IntroductionEconomic development means overall increase the wellbeing of human capital over a period of time as compared to increase in national income. The only increase in the national income doesn't mean economic development. For that, economic development models used to observe the real effect.
Types of Models
- Harrod-Domar growth model
- Lewis Structural Change Model
- Rostow's Model – the 5 Stages of Economic Development
- Chenery's patterns of development
- Neoclassical dependence model
- The International Dependence Revolution (IDR)
- Traditional Neoclassical Growth Theory
1) Harrod-Domar growth modelThis model mainly depends on two factors:
- In this model, the main strategy is a mobilisation of saving and to generate investment to increase economic growth.
- It means investment leads to growth and it comes from saving.
- Higher income means higher savings.
- Economic growth measured by saving ratio and capital input-output ratio.
2) Lewis Structural Change ModelIt is also called as DUEL-SECTOR model.
This model has two sectors:
- It has surplus of labour for i.e. Agriculture sector
- Modern sector focuses on the transfer of surplus labour to the modern sector for i.e. Industrial sector
3) Rostow's Model – the 5 Stages of Economic DevelopmentThe American Economist, W.W.Rostow developed this theory by saying that nation passed through five stages of economic growth development.
- The traditional society
- The pre-conditions for off-take
- The takeoff
- The drive to maturity
- The age of high mass consumption
4) Chenery's pattern of development
- Chenery along with his colleagues examined patterns of development for countries at different per capita income levels.
- Shift from agriculture to industrial production.
- A steady accumulation of physical and human capital.
- Change in consumer demands.
- Increased urbanisation.
- A decline in family size.
- Demographic transition.
5) Neoclassical Dependence ModelThis model is based on the condition, dependence is a condition by which one country's economic development depends on others.
6) The International Dependence Revolution (IDR)
- This model opposes the tradition's emphasis on the GNP growth for the development.
- It mainly emphasis on the international relations and policy reforms.
- IDR model stated that developing countries as intercept by institutional, political, and economic rigidities in both domestic and international setup.
7) Traditional Neoclassical Growth Theory
- This theory mainly depend on these three Output growth results
- Increase in labor
- Increase in capital
- Changes in technology
Conclusion:The open economy has higher levels of per capita income while the closed economy has low savings rates leads to lower per capita income.
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