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6 views

Models

Uploaded by

Lohit Kumar
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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4/25/2019

Gunnar Myrdal’s Theory (1956)


• Noble Prizewinner in economics, Prof. Gunnar Myrdal’s theory –
“Spread effects and Backwash effects” based on the problems of less
developed countries.
• He explained the impact of the growing region (nucleus) on rest of the
economy with the help of two opposite kinds of forces - “Spread
effect” and “Backwash effect”.
Ø “The Spread effect” – refers to all growth inducing effects i.e., inflow of
raw materials, new technologies, demand for the agricultural products, if
strong enough, these forces may start a cumulative expansionary process
in the lagging regions.

Ø “The Backwash effect” – refers to all adverse effects i.e., withdrawal of


skilled labour from underdeveloped regions, capital and goods - all of
which rush to the dynamic centre of development.

Spread effects continued to become stronger in developed countries while


Backwash effects continued to become even more widespread in backward
countries and regions.
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Rostow's Stages of Economic Growth model is one of the major historical models of economic
growth. It was published by American economist Walt Whitman Rostow in 1960.

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4/25/2019

Friedman's Core Periphery Theory, 1966

The basic principle of the 'Core-Periphery' theory is that as general prosperity


grows worldwide, the majority of that growth is enjoyed by a 'core' region of
wealthy countries despite being severely outnumbered in population by those
in a 'periphery' that are ignored.

The area of high growth becomes known as the core, and the neighboring area is
the periphery. Cores and peripheries may be towns, cities, states, or nations.

The core countries dominate and exploit the peripheral countries for labor and
raw materials. The peripheral countries are dependent on core countries for
capital.

The Core-Periphery model helps explain why some inner city areas enjoy
considerable prosperity, whilst others display all the signs of urban deprivation
and poverty.

John Friedman proposed that the world can


be divided into four types of regions.
These are;
◦ Core regions
- Core regions refer to centers, which are
usually metropolitan. These centers typically
have a high potential for innovation
(improvement) and growth.
◦ Upward transition regions
- Upward transition regions are areas of
growth, which spread over small centers,
rather than at the core.

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◦ Resource frontier regions


- This refers to a newly colonized region at the
periphery of a country, which is brought into
production for the first time
◦ Downward transition regions
- These are regions on the periphery
characterized by depleted resources, low
agricultural productivity or by outdated
industry.

According to John Friedman’s theory, there


are four stages of development.These
include;
1. Stage 1 - Pre-industrial
2. Stage 2 - Transitional
3. Stage 3 - Industrial
4. Stage 4 - Post-industrial

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Location Quotient
Location quotient (LQ) is basically a way of quantifying how
concentrated a particular industry, cluster, occupation, or
demographic group is in a region as compared to the nation.

It can reveal what makes a particular region “unique” in


comparison to the national average.

LQ is augmented by two other pieces of information: size of


industry/cluster/occupation in terms of jobs, and percent change in
LQ over a given time period.

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4/25/2019

Location Quotient
Industry LQ is a way of quantifying how “concentrated” an industry
is in a region compared to a larger geographic area, such as the
state or nation.
• To determine which industries make the regional economy
unique.
• To identify the “export orientation” of an industry and identify
the most export-oriented industries in the region.
• To identify emerging export industries beginning to bring money
into the region.

Economic Inequality

In this context, inequality measures the disparity between a percentage of


population and the percentage of resources (such as income) received by
that population.

Inequality increases as the disparity increases.

If a single person holds all of a given resource, inequality is at a maximum. If


all persons hold the same percentage of a resource, inequality is at a
minimum.

Inequality studies explore the levels of resource disparity and their practical
and political implications.

Measuring changes in inequality helps determine the effectiveness of


policies aimed at affecting inequality and generates the data necessary to
use inequality as an explanatory variable in policy analysis.

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4/25/2019

Economic Inequalities can occur for several reasons:

Physical attributes – distribution of natural ability is not


equal
Personal Preferences – Relative valuation of leisure and
work effort differs
Social Process – Pressure to work or not to work varies
across particular fields or disciplines
Public Policy – tax, labor, education, and other policies
affect the distribution of resources

An equality diagonal represents perfect equality: at every point,


cumulative population equals cumulative income.

The Lorenz curve measures the actual distribution of income.


Cumulative Income

• A – Equality Diagonal
A Population = Income
• B – Lorenz Curve
• C – Difference Between
Equality and Reality
C
When there is perfect equality, the Lorenz
curve is the equality diagonal, and the value of
the Gini Coefficient is zero.
B When one member of the population holds all
of the resource, the value of the Gini
Cumulative Population Coefficient is one.

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¡ The “distance” between the 450 line and


Lorenz Curve the Lorenz curve indicates the amount of
inequality in the society
§ The greater is inequality, the further
will the Lorenz curve be from the 450
% of National Income line

In this example, the


Lorenz curve lies
further below the line of
equality. Now, the
poorest 30% only earn
7% of the national
income.
20%

7%

30% Percentage of Population

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• SS Analysis is a method of analyzing differences between growth in a local


economy and the growth in the national economy
• It determines how much of the regional growth is due to national trends and how
much is caused by different regional factors.
• It isolates the effect of local influences on growth from effects that operates
industry wide or at the national level
• The variations of local effects across industries can indicate different strength and
weakness of the local economy

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