Bring out the differences and similarities between endogenous growth models and exogenous growth models.
Differences
Table 1
| Exogenous | Endogenous | |
| Assumptions | Diminishing marginal returns on investments | Increasing marginal returns on capital investments |
| Constant returns to scale/DRS? | Increasing returns to scale in aggregate production | |
| Focus on externalities in determining the rate of return on investments | ||
| Source of growth | Growth in Capital labour ratio due to savings and investment | Increasing returns are a source of growth, apart from technology, public and private investments in human capital, external economies and productivity improvements. |
| Eqn | Y=AK | |
| Long term growth | Growth tapers off in the long run | Since there are no diminishing returns to capital, possibility exists that investments in physical and human capital can generate external economies and productivity that are enough to offset diminishing returns. The net result is sustained long term growth. |
| Convergence | Proposes convergence | No tendency for convergence. A temporary or prolonged recession in one country can lead to a permanent increase in the income gap between itself and wealthier countries |
| International flow of capital | Int flow of capital because of higher returns in developing countries. This leads to convergence | International flow of capital accentuates wealth disparity between developed and developing countries. Though return on investment in developing country may be high, complementary investments in human capital, infrastructure, or R&D are low. |
| Technological change | Do not explain technological change. Its exogenous. | Explain technological change as an endogenous outcome of public and private investments in human capital and knowledge intensive industries. |
Similarity
- Both emphasise the importance of savings and human capital investments for achieving rapid growht
Models of Coordination failure
- Big Push
Models of structural change
- Lewis’s two sector model
- Chenery’s patterns of development
Convergence in Solow’s model. Assess.
<Categorise models according to their emphasis and chronology>
Compare Rostow’s model with the Harrod-Domar model of growth.
Hypotheses of Underdevelopment
- Geographic determinism
Basic Needs Approach
- One of the approaches to the measurement of absolute poverty
- It attempts to define the absolute minimum resources necessary for long term physical well-being usually in consumption goods
- The poverty line is then defined as the amount of income required to satisfy those needs
- Basic needs approach was introduced by the ILO in 1976 at its World Employment Conference
- Traditional list of immediate basic needs is food, shelter and clothing.
- Related approaches focus on capabilities rather than consumption
Basic needs approach and Development
- Development programs following the basic needs approach do not invest in economically productive activities that will help a society carry its own weight in the future, rather it focuses on allowing the society to consume just enough to rise above the poverty line and meet its basic needs.
- These programs focus more on subsistence than fairness
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Human Development Index
The Human Development Index (HDI) is a summary composite index that measures a country’s average achievements in three basic aspects of human development: health, knowledge, and income. It was first developed by the late Pakistani economist Mahbub ul Haq with the collaboration of the Nobel laureate Amartya Sen and other leading development thinkers for the first Human Development Report in 1990. It was introduced as an alternative to conventional measures of national development, such as level of income and the rate of economic growth.
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