number of agricultural workers (there will be more migrants to the city), so

that in the new equilibrium there will be e – b informal urban workers, which is clearly

greater than d – b. So, in general, the flatter the agricultural labour demand curve, the

more likely is that the absolute size of the urban informal sector goes up despite the aim

of the policy is to reinforce the urban formal sector. Basically, the free choice of the

peasants to move to the city can render the governmental policy even counterproductive.

There are two points worth stressing, the first related to the relative size of the urban

informal sector, and the second to the economic meaning of the slope of the labour

demand curve in the agricultural sector. As to the first point, from the equilibrium

condition (EC) we can immediately infer that after the introduction of the governmental

policy the relative size of the urban informal sector (its size measured as a fraction of the

total urban sector) must have diminished, irrespective of what happens to its absolute

size. However, what really matters in policy and social terms (congestion, crime rates,

diffusion of diseases, etc.) is the absolute size, the relative being quite insignificant.

Regarding the slope of the agricultural labour demand curve, it is clearly a measure of the

elasticity of labour demand to the real wage. The flatter the curve is, the more responsive

is the labour demand. In the limit, with a horizontal curve, agricultural labour demand is

perfectly elastic at a given wage rate and we are back to the Lewis case of surplus labour.

In such a case, any increase in the manufacturing formal employment will be

accompanied by an equivalent (in percentage terms) increase in the urban informal

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employment. The city is larger than before, but the proportional expansion of the formal

and informal sectors has compromised the realisation of the government’s objectives.

This general principle can be applied to other policies as well, not necessarily linked to

formal labour demand: “ ..policies aimed at directly reducing urban congestion (say, by

building more roads), reducing pollution (say, by building a subway), or increasing the

provision of health (say, by building new public hospitals) might all have the paradoxical

effect of finally worsening these indicators......because fresh migrations in response to the

improved conditions ends up exacerbating the very conditions that the initial policy

attempted to ameliorate” (Ray, 1999).

EXERCISES AND ASSIGNMENTS

Could you briefly describe the logical mechanism behind economic growth in the very

traditional neoclassical model? What are the main implications for long run growth of

such an analytical framework (think to the Solow model)?

Imagine that population growth is not exogenous and constantly equal to “n”, but it

depends on per head capital stock as proxy of the wealth of the economy. In particular,

assume that there is a negative relationship between population growth and per head

capital stock. Can you represent graphically such a possibility by aptly modifying the

original Solow model diagram? Can you represent the case of a poverty trap as induced

by endogenous population growth?

Can you summarise in a few words the main departures of the “new growth theory” from

the traditional neoclassical framework a la Solow? What are the most relevant

implications for long run growth of the endogenous growth models (focus in particular on

their implications in terms of conditional convergence and North-South uneven

development)?

Try to summarise the basic features of the Keynesian-Structuralist approach to growth

and development. What is the role of trade relations in determining the growth possibility

of a developing country?

Most of economic literature believes free trade is beneficial for growth. Are there any

economic rationale fostering an opposite view and claiming protection as useful for

economic development? Summarise briefly both the positions in favour and against free

trade.

Could you briefly summarize the concept of economic development behind the Lewis

model, and the reasons it gives so much emphasis on “structural change”? What are the

main phases of structural change?

Explain the concept of disguised unemployment. What should be the optimal level of

agricultural employment if this sector worked in a capitalistic way? Give an analytical

support to your answer. 30 of 43

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Euromodel – DEVELOPMENT ECONOMICS

Describe the role that agricultural wage rate plays in the industrialization process.

What are the main ways in which the former influences the latter? Might it play a

different role if we adopted a Keynesian rather than a Lewis-type perspective?

In a Lewis-type economy what might be the effects on the ongoing process of

industrialization of income taxes on agricultural revenues? And what the effects on the

ongoing process of industrialization of agricultural subsidies fostering the expansion of

foodstuff productions? Provide some logical arguments that support your answer.

Imagine an African country whose production consists essentially of agricultural goods

devoted to exports. In addition, internal consumptions or investment goods are imported

from abroad. This country exports, moreover, are affected by low price elasticity: Any

unit of surplus on international market can be sold and allocated due to more than

proportional reductions in corresponding prices. Might a public intervention to control

and manage exports flows be required? Could it improve the above considered economic

scenario? Why?

What are the effects of technological improvements on agricultural surplus? How can

they affect ongoing industrialization?

Describe briefly some different kinds of technological changes that may occur in

agricultural productions. Remembering in particular what said about the African context,

can you explain why some specific aspects of technological change can hamper and

impede its implementation?

Explain the “institutional constraints” that might impede the introduction of technological

progress. Following the Bhaduri framework, what are the effects of an increase in the

interest rate I that the landlord-lender applies to the tenants-borrower? What about the

product share that, according to the sharecropping contract, is claimed by the landlord?

Imagine a micro-credit government policy aiming at providing financial resources to

farmers. What might be the effects of such a policy for the incentive to the introduction

of technological improvements in the Bhaduri model?

Plot the equilibrium condition in the Harris-Todaro model and describe the logical

process that leads to its achievement. What is the equilibrium condition and its

*m rises?

underlying economic meaning? What happens if w

What role does labour demand elasticity to wage rate in the agricultural sector have in

determining the dimension of urban informality? Plot the results we obtain by imagining

higher or lower values of this variable (labour demand elasticity).

What effect might a public policy that increases wage rate flexibilities in the modern

sector have on the Harris-Todaro equilibrium condition? Would Keynes agree with this

proposal (suggestion: to answer this last question, think about a theoretical approach

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considering demand-side aspects of economic system rather than exclusively supply side

ones)?

How does an increasingly productive agricultural sector affect the equilibrium condition

of the Harris-Todaro model? Describe it in a few words and give a graphical

representation of your answer.

MAIN REFERENCES

Abramovitz, M. (1956), Resource and Output Trends in the United States since 1870,

American Economic Review, 46: 5 – 23.

Arrow, K. (1962), The Economic Implications of Learning by Doing, Review of

Economic Studies, 29: 155 – 173.

Bardhan P, Srinivasan T.N. (1971), Crop sharing tenancy in agriculture: A theoretical and

empirical Analysis, American Economic Review 61: 48-64;

Bardhan, P. (1980), Interlocking factor markets and agrarian development: A review of

issues, Oxford Economic Papers 32: 82-89;

Bardhan, P. (1984), Land, Labour and rural poverty, New York, Columbia University

Press.

Bhardan, P. and C. Udry (1999), Development Microeconomics, Oxford, England,

Oxford University Press.

Basu, K. (1984), Implicit interest rates, usury and isolation in backward agriculture,

Cambridge Journal of Economics, 8: 145-59;

Basu, K. (1990), Agrarian structure and economic underdevelopment, Chur, Switzerland,

Harvard Accademy;

Basu, K. (1997), Analytical Development Economics. The Less Developed Economy

Revisited, Cambridge, MA. and London, England, The MIT Press;

Beladi, H., and Marjit, S. (1996), An analysis of rural-urban migration and protection,

Canadian Journal of Economics, 29: 930-40;

Bhaduri, A. (1973), A study in agricultural backwardness under semi-feudalism,

Economic Journal 83:120-37;

Bhaduri, A. (1977), On the formation of usurious interest rates in backward agriculture,

Cambridge Journal of Economics, 1: 341-52;

Bhaduri A. (1983), The economic structure of backward agriculture, London, Academic

Press; 32 of 43

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Bhagwati, J.N., and Srinivasan T.N. (1974), On reanalysing the Harris-Todaro model:

Policy ranking in the case of sector-specific sticky wages, American Economic Review,

64: 502-8;

Bravemarman, A., and Stiglitz, J. (1982), Sharecropping and the interlinking of agrarian

markets, American Economic Review, 72: 695- 715;

Cardoso, E.A.. (1981), Food supply and inflation, Journal of Development Economics, 8:

269-84;

Chenery H. and Syrquin M. (1986), Typical Pattern of Transformation, in Chenery H.,

Robinson S., and Syrquin M. (1986), Industrialization and Growth, New York, Oxford

University Press.

Chenery H. and Srinivasan T.N. (1988), Handbook of Development Economics,

Amsterdam, North Holland;

Fields, G. (1975), Rural-urban migration, urban unemployment and underemployment,

and job-search activity in LDCs, Journal of Development Economics, 2:165-87;

Furtado, C. (1964), Development and underdevelopment, Berkeley, University of

California Press;

Griffin, A. (1974), The political economy of agrarian change, London, Mcmillan;

Harris, J.R., and Todaro, M.P. (1970), Migration, unemployment and development: A

two-sector analysis, American Economic Review 60:126-42;

Hirschman, A. (1958), The Strategy of economic Development, New Haven, Yale

University Press;

Hoff, K., and Stiglitz, J. (1994), Some surprising analytics of rural credit subsidies,

University of Maryland, Mimeo;

Jorgenson, D.W. (1967), Surplus agricultural labour and the development of a dual

economy, Oxford Economic Papers, 19: 288-312;

Kaldor, N. (1967), Strategic Factors in Economic Development, Ithaca, Cornell

University.

Kalecki, M. (1976), Essays on developing economies, Hassocks, UK, Harvest Press;

Kotwal, A. (1985), The role of consumption credit and agrarian tenancy, Journal of

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Lewis, W.A. (1954), Economic development with unlimited supplies of labour,

Manchester School 28:139-91;

Lewis, W.A. (1958), Unlimited labour: Further notes, Manchester School 32:1-32;

Mankiw, G., Romer, D., and Weil, D., (1992), A Contribution to the Empirics of

Economic Growth, Quarterly Journal of Economics, 107: 407 – 437.

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Oxford Economic Papers, 28: 406-25;

Montobbio, F. (2002), An Evolutionary Model of Industrial Growth and Structural

Change, Structural Change and Industrial Dynamics, 13: 387 – 414.

Mukherji, B. (1975), Peasants in semi-feudal agriculture: A note on A. Bhaduri model,

Indian Economic Review, 10: 49-61;

Naqvi, N. (1990), Technological stagnation, tenurial laws and adverse selection:

Comment, American Economic Review, 80: 935- 40;

Neary, P. (1981), On the Harris-Todaro model with inter-sectoral capital mobility,

Economica, 48: 219-34;

Newberry, D.M.G. (1975), The choice of rental-contract in peasant agriculture, in

Reynolds L.G. (ed.), Agriculture in developing theory, New Haven, Yale University

Press;

Nurske R. (1953), Problems of capital formation in underdeveloped countries, New

York, Oxford University Press.

Prebisch, R. (1959) Commercial Policies in underdeveloped countries, American

Economic Review, 49: 251-73;

Ray, D. (1999), Development Economics.

Ranis, G., and Fei, J.C.H. (1961), A theory of economic development, American

Economic Review, 51: 533-65;

Rebelo, S. (1991), Long Run Policy Analysis and Long Run Growth, Journal of Political

Economy, 99: 500 – 521.

Rodriguez F., Rodrik D. (2001), Trade policy and economic growth: a skeptic’s guide to

the cross-nation evidence, Macroeconomics Annual 2000, MIT Press.

Romer, P. (1986), Increasing Returns and Long Run Growth, Journal of Political

Economy, 94: 1002 – 1037. 34 of 43

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Romer, P. (1990), Endogenous Technological Change”, Journal of Political Economy,

98: S71 – S102.

Ros, J. (2000), Development Economics and the Theory of Growth, Indiana, Michigan

University Press.

Rosenstein-Rodan, P.N. (1943), Problems of industrialization in eastern and south-

eastern Europe, Economic Journal, 53: 202-11;

Sachs, J. (2005), The End of Poverty: How We Can Make it Happen in our Lifetime,

London, Penguin Books.

Sen, A. (1966), Peasant and dualism with or without surplus labour, Journal of Political

Economy, 74: 425-50;

Srinivasan, T.N. (1979), Agricultural backwardness under semi-feudalism: Comment,

Economic Journal 89:416-19;

Solow, R. (1956), A contribution to the theory of Economic Growth, Quarterly Journal

of Economics, 70: 65 – 94.

Solow, R. (1957), Technical Change and the Aggregate Production Function, Review of

Economics and Statistics, 39: 312 – 320.

Stiglitz, J.E. (1974), Incentives and risk sharing in sharecropping, Review of Economic

Studies 41:219-55;

Taylor, L. (1983), Structuralist Macroeconomics: Applicable Models for the Third

World, New York, Basic Books.

Thirlwall, A.P. (1979), The Balance of Payments Constraint as an Explanation of

International Growth Rate Differences, Banca Nazionale del Lavoro Quarterly Review,

32: 45 – 53.

Todaro, M.P. (1969), A model of labour migration and urban unemployment in less

developed countries, American Economic Review, 59: 138-48;

Todaro, M.P. (1976), Internal migration in developing countries, Geneva, International

Labour Organization;

UNCTAD (1998), Trade and Development Report 1998, Geneva.

INTERNET WEBSITES

WWW.WORLDBANK.ORG

The wide spectrum of World Bank researches concerns also microeconomic issues

like agriculture and rural development and poverty. One can find really lots of

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contributions on these issues just looking at the “publications” section in the home

page. Once on the mask for advanced search, just introduce the field of interest

into the appropriate space. The list of required contributions will appear.

WWW.UNCTAD.ORG

Look for the link “Development of Africa”. Agricultural issues are enquired in the area

devoted to “Least developed countries”. In this case, search by clicking on the link

“programs” in the homepage.

WWW.ILO.ORG

This is the website of the International Labour Organization. The link “informal

economy” in the homepage sends you to publications, events and activities on this

issue.

WWW.ECLAC.ORG/DDPE/DESAROLLOAGRICOLA

The website of the division of productive development and management (and agricultural

development) at ECLAC, the Economic Commission For Latin American and the

Caribbean.

WWW.WIDER.UNU.EDU

The Wider Institute traditionally gives great emphasis to the problem of income

distribution and inequality. This website provides a quite extended range of Wider

publications on this theme (among other issues). They are available clicking on the link

“publications”.

WWW.ECONOMICS.OX.AC.UK

The website of the Department of Economics at Oxford University. A research group on

development economics is currently active. Their contributions can be found by

following these steps: homepage ->Research, Working papers and Centres -

>Development economics. Specific works on African economies are available.

WWW.IDS.AC.UK/IDS

The website of the Institute for Development Studies at Sussex University, United

Kingdom. Its main research topics concern industrial strategies, food security and famine,

poverty and inequality, education and social security. It is possible to find some

contributions on these issues clicking on “publications” directly from the homepage.

WWW.GDNET.ORG

The website of Global Development Network. One can find a wide range of papers on

“Microeconomics of growth” by clicking on “activities” from the homepage and then on

“global research projects”. These contributions are often targeted on specific geographic

areas.

WWW.ZED.DE

The website of the Centre for Development Research. “Economic and Technological

change” and “Ecology and Natural resources management” stand out among their

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principal research topics. One can find the desired contributions by clicking on the list of

treated issues directly from the homepage.

WWW.GRADE.UNITN.IT

The website of Grade, the Group of Research and Analysis on Development at the

University of Trento in Italy. On its website one can find some contributions on agrarian

economy, poverty analysis at microeconomic level, and on the informal sector. To find

their publications follow these steps: homepage -> activities -> publications.

WWW.DAGLIANO.UNIMI.IT

The website of Centre Luca Dagliano. Institutional and microeconomic determinant of

poverty appear among their research issues as well as European integration with Eastern

countries. It is possible to find contributions about specific issues by looking at the

publications section and enter the working papers page.

WWW.MST.ORG.BR

The website of the movement of “Sem Terra” (“Without Land”) for land reform and

redistribution in Brazil.

WWW.INOMICS.COM

Inomics is an Internet service especially tailored to the needs of economists. At this site

you can find job openings for economists, conference announcements, a human-edited

directory as well as a database of research papers in economics. From the homepage you

can subscribe to a weekly update on new conference calls.

CONFERENCES

Here follows a list of the principal conferences and meetings on development.

Poverty Reduction, Equity and Growth

First PEGNet Workshop, Kiel, Germany, from 28 April to 28 April 2006

www.ifw-kiel.de

Education and Development

Third International Conference, Preveza, Greece, from 26 May 2006 to 27 May 2007

www.preveza.teiep.gr

Poverty and Economic Policy

Addis Abeba, Ethiopia, from 17 June 2006 to 25 June 2006

www.pep-net.org

Inequity, Poverty and Development: The Role of Markets and Institutions

Canazei (Trento), Italy, from 2 July to 8 July 2006

www.dse.univr.it

Early Economic Developments

First Conference, Copenhagen, Denmark, from 31 August to 1 September 2006

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DESCRIZIONE DISPENSA

In questo materiale didattico vengono trattati i seguenti argomenti. La cooperazione internazionale: evoluzione storica ed istituzionale. Le politiche macroeconomiche per lo sviluppo: le politiche di import substitution degli anni 50 e i modelli dei “gap”; la proposta liberista di primi anni 80 ed il Washington Consensus. Microeconomia dello sviluppo: pressioni competitive ed incentivi economici, dinamica della produttività e innovazione tecnologica. Pro-poor development policies: nuove teorie sulla povertà e sulle politiche volte alla sua riduzione.


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Corso di laurea: Corso di laurea magistrale in urbanistica
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A.A.: 2011-2012

I contenuti di questa pagina costituiscono rielaborazioni personali del Publisher Atreyu di informazioni apprese con la frequenza delle lezioni di Cooperazione allo sviluppo e studio autonomo di eventuali libri di riferimento in preparazione dell'esame finale o della tesi. Non devono intendersi come materiale ufficiale dell'università Mediterranea - Unirc o del prof Botta Alberto.

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