Community Economic Development ECON 3990

Community Economic Development ECON 3990

Economic Theory

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Introduction

Survey of existing economic theories

Two areas of theory Regional Development Theory Economic Development Theory

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Economic Development Theories

Development Stages Theory

Staple Theory

Big Push Theory

Convergence Theory

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Regional Development Theories

Development Stages

Theory

Export Base Theory

Location Theory

Attraction Model Theory

4

Theories

Post World War II: theories emerged to

explain economic development

Two opposing theories of regional growthDevelopment Stages TheoryExport Base Theory

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Development Stages Theory

Sequential path of development

Theory proposes three stages:

Primary SecondaryTertiary

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Export Base Theory

Regional growth is dependent on the

export base

“Exportable Commodities”

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Staple Theory of Economic Growth

Staple theory explains economic growth as a process of diversification around the base

Central concept, examines the spread effects of the export sector

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Staple Theory

Impact of export activity on the domestic economy and society

The construction of a staple theory involves classifying the spread effects

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Staple Theory: Linkages

Backward Linkages: a measure of the extent that a sector’s output depends on inputs purchased from other sectors in the region.

Forward Linkages: a measure of the extent that a sector’s output is sold as inputs to other sectors of the region

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Staple Theory: Linkages

Final Demand Linkage: amount that investment in domestic sectors is producing consumer goods for the export sector

Linkages have a multiplier effect

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Staple Theory: Leakages

Leakages measure income flows leaving a region

Examples include migratory labour and servicing capital imports

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The Staple Trap

over-concentration of resources devoted to the export sector

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Big Push Theory

development requires a series of projects

Complementarity of industries

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Location Theory

Regions best suited to industrialization are predisposed to higher rates of growth and development

Location location location!

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Attraction Models

Community can alter its position by offering incentives and subsidies

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Convergence Theory

Underdevelopment is a consequence of increasing divergence and unresponsiveness of domestic production to respond to the needs of the local population

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Two stage strategy of convergence

Convergence of domestic resource use and domestic demand

Convergence of domestic demand and domestic need

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