Community Economic Development ECON 3990
Economic Theory
1
Introduction
Survey of existing economic theories
Two areas of theory Regional Development Theory Economic Development Theory
2
Economic Development Theories
Development Stages Theory
Staple Theory
Big Push Theory
Convergence Theory
3
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
8
Staple Theory
Impact of export activity on the domestic economy and society
The construction of a staple theory involves classifying the spread effects
9
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
14
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
18
Recommended
