Leading issues in economic development, GM Meier, JE Rauch

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Content: Leading Issues in economic development SEVENTH EDITION GERALD M. MEIER Stanford University JAMES E. RAUCH University of California, San Diego New York Oxford OXFORD UNIVERSITY PRESS 2000
CONTENTS
LIST OF EXHIBITS
xv
PREFACE
xvii
USING THIS BOOK
xix
I. INTRODUCTION
1
Overview
1
I.A. MEASURING DEVELOPMENT
5
Note I.A.1. The Evolution of Measures of Development
5
Selection I.A.1. Why Are Services Cheaper in the Poor Countries?
13
Comment I.A.1. The Productivity and Factor Proportions Explanations Again
17
Selection I.A.2. Burden of Poverty
18
Comment I.A.2. Capabilities and Entitlements
30
I.B. ECONOMIC PERFORMANCE OF LESS DEVELOPED COUNTRIES:
THE RECENT PAST
35
Selection I.B.1. The East Asian Miracle
36
Selection I.B.2. East Asian Crisis: An Overview
42
Selection I.B.3. Completing China's Move to the Market
48
Selection I.B.4. Latin American Economic Development: 1950­1980
52
Selection I.B.5. The Launching of the Reforms
58
Selection I.B.6. Indian Economic Reforms: Background, Rationale,
Achievements, and Future Prospects
61
Note I.B.1. The Triumph of Laissez-Faire?
64
Selection I.B.7. Explaining Africa's Development Experiences
65
I.C. THE DISCIPLINE OF DEVELOPMENT ECONOMICS
69
Note I.C.1. Evolution of Development Economics
69
Comment I.C.1. Classical Growth Theory
72
Comment I.C.2. Development Economics as a Special Subject
73
Note I.C.2. New Endogenous Growth Theory
75
vii
viii CONTENTS
II. HISTORICAL PERSPECTIVE
77
Overview: The Division of the World
77
Selection II.1. The Spread of Economic Growth to the Third World: 1850­1980
80
Comment II.1. State-owned Enterprises and Privatization
96
Selection II.2. The Division of the World and the Factoral Terms of Trade
97
Note II.1. Why Not Export First?
102
Note II.2. The Lewis Model of the World Economy
104
Selection II.3. Agricultural Productivity, Comparative Advantage, and
Economic Growth
107
Comment II.2. Income Elasticity of Demand for Food in the Matsuyama Model
110
Selection II.4. Income Distribution, Market Size, and Industrialization
111
Comment II.3. Minimum Market Size in the Murphy­Shleifer­Vishny Model
113
Selection II.5. Divergence, Big Time
114
III. SAVINGS AND INVESTMENT
119
Overview: Savings--The Engine of Growth?
119
Note III.1. The AK Model
123
Selection III.1. Is Fixed Investment the Key to Economic Growth?
126
Selection III.2. interest rates in the Organized Money Markets of
Underdeveloped Countries and Interest Rates Outside the
Organized Money Markets of Underdeveloped Countries
129
Selection III.3. Financial Liberalization in Retrospect: Interest Rate Policies in LDCs
133
Comment III.1. Financial Liberalization
136
Selection III.4. Financial Development and Economic Growth in
Underdeveloped Countries
138
Selection III.5. Financial Development and Economic Growth: Views and Agenda
141
Selection III.6. Good Policy or Good Luck? Country Growth
Performance and Temporary Shocks
147
Comment III.2. Policies Versus Shocks: A Closer Look
153
IV. International trade AND TECHNOLOGY TRANSFER
155
Overview
155
IV.A. TRADE
159
Selection IV.A.1. Natural Resource Abundance and Economic Growth
161
Note IV.A.1. Import-substituting Industrialization and the Infant-Industry Argument
168
Selection IV.A.2. Typology in Development Theory: Retrospective and Prospects
170
Selection IV.A.3. An Exposition and Exploration of Krueger's Trade Model
175
Comment IV.A.1. Moving Up the Ladder and Changes in Relative Costs of Factors
of Production
178
CONTENTS ix
Selection IV.A.4. The Process of Industrial Development and Alternative
Development Strategies
180
Selection IV.A.5. Exchange Control, Liberalization, and Economic Development
187
Selection IV.A.6. Trade Policy Reform
191
Comment IV.A.2. Stabilization-cum-Liberalization Programs
193
Selection IV.A.7. Getting Interventions Right: How South Korea and Taiwan Grew Rich 195
Note IV.A.2. Tradeability of Intermediate Goods, Linkages, and Bottlenecks
202
IV.B. FOREIGN CONTACT AND TECHNOLOGY TRANSFER
204
Note IV.B.1. Learning in International Production Networks
204
Selection IV.B.1. Technology Gaps Between Industrial and developing countries:
Are There Dividends for Latecomers?
206
Selection IV.B.2. The Benefits of FDI
209
Note IV.B.2. Trade as Enemy, Handmaiden, and Engine of Growth
211
V. HUMAN RESOURCES
213
Overview
213
V.A. EDUCATION
216
Note V.A.1. Three Views of the Contribution of Education to Economic Growth
216
Selection V.A.1. The Role of Human Capital in Economic Development:
Evidence from Aggregate Cross-Country Data.
218
Selection V.A.2. Economic Impact of Education
223
Comment V.A.1. Ability Differences, Spillovers, and the Returns to Education
226
Comment V.A.2. Education and Development
227
Selection V.A.3. Interpreting Recent Research on Schooling in Developing Countries 229
Selection V.A.4. Schooling Quality in a Cross Section of Countries
234
Selection V.A.5. Creating Human Capital
237
V.B. POPULATION
241
Note V.B.1. The Size of the World's Population and the Size of the Average Family 241
Selection V.B.1. Economic Approaches to Population Growth
242
V.C. HEALTH AND NUTRITION
249
Selection V.C.1. Health and Nutrition
254
Selection V.C.2. Investing in Health
257
V.D. GENDER AND DEVELOPMENT
263
Selection V.D.1. Women's Education in Developing Countries: An Overview
263
x CONTENTS
Selection V.D.2. Women in the Labor Force
271
Selection V.D.3. Women, Poverty, and Development in the Third World
275
Selection V.D.4. Women in Developing Countries
280
Selection V.D.5. Missing Women
283
Selection V.D.6. Grameen Bank: Performance and Sustainability
285
Comment V.D.1. The Grameen Bank and "Empowerment" of Women
287
Comment V.D.2. Gender-Aware Analysis
288
VI. MIGRATION AND THE URBAN INFORMAL SECTOR
289
Overview: The Evolving View of Urban Underemployment, the Informal Sector,
and Their Connection with Rural-Urban Migration
289
Selection VI.1. Urban Growth in Developing Countries: A Demographic Reappraisal 293
Selection VI.2. Economic Development with Unlimited Supplies of Labor
297
Selection VI.3. A Model of Labor Migration and Urban Unemployment in
Less Developed Countries
300
Note VI.1. The Lewis Versus the Harris­Todaro View of Underemployment in
Less Developed Countries
302
Selection VI.4. Wage Spillover and Unemployment in a Wage-gap Economy:
The Jamaican Case
307
Note VI.2. Econometric Studies of Migration
312
Selection VI.5. The Informal Sector
313
Selection VI.6. A Reassessment of Kenya's Rural and Urban Informal Sector
316
Selection VI.7. Labour Market Modelling and the Urban Informal Sector:
Theory and Evidence
318
Selection VI.8. The Role of the Informal Sector in the Migration Process:
A Test of Probabilistic Migration Models and Labour Market Segmentation
for India
323
VII. AGRICULTURE
329
Overview
329
VII.A. THE IMPORTANCE OF AGRICULTURE FOR ECONOMIC DEVELOPMENT
332
Selection VII.A.1. Development Strategy in a Limping World Economy
332
Note VII.A.1. Food, Hunger, Famine
335
VII.B. DESIGNING AN AGRICULTURAL STRATEGY
336
Selection VII.B.1. Some Theoretical Aspects of Agricultural Policies
336
Selection VII.B.2. Criteria for the Design of Agricultural Development Strategies
340
Comment VII.B.1. The Green Revolution
345
Comment VII.B.2. Land Reform Selection VII.B.3. The Agricultural Transformation Note VII.B.1. Induced Technical and Institutional Change
CONTENTS xi 346 347 350
VII.C. MICROECONOMICS OF THE RURAL SECTOR
352
Selection VII.C.1. The New Development Economics
352
Selection VII.C.2. Contractual Arrangements, Employment, and Wages in
Rural Labor Markets: A Critical Review
356
Selection VII.C.3. The New Institutional Economics and Development Theory
359
Selection VII.C.4. Rural Credit Markets and Institutions in Developing Countries:
Lessons for Policy Analysis from Practice and Modern Theory
361
Selection VII.C.5. A Survey of Agricultural Household Models:
Recent Findings and Policy Implications
364
Comment VII.C.1. Supply Functions and Price Responsiveness
366
VII.D. AGRICULTURAL PRICING POLICY AND URBAN BIAS
368
Note VII.D.1. Agricultural Pricing Policy
368
Selection VII.D.1. Urban Bias
370
Comment VII.D.1. Rural­Urban Terms of Trade
373
Comment VII.D.2.The Rural­Urban Divide
373
VIII. INCOME DISTRIBUTION
375
Overview
375
Note VIII.1. Measurement of income inequality
379
VIII.A. THE IMPACT OF DEVELOPMENT ON INCOME DISTRIBUTION
382
Selection VIII.A.1. Economic Growth and Income Inequality
382
Selection VIII.A.2. Inequality, Poverty, and Development
387
Selection VIII.A.3. Growth and Income Distribution
391
Selection VIII.A.4. A Note on the U Hypothesis Relating Income Inequality
and Economic Development
394
Selection VIII.A.5. Economic Development, Urban Underemployment, and
Income Inequality
395
Comment VIII.A.1. The Informal Sector, Intraurban Inequality, and the Inverted U
399
VIII.B. THE IMPACT OF INCOME DISTRIBUTION ON DEVELOPMENT
401
Selection VIII.B.1. Distributive Politics and Economic Growth
401
Selection VIII.B.2. Income Distribution, Political Instability, and Investment
404
xii CONTENTS
VIII.C. CASE STUDIES
409
Selection VIII.C.1. Economic Growth and Income Distribution in Taiwan, 1953­64
409
Selection VIII.C.2. Brazilian Size Distribution of Income
417
IX. POLITICAL ECONOMY
421
Overview
421
IX.A. THE (PROPER) ROLE OF THE STATE IN LESS DEVELOPED COUNTRIES
426
Selection IX.A.1. Public Policy and the Economics of Development
426
Comment IX.A.1. Development Planning
431
Comment IX.A.2. Governing the Market
432
IX.B. RENT SEEKING AND GOVERNMENT FAILURE
434
Note IX.B.1. What Are Rents?
434
Selection IX.B.1. The Political Economy of the Rent-Seeking Society
437
Comment IX.B.1. Complete Rent Dissipation Through Competitive Rent Seeking in
the Harris­Todaro Model
440
Comment IX.B.2. The Relationship Between Rent Seeking and Corruption
440
Selection IX.B.2. Neoclassical Political Economy, the State, and
Economic Development
442
Selection IX.B.3. India
446
Selection IX.B.4. Governments and Agricultural Markets in Africa
450
Selection IX.B.5. Africa's Growth Tragedy: Policies and Ethnic Divisions
456
IX.C. STATE CAPACITY
471
Selection IX.C.1. Institutions and Economic Performance:
Cross-Country Tests Using Alternative Institutional Measures
471
Selection IX.C.2. The State as Problem and Solution:
Predation, Embedded Autonomy, and Structural Change
476
Selection IX.C.3. Taking Trade Policy Seriously:
Export Subsidization as a Case Study in Policy Effectiveness
495
Selection IX.C.4. Bureaucratic Structure and Bureaucratic Performance in
Less Developed Countries
508
X. DEVELOPMENT AND THE ENVIRONMENT
517
Overview: Environmental Problems in Less Versus More Developed Countries
517
Selection X.1. Development and the Environment
520
Comment X.1. The "Environmental Kuznets Curve''
529
Selection X.2. North­South Trade and the global environment
531
CONTENTS xiii
Comment X.2. Empirical Studies of the Impact of International Trade on the
Environment in Less Developed Countries
533
Selection X.3. Deforestation and the Rule of Law in a Cross Section of Countries
535
Selection X.4. Determinants of Pollution Abatement in Developing Countries:
Evidence from South and Southeast Asia
544
Selection X.5. Sustainable Development: Ecology and economic progress
554
Comment X.3. Weak Sustainability, Genuine Savings, and Green National Accounting
559
APPENDIX: HOW TO READ A REGRESSION TABLE
561
INDEX OF SELECTION AUTHORS
567
INDEX
569
EXHIBITS
Exhibit I.A.1. Basic Indicators
8
Exhibit I.A.2. Exchange-Rate-Deviation Index in Relation to Real GDP per Capita,
Thirty-four Countries, 1975.
12
Exhibit I.A.3. The Human Development Index
21
Exhibit I.A.4. Similar Income, Different Human Development, 1993
23
Exhibit I.A.5. Human Development Index Rankings
24
Exhibit I.A.6. Population and Labor Force
31
Exhibit I.B.1. Balance Sheet of Human Development--Developing Countries
35
Exhibit I.B.2. East Asian GDP Growth, 1996­1998
41
Exhibit III.1. Economic and Social Indicators in Fast and Slow Growth Economies
122
Exhibit IV.A.1. Share of Primary Products in Merchandise Exports and Index of
Export Concentration
159
Exhibit V.C.1. Health Indicators
249
Exhibit V.C.2. Life Expectancies and Health Expenditures in Selected Countries
262
Exhibit VI.1. Self-employment and Unpaid Family Workers Circa 1990
295
Exhibit VII.D.1. Rural and Urban Poverty in the 1980s
373
Exhibit IX.A.1. Market Failure and State Intervention
431
PREFACE The economics of development is one of the most exciting subjects in social science. Why, two centuries after the Industrial Revolution, are poverty and its attendant ills so prevalent in most of the world? And what can be done about it? Nobel Prize­winning economist Robert Lucas wrote of the questions addressed by development economics, "Once one starts to think about them, it is hard to think about anything else" ["On the Mechanics of Economic Development," Journal of Monetary Economics 22 (July 1988), p. 5]. Development economics is also a very frustrating subject. Unlike most areas within economics, there exists no consensus on what the student should know. Two scholars can with equal justification write two completely different textbooks. The aim of this book is to convey as much of the excitement of development economics and as little of the frustration as possible. To this end we have avoided writing the ordinary type of textbook, instead culling the most insightful readings from the diffuse field of development and bringing them into conceptual order. By using this distinctive approach we allow for a variety of perspectives while keeping in sight the most important overarching themes. The section "Using This Book" (p. xix) describes our strategy of combining excerpted readings ("Selections") with our own "Overviews," "Notes," "Comments," and "Exhibits.'' After being responsible for the previous six editions of Leading Issues in Economic Development over the past 35 years, Professor Meier has now selected Professor Rauch to upgrade and modernize this seventh edition and to perpetuate subsequent editions. This edition is mainly Professor Rauch's effort. It reflects his desire to strengthen the analytical and quantitative dimensions of development economics and to illuminate contemporary--and future--problems of development policymaking. In all, it provides fresh and serious attention to the interplay between development experience, changing views of economists, and policy. While this seventh edition maintains the format of previous editions, the inclusion of a new author has brought many changes relative to the sixth edition: · New chapters on income distribution and on development and the environment have been added while other chapters have been consolidated. · Most of the Selections and Notes are new. · The representation in the Selections of articles from leading professional journals has increased. · The Selections make greater use of statistical analysis, and an Appendix, "How to Read a Regres- sion Table," has been added to ensure that these Selections are easily accessible to all readers. We wish to express our appreciation to the authors and publishers who have granted permission to use excerpts from publications for which copyrights exist. Specific acknowledgment is given with each Selection. Some parts of the original versions of the excerpted materials have been omitted out of consideration for relevance and to avoid repetition. In some instances, tables and diagrams have been renumbered and the footnotes have been deleted or renumbered. We would like to thank a number of extremely busy people who generously took time out to provide advice or to comment on portions of the manuscript: Richard Carson, Graham Elliott, Peter Evans, and Dani Rodrik. We would also like to acknowledge the valuable research assistance of Neville Francis, Timothy Kane, Paula Lindsay, and Donald McCubbin. James Rauch wishes to thank his wife, Doris xvii
xviii PREFACE Bittar, for making room in her life for this book during its final months of preparation. Kenneth MacLeod has been a very helpful and patient editor. Finally, we are grateful to the entire profession of social scientists whose writings on development provide the foundation for this volume.
USING THIS BOOK Instructors and students can use this book more like a main text or more like a supplementary reader. To facilitate the latter approach the contents have been designed to allow individual freedom of choice in deciding what chapters and Selections to read and in what sequence. If the former approach is taken, the organizational and thematic guidance of the chapter Overviews can be followed and the chapters can be read in numerical order. The chapters include the following materials: Overviews: These are introductory essays that show how the subsequent chapter materials fit together and elucidate one or more overarching themes. They sometimes contain ideas that are not explicitly presented by the other chapter materials. Selections: These are the core of the book. They present a broad sample of the major contributions by scholars and practitioners on the central issues in economic development. Each Selection has been edited for the sake of brevity and to highlight the points of greatest relevance for the chapter in which it appears. Notes: These serve two purposes. One is to expound important ideas that are extant in the literature but are not presented as clearly or simply as we would like. The other is to present more original material that complements the Selections. Comments: Like the Notes, these serve two purposes. One is to clarify or expand upon the immediately preceding Selection. The other is to suggest additional readings on the subject of the immediately preceding Selection. Exhibits: These are tables and charts that provide empirical illustrations and data on topics under discussion. Starting with Selection III.1, some Selections include regression tables. Readers without econometric training are urged to refer to the Appendix to get the most insight from these Selections. xix
INDEX OF SELECTION AUTHORS
Ahluwalia, Montek S., 387­90 Alesina, Alberto, 401­3, 404­8 Balassa, Bela, 180­86 Banerjee, Biswajit, 323­27 Barbier, Edward, 554­59 Bardhan, Pranab, 359­60, 446­49 Barro, Robert J., 234­36 Bates, Robert H., 450­55 Behrman, Jere R., 254­56 Benhabib, Jess, 218­22 Bhagwati, Jagdish N., 13­17, 187­90 Binswanger, Hans P., 356­58 Birdsall, Nancy, 242­48 Blomstrцm, Magnus, 126­28 Braverman, A., 361­63 Buvinic, Mayra, 275­79 Cardoso, Eliana, 52­57 Chichilnisky, Graciela, 531­33 Collier, Paul, 280­82 Deacon, Robert T., 535­43 Deardorff, Alan V., 175­78 Deolalikar, Anil B., 254­56 Easterly, William, 147­53, 456­70 Edwards, Sebastian, 58­60 Evans, Peter B., 476­94, 508­15 Fei, John C. H., 409­16 Fields, Gary S., 318­22, 391­93 Fishlow, Albert, 52­57, 417­20 Guasch, J. L., 361­63 Hanushek, Eric A., 229­33 Harrison, Ann, 209­10 Hettige, Hemamala, 544­53
Hill, M. Anne, 263­70 Huq, Mainul, 544­53 ILO Mission, 313­15 International Labour Office, 271­74 Johnston, Bruce F., 340­45 Keefer, Philip, 471­75 Khalily, Baqui, 285­87 Khan, Zahed, 285­87 Khandker, Shahidur R., 285­87 King, Elizabeth M., 263­70 Knack, Stephen, 471­75 Kremer, Michael, 147­53 Krueger, Anne, 187­90, 437­40 Kuo, Shirley W. Y., 409­16 Kuznets, Simon, 382­86 Lee, Jong-Wha, 234­36 Levine, Ross, 141­46, 456­70 Lewis, W. Arthur, 97­101, 297­99, 332­34 Lipsey, Robert E., 126­28 Lipton, Michael, 370­72 Livingstone, Ian, 316­17 Lycette, Margaret A., 275­79 McKinnon, Ronald I., 133­36 Markandya, Anil, 554­59 Matsuyama, Kiminori, 107­9 Murphy, Kevin M., 111­13 Overseas Development Institute, 65­68 Pack, Howard, 206­8 Pargal, Sheoli, 544­53 Patrick, Hugh T., 138­40 Pearce, David, 554­59
Perkins, Dwight, 48­51 Perotti, Roberto, 404­8 Preston, Samuel H., 293­94 Pritchett, Lant, 114­18, 147­53 Psacharopoulos, George, 223­26 Ranis, Gustav, 170­74, 409­16 Rauch, James E., 395­99, 508­15 Reynolds, Lloyd G., 80­95 Robinson, Sherman, 394 Rodrik, Dani, 195­201, 401­3, 495­507 Rosenzweig, Mark R., 356­58 Sachs, Jeffrey D., 161­67 Sen, Amartya, 283­84 Shleifer, Andrei, 111­13 Singh, Inderjit, 364­66 Spiegel, Mark M., 218­22 Squire, Lyn, 364­66 Srinivasan, T. N., 61­63, 442­45 Stern, Nicholas, 426­30 Stiglitz, Joseph E., 336­39, 352­55 Strauss, John, 364­66 Summers, Lawrence, 147­53 Tidrick, Gene M., 307­11 Timmer, C. Peter, 347­49 Todaro, Michael P., 300­301 Vishny, Robert W., 111­13 Wai, U Tun, 129­32 Warner, Andrew M., 161­67 Wheeler, David, 544­53 World Bank, 18­20, 36­41, 42­47, 191­92, 237­40, 257­61, 520­29 Zejan, Mario, 126­28
567
INDEX
Acquired immune deficiency syndrome (AIDS), 257, 260 Adverse selection effect, 362 Afghanistan, 88, 91, 263, 536 Africa, 104. See also East Africa; North Africa; South Africa; Sub-Saharan Africa; West Africa; agriculture and, 97, 100, 333; divergence and, 115; economic environment in, 430; economic growth in, 84­85, 86­87, 89, 91, 92, 94; education in, 219, 225; environment and, 526, 528; health in, 258; industrialization and, 98, 99, 451­52; population of, 244; poverty in, 18; ruralurban migration in, 293, 294; state intervention in agricultural markets, 450­55; typology of development in, 170­74; unemployment in, 310; women in, 274, 275, 276, 281 Agency for Marginal Farmers and Agricultural Labour (MFAL), 447 Agricultural household models, 331, 364­66 Agricultural productivity: comparative advantage, economic growth and, 107­9; factoral terms of trade and, 99­101; in Lewis model of world economy, 104­6; soil, water and, 522­23; strategies for increasing, 343 Agriculture, 329­74. See also Rural entries; bimodal strategy, 330, 340­42, 343, 345, 347; design of development strategies for, 340­45; division of world into industry and, 97­99; economic development and, 332­34; economic growth and, 81, 82, 83­84, 342­43; elasticity of demand for goods, 107­8, 109, 110; income distribution and, 332­33, 336, 341­42, 384; interrelated strategy in, 347­48; in Krueger's trade model, 175­78; policies for, 336­39; pricing policy for, 331, 337­38, 366­67, 368­69, 448; state intervention in African, 450­55; in Sub-Saharan Africa, 65; supply elasticity of production, 366­67; in Taiwan, 340, 344,
348, 412­14; transformation of, 347­49; unimodal strategy, 330, 340­43, 345, 347; women and, 271, 272­73, 276, 278­79 Ahluwalia, Montek, 209 Air quality, 521­22, 525 AK model, 120, 121, 123­25, 151, 178 Algeria, 86, 87 Alliance for Progress, 54 Amakudari, 481 Amazon Basin, 532 Argentina, 99, 406; agriculture and, 108; economic development in, 52; economic growth in, 86, 92, 94, 473; economic reforms in, 58; industrialization and, 98, 182, 183; poverty in, 55; trade and, 192, 202 Asia, 2, 104. See also East Asia; South Asia; Southeast Asia; agriculture and, 97, 100, 333, 344; economic growth in, 80, 84, 86, 93; education in, 429; environment and, 526; industrialization and, 99; interest rates in, 129, 134; population of, 242; rural-urban migration in, 294; women in, 271, 272­73, 274, 275, 276, 283, 284 Assassinations, 458, 540 Association of Southeast Asian Nations (ASEAN), 43 Australia, 88, 99, 101, 105, 183 Automobile industry, 202, 500­501 Autonomy. See Embedded autonomy; State autonomy Backwash, 98 Bahrain, 166 Balanced growth, 69­70 Bangladesh: economic growth in, 88; family planning programs in, 247; famine in, 335; Foreign direct investment and, 210; Grameen Bank of, 215, 285­88; infrastructure of, 429; pollution abatement in, 544­45, 548­51; population in, 244, 245; poverty in, 18; technology transfer and, 204; women in, 271, 283, 284; women's education in, 269 Bangladesh Chemical Industries Corporation (BCIC), 548 Banks, 139; central, 46, 142, 502; in
East Asia, 36, 37, 44, 45; financial development and, 142; in India, 61; interest rates in, 129, 131, 132 BAPEDAL, 547 Barbados, 297 Basic indicators, 8­11 BEFIEX program, 499­500 Belgium, 107 Benin, 264 Big push, 69 Bimodal agricultural strategy, 330, 340­42, 343, 345, 347 Biodiversity, 523­24 Birth rates, 2, 82, 298. See also Fertility rates Black markets, 162, 424, 458, 459, 460, 461, 463 Bolivia, 144; education in, 237, 240; export subsidies and, 495, 503, 505; poverty in, 18; women in, 276; women's education in, 264 Botswana, 65; economic growth in, 147, 152; ethnic diversity in, 463; political system of, 406; trade and, 156; women in, 275; women's education in, 263, 268 Branco, Castello, 417 Brazil, 5, 6; deforestation in, 536; economic development in, 52; economic growth in, 54, 83, 84, 86, 91, 92, 93, 94; economic reforms in, 58, 60; education in, 230, 231, 232, 239, 419; environment and, 527, 528, 531; export subsidies and, 495, 499­501; health in, 427; income distribution in, 56, 378, 417­20; industrialization and, 98, 99; poverty in, 36, 55; state intervention in, 488­91, 493, 494; trade and, 189, 192, 202; women in, 273, 276 Bribery, 438, 461, 509 Brundtland Report, 555 Bureaucracy, 471, 472, 477­78, 481, 482­83, 484, 486­89, 490, 491­92, 493­94; internal promotion in, 508­9, 511, 514; meritocratic recruitment in, 424, 478, 482, 486, 488, 508, 509, 510­11, 512, 514; predation and, 479­80; salaries in, 508­9, 511, 514; structure and performance of, 508­15 569
570 INDEX Burkina Faso, 263, 276, 526 Burma, 86, 89, 93, 99 Burundi, 115 Busia, Kofi, 453, 462­63 Business Environmental Risk Intelligence (BERI), 471, 472, 508, 514 Business International (BI), 508 Buyer-driven chains, 204­5 Cameroon, 276 Canada, 88, 99, 101, 183, 417 Capital accumulation, 72, 73, 178­79 Capital availability, 42­43 Capital formation, 126­28 Carbon taxes, 527 Caribbean, 19, 59, 263, 266, 271, 275, 459 Catch-up effects, 218, 220, 221, 459­60 Central Banks, 46, 142, 502 Central Europe, 98, 99, 181, 182 Ceylon, 86, 98, 99 Chad, 115 Chaebols, 45, 197, 483­84 Chiang Kai Shek, 484 Child mortality, 19, 82, 257, 260 Children: balance sheet of human development, 35; poverty and, 18; women's earnings and nutrition in, 277 Chile, 99, 183­84; economic development in, 52; economic growth in, 86, 89, 91, 92; economic reforms in, 58; environment and, 528; health in, 429; poverty in, 55; technology and, 207; trade and, 156, 192; women in, 276, 277 China, 3, 99, 105, 409. See also Hong Kong; Taiwan; divergence and, 115; economic crisis in, 42; economic growth in, 36, 38­39, 80, 81, 83­84, 85, 88, 89, 90, 91, 92, 93; environment and, 523, 524, 527; famine in, 335; health in, 427­29; industrialization and, 98; move to the market, 48­51; poverty in, 19; rural-urban migration in, 293, 294; women in, 271, 283­84; women's education in, 263 China Productivity Center, 207 China Steel, 485 Chinese Petroleum Corporation (CPC), 198 Chlorofluorocarbons (CFCs), 521 Chrysler, 182 Classical economics: development economics and, 69; growth theory and, 72­73; income inequality and, 387 Closed economies, 77­78, 98, 107, 108 Cocoa Marketing Board, 455
Coefficient of our ignorance, 225 Collective choice analysis, 443 Colombia: economic development in, 52; economic growth in, 91, 93, 94; industrialization and, 99, 112; trade and, 202; women's education in, 263 Colonialism, 170 Colosio, Luis Donaldo, 58 Commodity markets, 450­51 Commonwealth of Independent States (CIS), 48 Communist Party (China), 48 Community Development Programmes, 446­47 Comparative advantage, 107­9 Competitiveness hypothesis, 355 Concertina approach to tariffs, 192 Constrained Pareto efficiency, 354, 360 Contracts: enforceability of, 472; government repudiation of, 471; in rural sector, 330, 356­58 Coordination: failure of, 195­98; investment policies for, 198­200 Copper, 183­84 Corruption, 440­41, 471, 508, 512, 514 Costa Rica, 319­21, 473, 532 Cost sharing, 352­53, 354 Cote d'Ivoire. See Ivory Coast Council for Mutual Economic Assistance (CMEA), 48 Council on Economic Planning and Development (CEPD), 484 Crash Scheme for Rural Employment (CSRE), 448 Credit: in agricultural market, 338, 340; in East Asia, 43­44; in rural sector, 361­63, 447; women and, 280­81, 285­86 Cross-country studies: of deforestation, 535­43; of economic growth, 458­60; of economic growth and financial development, 141­45; of education and economic development, 218­22; of education quality, 234­36; of income inequality, 387­90 Cuba, 90, 91 CUF, 549 Cultural Revolution, 50, 115 Deadweight losses, 422, 435, 443 Death rates. See Mortality rates Decollectivization, 49­50 Default risk, 244­45, 539 Deforestation, 518, 523, 531­32, 535­43; income and, 538­39; population and, 536­38, 541­42 Demand-following supply response, 138­40 Democracies, 402, 404 Deng Xiaoping, 48 Denmark, 527
DENR, 545, 546 Departmento Administrativo de Servico Publico (DASP), 489 Deterioration phase of income inequality, 389 Developmental states, 480­88 Development economics, 69­76; evolution of, 69­74; in rural sector, 352­55 Development measures, 5­34; burden of poverty in, 18­35; evolution of, 5­7; price of services as, 13­17 Development theory, 359­60 Dictatorships, 402, 404 Direct taxes, 368, 386, 418 Disability-adjusted life year (DALY), 257, 259 Disguised unemployment, 297, 317 Divergence, 114­18 Division of labor: classical growth theory on, 72; by gender, 272­73 Domestic investment, 36 Domestic resource cost (DRC) ratio, 182 Dominican Republic, 52, 263 Dutch disease model, 161, 164, 165, 173 Earnings. See Wages/earnings East Africa, 92, 275­76 East Asia: economic crisis in, 42­47; economic growth in, 36­41, 147, 152; education in, 36, 234­35, 236, 237­39; family planning programs in, 36, 246; income distribution in, 407; market governance in, 432; poverty in, 19; state intervention in, 480, 482, 486­87, 494; Sub-Saharan Africa compared with, 456, 460, 466, 467; typology of development, 170­74; women's education in, 263, 266 Eastern Europe, 2; China compared with, 48; environment and, 526; import substitution and, 181; industrialization and, 182 Econometric studies of migration, 312 Economic booms, 85­88 Economic Commission for Latin America, 52­53 Economic development: agriculture and, 332­34; education and, 218­22, 227­28; environment and, 520­29; impact of income distribution on, 377, 401­8; impact on income distribution, 375­77, 382­400; income inequality and, 387­90, 394, 395­99; in Latin America: 1950­1980, 52­57; in neoclassical economics, 442­45; planning for, 431­32; policy role in, 426­33; in Sub-Saharan
Africa, 65­68; typology of, 170­74; underemployment and, 395­99; unlimited labor supply and, 297­99 Economic environment, 429­30 Economic growth: agricultural productivity, comparative advantage and, 107­9; agriculture and, 81, 82, 83­84, 342­43; cross-country studies of, 141­45, 458­60; in East Asia, 36­41, 147, 152; education and, 216­17; environment and, 524­26; extensive, 80­85; financial development and, 138­40, 141­46; fixed investment and, 126­28; functional approach to, 40­41; income distribution and, 391­93, 401­3, 409­16; income inequality and, 382­86; industrialization and, 81, 82, 183­84; institutional indicators and, 471­75; intensive, 80, 88­95; in Latin America, 52­54, 80, 84, 86, 89, 90, 93, 94; natural resources and, 156, 161­67; policies versus shocks in, 147­53; in Sub-Saharan Africa, 80, 456­70; in Third World countries: 1850­1980, 80­96; trade and, 81, 82, 84, 85­86, 87, 89, 90, 149­51, 187­90; turning point in, 85­88 Economic indicators, 56 Economic Planning Board (EPB), 483 Economic reforms: in India, 61­63; in Latin America, 58­60 Ecuador, 18, 532 Education, 214, 216­40. See also Women's education; access to, 230­32; balance sheet of, 35; bureaucracy and, 512­14; creating human capital with, 237­39; dropout rates and, 235­36, 240; in East Asia, 36, 234­35, 236, 237­39; economic development and, 218­22, 227­28; economic impact of, 223­28; effect of facilities, 229, 232; grade repetition and, 232, 235­36, 240; income distribution and, 419; in India, 447­48; policies on, 429; population and, 242­44; poverty and, 19; pupilteacher ratio and, 229, 234, 235­36; quality of, 230­32, 234­36; quality of children and, 243­44; research on, 229­33; returns to investment in, 223­27; social impact of, 225­26; in SubSaharan Africa, 65, 68, 237, 238, 429; teacher education and, 229; teacher experience and, 229; teacher salaries and, 229, 234,
235, 236; test scores and, 236; textbooks in, 229, 231; total expenditure per pupil and, 229, 234, 236 Egypt, 7; bureaucracy in, 514; divergence and, 115; economic growth in, 84, 85, 88, 89, 92, 93, 94; education in, 230, 231, 232; poverty in, 18; trade and, 189; women in, 283 Elasticity of demand, 107­8, 109, 110 Electronic Research and service organization (ERSO), 199 El Salvador, 52 Embedded autonomy, 478, 480, 481­82, 484, 485­86, 487, 490, 491, 493, 494 Employment. See also Labor force; Underemployment; Unemployment: in India, 448; in rural sector, 356­58 Enclosure, 532 Endogenous growth theory, 4, 75­76, 120, 121, 218; two-sector model of, 107­9 Endogenous politicians, 443 Endowment ratio, 15­16 Engel's law, 78, 109 England, 97, 138, 244­45. See also Great Britain/United Kingdom; environment and, 531, 532; industrialization and, 111 Environment, 517­59; balance sheet of, 35; economic development and, 520­29; Kuznets curve for, 517, 529­30; sustainable development and, 519, 554­59; trade and, 518, 531­34 Environmental Protection Agency (EPA), 529, 547, 548 Ethiopia, 88, 115, 335 Ethnic diversity, 423­24, 456­58, 460­66; bureaucracy and, 514; concepts and country examples, 460­63; measuring, 463 Europe, 88. See also Central Europe; Eastern Europe; Southern Europe; Western Europe; agriculture and, 99­100; divergence and, 114; education in, 225; environment and, 528; trade and, 202; women in, 283 Exchange-rate deviation index, 6, 12 exchange rates, 43­44, 45, 46, 54 Exploitation hypothesis, 354­55, 361 Export crops, 450­51 Export processing zones (EPZs), 50, 165, 210 Export promotion: direct, 192; import substitution versus, 187­88 Exports, 180, 184­85; China and, 48, 50, 51; East Asia and, 36, 37, 46, 47; economic growth and, 87­88, 90, 93­94; fictitious, 503, 504; as
INDEX 571 first trade move, 102­3; foreign direct investment and, 210; India and, 61, 62; industrialization and, 183­84; Korea and, 105; Latin America and, 53; natural resources and, 162; primary products in, 155­56, 159­60; Sub-Saharan Africa and, 65, 68; Taiwan and, 105 Export subsidies, 424, 495­507; failures in, 502­3; intermediate cases, 503­6; successes in, 496­501 Export substitution: primary, 171, 173; secondary, 171­72, 173 expropriation risk, 471, 472, 473­74 Extensive growth, 80­85 Externalities, 259, 336 Extinction, 523­24 Factoral terms of trade, 99­101 Factor prices, 175, 176, 178 Factor proportions explanations, 17 Factors of production, 178­79 Family distribution of income (FID), 409, 415­16 Family income, 244 Family planning programs, 36, 242, 246­47, 345, 348 Family size, 241 Famine, 335 Fertility rates, 242, 243, 244, 283. See also Birth rates; economic growth and, 82, 83; education and, 226; family planning programs and, 246­47; infant mortality and, 245­46; nutrition and, 255 Fertilizer plants, 544, 548­49 Fictitious exports, 503, 504 Financial development, 138­40, 141­46 Financial liberalization, 133­37 Five-Year Plan, 431 Fixed investment, 126­28 Fixed-rate tenancy, 357, 358 Food and Agriculture Organization (FAO), 535 Food crops, 451 Food prices, 254­55 Food supply, 82­84, 88­89, 91 Foreign direct investment (FDI), 90, 102, 157­58; benefits of, 209­10; China and, 50­51; East Asia and, 39, 44; Latin America and, 53, 58; technology transfer and, 209­10 Formal sector, 313, 317, 319; mobility from informal sector to, 323­26; relation between informal sector and, 314­15, 321 Four Tigers, 3, 36. See also Hong Kong; Korea; Singapore; Taiwan France, 90, 97, 138, 283 Franc Zone, 65
572 INDEX Free-rider problem, 168, 442, 443, 445 Freighters, 97 Full income, 365 Functional approach to economic growth, 40­41 Gabon, 166 Gakubatsu, 481 Gandhi, Indira, 62 Gandhi, Rajiv, 62 Gender. See Women Gender-aware analysis, 288 General Agreement on Tariffs and Trade (GATT), 192, 500 General Motors, 182 Genuine savings, 559 Germany, 2, 97; environment and, 532; income distribution in, 375­76, 382­83, 386; interest rates in, 124 Ghana: divergence and, 115; economic growth in, 86, 87, 94; environment and, 533­34; ethnic diversity in, 462­63; health in, 257; import substitution and, 180; industrialization and, 99; state intervention in agricultural markets, 453, 454, 455; trade and, 189; women in, 273 Gini coefficient, 376, 380, 392, 395, 401­2, 416, 417 Gini indices, 56, 57 Global warming, 521 Gold Coast, 298 Goldenberg (firm), 502­3 Government. See Policies; State intervention Government failure, 336, 348, 422­24 Grameen Bank, 215, 285­88 Granger-causes growth, 120, 126 Great Bengal Famine, 335 Great Britain/United Kingdom, 90, 97, 98, 100, 101, 105, 107, 168, 170. See also England; divergence and, 115; environment and, 531; import substitution and, 184; income distribution in, 375­76, 382­83, 384, 386, 419; industrialization and, 180; Jamaican emigration to, 307; women in, 283, 298 Great Depression, 52, 87, 170 Greece, 191 Greenhouse warming, 517, 524 Green national accounting, 559 Green Revolution, 109, 272­73, 330, 333, 340, 345­46, 430 Gross domestic product (GDP): absorption in form of services and commodities, 14; agriculture and, 368; in AK model, 123, 125; bureaucracy and, 508; calculating a lower bound for, 114­16; of China, 48, 49; of East Asia, 36;
economic growth and, 84­95, 142­45; education and, 234, 235; environment and, 523; exchangerate deviation in relation to, 6, 12; fixed investment and, 126; of India, 61, 62, 63; interest rates and, 134­36; investment and, 406, 407; of Latin America, 52, 53; natural resources and, 161, 162, 163­65 Gross national product (GNP), 2; as development measure, 5­7; in East Asia, 37; economic growth and, 92, 93, 94; education and, 237, 239; health care and, 258; inverted-U hypothesis and, 387, 389; women's education and, 263 Growth accounting, 219­22 Grupo Executivo para Industria Automobilistica (GEIA), 490­91 Guatemala, 18, 58 Gulf War, 62 Haiti, 58, 307, 310, 529, 536 Handicrafts, 81, 84, 89 Harris-Todaro model, 423; rent seeking in, 440; of underemployment, 291, 302­6, 396, 399 Headcount index, 19 Health, 214­15, 249­62, 344, 348; balance sheet of, 35; education and, 226; indicators of, 249­53; investing in, 257­62; policies on, 260, 427­29; population and, 242­43; problems in system, 257­59 Health Insurance, 258, 259 High-income economies: basic indicators in, 11; development measures in, 5; Gini coefficient in, 392; health indicators in, 252­53; population and labor force in, 34; self-employment and unpaid family workers in, 295­96 High-performing East Asian Economies (HPAEs), 3, 36­41, 237­39. See also Hong Kong; Indonesia; Korea; Malaysia; Singapore; Taiwan; Thailand Historical perspective, 77­118; on division of the world, 97­99; on factoral terms of trade, 99­101; on spread of economic growth, 80­96 Honduras, 55, 276, 473 Hong Kong, 3, 51, 460, 466; economic crisis in, 43; economic development in, 52; economic environment in, 430; economic growth in, 36, 39, 94, 147; education in, 237; family planning programs in, 246; import substitution and, 184; industrialization and, 180; natural
resources and, 164; trade and, 184; women's education in, 270 Hot Oil Act, 532 Household model, 243, 244 Household production, 80­81 Human capital: creating, 237­39; economic development and, 218­22; knowledge acquisition, investment and, 207­8 Human development: balance sheet of, 35; income and, 23 Human Development Index (HDI), 2, 7, 21­22, 24­29, 119, 123 Human resources, 213­88. See also Education; Health; Nutrition; Population; Women Hungary, 182­83, 184, 185, 529 Hunger, 335 Hyundai, 196­98 Ibadan, 81­82 Illiteracy, 7, 68, 240. See also Literacy Imperfect information, 336, 353, 355, 357­58, 359­60, 361 Import licenses, 62, 188, 189­90, 434­36, 437­39, 440­41 Import quotas, 188, 191, 338, 423, 434­36 Imports, 54, 89, 90, 157 Import-substituting industrialization, 156, 168­69 Import substitution, 92­93, 170, 185, 189, 499; export promotion versus, 187­88; first stage of, 180­81; India and, 61, 181; Latin America and, 52, 53, 54, 181, 185; primary, 171, 173; secondary, 171­72, 173; second stage of, 181­83, 184, 186, 202; Sub-Saharan Africa and, 67 INBIO, 532 Income: balance sheet of, 35; deforestation and, 538­39; education and, 221­22; environment and, 524­26; family, 244; family distribution of, 409, 415­16; full, 365; human development and, 23; in India, 61, 448­49; per capita. See Per capita income; secular levels of, 382, 383, 384, 386; subsistence, 115 Income distribution, 375­420. See also Income inequality; agriculture and, 332­33, 336, 341­42, 384; in Brazil, 417­20; economic development impact on, 375­77, 382­400; economic growth and, 391­93, 401­3, 409­16; impact on economic development, 377, 401­8; industrialization and, 111­13, 384, 385, 386, 414­16; in Latin America, 54­57, 403, 407; market size and, 111­13;
political instability, investment and, 404­8; politics of, 401­3; population and, 244; in Taiwan, 378, 403, 409­16 Income inequality, 394. See also Income distribution; economic growth and, 382­86; measurement of, 379­81; poverty and, 387­90; trends in, 382­84, 385­86; urban underemployment and, 395­99 Income taxes, 124, 125, 386 India, 3, 105, 168, 446­49; agriculture and, 101, 414; asset redistribution policies in, 446; credit for rural sector in, 447; divergence and, 115; economic environment in, 431; economic growth in, 83, 84, 85, 88, 89, 90, 91, 92, 93, 94; economic reforms in, 61­63; education in, 447­48; environment and, 524; export subsidies and, 505­6; family planning programs in, 246, 247; Five-Year Plan in, 431; foreign direct investment and, 209; health in, 429; hunger in, 335; import licenses and, 62, 437; import substitution and, 61, 181; industrialization and, 61, 63, 98, 99; informal sector in, 323­27; pollution abatement in, 544, 545, 549­51; population of, 242­43; poverty in, 18, 36, 61; public investment in, 446­47; rent seeking in, 438­39, 444; rural investment in, 448; rural-urban migration in, 293; state intervention in, 491­93, 494; trade and, 61, 188, 191; women in, 272, 273, 275, 283, 284; women's education in, 269­70 Indian Administrative Service (IAS), 491­92 Indian Civil Service (ICS), 491 Indirect taxes, 368, 449 Indonesia, 3; deforestation in, 536; divergence and, 115; economic crisis in, 42, 44, 47; economic environment in, 430; economic growth in, 36, 83, 88, 91, 92; education in, 237, 240; environment and, 526, 529; health in, 257, 429; pollution abatement in, 544, 545, 547­48, 549­51; poverty in, 18; ruralurban migration in, 293; women in, 273, 276 Indoor pollution, 517, 522 Induced technical innovation, 350­51 Industrial and Commercial Development Corporation, 315 Industrial Development Bureau (IDB), 484, 485, 491
Industrialization. See also Manufacturing: Africa and, 98, 99, 451­52; agricultural productivity and, 107­9; alternative development strategies for, 180­86; division of world into agriculture and, 97­99; economic growth and, 81, 82, 183­84; import-substituting, 156, 168­69; income distribution and, 111­13, 384, 385, 386, 414­16; India and, 61, 63, 98, 99; market size and, 111­13; Taiwan and, 111, 414­16; women and, 273­74 Industrialized Products Tax (IPI), 500 Industrial Revolution, 97­99, 107, 180 Infanticide, 283 Infant-industry argument, 156, 168­69, 182, 186 Infant mortality, 7, 115­16; in Chile, 429; in China, 427; female, 284; in India, 61; in Latin America, 56; population and, 245­46 Inflation, 63 Informal sector, 290, 291, 313­15; characteristics of, 314­15; diversity within, 319­20; easyentry, 291, 318, 319, 320­21; income inequality in, 395­98, 399­400; labor market modeling and, 318­22; main features of, 318­19; mobility to formal sector, 323­26; probabalistic migration model and, 292; reassessment of, 316­17; relation between formal sector and, 314­15, 321; role in migration process, 292, 323­27; rural, 314­15, 316­17; upper-tier, 291, 319, 320­21 Information costs, 355, 359, 361 Infrastructure, 426, 427, 429; of India, 446, 447; institutional, 411­12; quality of, 472; rural, 332; of Sub-Saharan Africa, 460; of Taiwan, 411­12 Institutional indicators, 471­75 Insurance: agricultural, 336; health, 258, 259; social, 258 Intensive growth, 80, 88­95 Interest rates: in East Asia, 47; financial liberalization and, 133­37; in Latin America, 54; in organized money markets, 129­32 Interlinkage, 352, 353, 354, 355, 361­62 Intermediate goods, 202­3 International commodity arbitrage, 5 International Comparison Project (ICP), 6, 13, 114 International Country Risk Guide (ICRG), 471, 472, 508, 514
INDEX 573 International Panel on climate change (IPCC), 524 International production networks, 204­5 International trade and development school, 443 Interrelated strategy in agriculture, 347­48 Inverted-U hypothesis, 375­77, 391, 394; explained, 387­90; intraurban inequality and, 395­98, 399­400 Investment, 119­22; in AK model. See AK model; domestic, 36; East Asia and, 44­46; fixed, 126­28; foreign direct. See Foreign direct investment; in health, 257­62; income distribution, political instability and, 404­8; India and, 446­47, 448; institutional indicators of, 471, 473­75; knowledge acquisition, human capital and, 207­8; policies to subsidize and coordinate, 198­200; public, 199­200, 446­47; in rural sector, 332, 448 Investment licenses, 438­39 Inward-oriented industrial development, 181­86 Iran, 88, 89 Iraq, 88, 89 Ishikawa curve, 83 Israel, 2, 191 Italy, 138, 473 Ivory Coast: bureaucracy in, 514; deforestation in, 536; economic growth in, 86, 87, 94; environment and, 533; import substitution and, 180; poverty in, 18; women's education in, 268 Jamaica: informal sector in, 318; unemployment in, 291, 307­11 Japan, 2, 3, 102, 139, 170, 405, 480­82, 484, 485, 486, 487; agriculture and, 340, 342, 344, 348, 414; divergence and, 114; economic crisis in, 45, 46, 47; economic growth in, 36, 41, 86, 89; education in, 225; environment and, 531, 532; income distribution in, 403, 417; industrialization and, 98; interest rates in, 124, 133; takeover of Korea, 87; trade and, 202 Japan Developmental Bank, 480 Japanese model, 480­82 Java, 18, 98, 268, 523, 524 Joint Commission on Rural Reconstruction (JCRR), 412, 414 Kenya: economic growth in, 86, 87; education in, 230, 239; environment and, 526; ethnic diversity in, 462, 463; export
574 INDEX subsidies and, 495, 505; health in, 429; informal sector in, 313­15, 316­17, 318; labor migration and unemployment in, 300­301; poverty in, 18; state intervention in agricultural markets, 451; typology of development in, 170­74; women in, 275, 276, 277, 282 Kenyatta administration, 462 Korea, 3, 102, 466, 480; economic crisis in, 42, 44, 45, 47; economic development in, 52; economic environment in, 430; economic growth in, 36, 39, 41, 87, 89, 91, 93, 94; education in, 225, 237; export subsidies and, 495, 496­99, 502­3; family planning programs in, 246; foreign direct investment and, 210; income distribution in, 403; interest rates in, 124; natural resources and, 164, 166; state intervention in, 157, 195­201, 482­84, 485, 487; technology and, 204, 206­8; trade and, 184, 185, 188, 192; women's education in, 268 Korup National Park, 532 Kravis-Heston-Summers productivity explanation, 13­15 Krueger's trade model, 175­78, 179 Kuomintang (KMT), 484­85, 486 Kuwait, 166 Kuznets, Simon, 375­76, 387, 391, 395 Kuznets environmental curve, 517, 529­30 Labor force, 195­96. See also Employment; education and, 216­17, 219, 220; modeling of informal sector and, 318­22; segmentation in, 323­27; unlimited supply in, 297­99; women in, 243, 269­70, 271­74, 297­98, 307 Laissez-faire, 64 Land ownership, 401­3 Land reform, 330, 332, 344­45, 346, 403, 409­12, 446 Land use model, 539 Latin America, 1, 3, 4, 104; agriculture and, 97, 100; economic and social indicators in, 56; economic development: 1950­1980, 52­57; economic growth in, 52­54, 80, 84, 86, 89, 90, 93, 94; economic reforms in, 58­60; education in, 219, 222, 238, 429; environment and, 526, 533; health in, 258; import substitution and, 52, 53, 54, 181, 185; income distribution in, 54­57, 403, 407; income inequality in, 390, 397; industrialization and, 98, 99, 182;
interest rates in, 129, 134, 137; poverty in, 19; rural-urban migration in, 293, 294; SubSaharan Africa compared with, 456, 458, 459, 464; trade and, 53, 202; typology of development, 170­74; women in, 271, 272, 275, 276, 277; women's education in, 263, 266 Law for Dealing with Illicit Wealth, 497 Law of Large Numbers, 396 Law of one price, 5 Lead, 521­22 Learning-by-doing, 75, 78, 161, 168, 211, 343 Lerner diagrammatic technique, 13 Lesotho, 529 Lewis model of underemployment, 291, 302­6 Lewis model of world economy, 104­6 Libya, 263 Life expectancy, 7; in China, 427; divergence and, 115; health expenditures and, 262; in India, 61; in Latin America, 56; poverty and, 18, 19; in Sub-Saharan Africa, 456; of women, 283, 284 Literacy, 56, 218, 263, 277, 284. See also Illiteracy Living standards, protection of, 429 Lobbying, 444 Local Manufacturers (Export Compensation) Act, 502 Log variance, 376, 394, 398, 399 Lorenz curve, 379­80 Low- and middle-income economies: basic indicators in, 11; health indicators in, 252; population and labor force in, 34 Lower-middle-income economies: basic indicators in, 9­10; health indicators in, 250­51; income inequality in, 397; selfemployment and unpaid family workers in, 295; women's education in, 265, 267 Low-income economies: basic indicators in, 8­9; development measures in, 5; Gini coefficient in, 392; health indicators in, 249­50; health systems in, 258; income inequality in, 389; population and labor force in, 31­32; self-employment and unpaid family workers in, 295; women's earnings in, 276­77; women's education in, 263­64, 265, 267 Lucky-Goldstar, 196­98 Ludhiana, 318 Macroeconomics: in Caribbean, 59; in East Asia, 43­44; education and, 225; health and, 254, 255; in
informal sector, 316; in Latin America, 52, 59, 60 Madagascar, 529 Mahalanobis Committee on Distribution of Income and Levels of Living, 61 Maharastra, 429 Mahaweli scheme, 528 Malawi, 267­68, 273, 282 Malaya, 86 Malaysia, 3; economic crisis in, 42, 44, 47; economic growth in, 36, 39, 40, 89, 91, 94; informal sector in, 319­21; natural resources and, 165; population in, 245; women in, 271, 273, 275; women's education in, 268­69 Malthus, Thomas, 73 Manmade Fibers Association, 485 Manufacturing. See also Industrialization: agriculture and, 333­34; economic growth and, 89­90, 92­93; in Krueger's trade model, 175­78 Mao Zedong, 48, 50 Market failure, 426; agriculture and, 336, 348, 356; environment and, 524; import-substituting industrialization and, 168­69; state intervention and, 431 Market policy approach to agriculture, 348 Markets, 432­33; agricultural, 336; China's move to, 48­51; commodity, 450­51; health care, 259­60; population and, 244­45; size of, 111­13 Marshallian ineffiency, 357 Marxist theory, 298, 442, 445, 477 Maternal mortality, 257, 283 Mauritania, 273 Mauritius, 65, 165, 529 McKenzie-Chipman diversification cone, 15 Merck and Company, 532 Mexico: bureaucracy in, 482; economic environment in, 430; economic growth in, 86, 89, 91, 92, 93, 94; economic reforms in, 58; environment and, 533; foreign direct investment and, 157­58, 210; political system of, 404; poverty in, 18, 55; trade and, 202; typology of development, 170­74; women in, 273 Microeconomics: education and, 223­25; health and, 254; in Latin America, 52; in rural sector, 330, 352­67 Middle class, 377, 407 Middle East, 2; economic growth in, 80; environment and, 524; natural resources and, 165; poverty in, 19; women in, 272; women's education in, 264, 266
Middle-income economies: basic indicators in, 9­11; development measures in, 5; health indicators in, 250­52; health systems in, 258­59; income inequality in, 389­90; population and labor force in, 32­34; self-employment andunpaid family workers in, 295; women's education in, 263­64 Migration. See Rural-urban migration Mill, John Stuart, 73 Minerals, 79, 86, 164, 165, 241 Minimum wage, 448 Ministry of International Trade and Industry (MITI), 480­81, 487, 491 Ministry of Trade and Industry (MTI), 483, 485 Mobutu Sese Seko, Joseph, 479, 480 Moi, Arap, 453, 462 Monopolies and Restrictive Trade Practices (MRTP) Act, 62 Morocco, 87; bureaucracy in, 514; environment and, 533; foreign direct investment and, 157, 209­10; poverty in, 18 Mortality rates, 2, 82­83, 298; child, 19, 82, 257, 260; infant. See Infant mortality; maternal, 257, 283 Mozambique, 65, 88, 115 Multinational enterprises (MNEs), 209­10 Murphy-Shleifer-Vishnv model, 113 Myrdal, Gunnar, 496 National Development Bank (BNDE), 489 Nationalization potential, 472 National Renewal Fund, 62 National Resources Commission (NRC), 484 Natural capital stock, 519, 554, 555­58, 559 Natural habitats, 523­24 Natural resources, 156, 161­67, 173 Neoclassical economics, 152, 423, 477; development economics and, 70, 71, 73; East Asian economic growth and, 39; income inequality and, 387; state, economic development and, 442­45 Neoutilitarian economics, 476, 477 Nepal, 88, 91, 95, 263, 264, 268, 275, 526 Netherlands, 107, 115 New institutional economics, 359­60 New Zealand, 99, 101, 509­10, 526 NGFF, 549 Nicaragua, 52, 230 Nigeria, 65, 450, 460; bureaucracy in, 514; economic growth in, 86, 87; environment and, 529; ethnic diversity in, 464; women in, 273
Nkrumah, Kwame, 462 Nongovernmental organizations (NGOs), 258, 259 North Africa, 1; economic growth in, 80; poverty in, 19; women in, 272, 275, 283, 284; women's education in, 264, 266 North America, 97, 98, 225, 283 Nutrition, 214­15, 254­56, 344, 348; balance sheet of, 35; famine and hunger, 335; policies on, 427­29; women's earnings and, 277 Off-shore companies, 44, 45 Oil and petroleum, 7, 50, 54, 165, 185, 532 Old-age security, 244­45 Open economies, 108 Organization for Economic Cooperation and Development (OECD), 54, 87, 94, 406, 485; agriculture and, 347; economic growth in, 147; environment and, 527, 548; income distribution in, 401 Organized money markets, 129­32 Outward-oriented industrial development, 184­86 Ozal, Turgut, 503, 504 Ozone layer depletion, 521 Pakistan: economic growth in, 85, 88, 91, 92, 93; education in, 237; family planning programs in, 246; women in, 283 Panama, 273 Park Chung Hee, 197, 482­83, 484, 497, 498, 499 Paternalism, 426 Penn World Tables, 114, 115, 116, 117 Per capita income, 3. See also Gross domestic product (GDP); Gross national product (GNP); in AK model, 123­25; as development measure, 5­7; divergence and, 114­18 Peru: economic growth in, 89, 91; economic reforms in, 58; health in, 258­59; poverty in, 18; women in, 276, 278 Petite bourgeoisie, 423, 449 Petrobas, 491 Philippines, 3; agriculture and, 414; deforestation in, 536; economic crisis in, 44; economic growth in, 39, 86, 90, 91, 92, 93; environment and, 523; family planning programs in, 247; industrialization and, 98; pollution abatement in, 545, 546­47; trade reform in, 192; women in, 273; women's education in, 263, 268 Physical Quality of Life Index (PQLI), 7 Plantations, 86, 100, 180, 271
INDEX 575 Pluralist theory, 453­54 Poland, 527, 529 Policies. See also State intervention: agricultural, 336­39; East Asian economic growth and, 36­37, 39­40; economic development and, 426­33; economic growth and shocks, 147­53; environmental, 526­28; health care, 260, 427­29; human capital formation, 237­39; investment, 198­200; pollution abatement, 551­52; in Sub-Saharan Africa, 460­66 Policy coherence, 496 Political stability/instability: deforestation and, 539­41; income distribution, investment and, 404­8; institutional indicators of, 472, 473, 474­75; in Sub-Saharan Africa, 458, 464­66 Pollution abatement, 544­53 Polonoreste projects, 528 Population, 2, 214, 241­48; agriculture and, 332, 333; deforestation and, 536­38, 541­42; of East Asia, 36; economic approaches to, 242­48; economic growth and, 82­84, 88­89, 91; environment and, 521; labor force and, 31­34; size of, 241 POSCO, 200 Poverty: balance sheet of, 35; burden of, 18­35; capabilities and entitlements in, 30; decline in, 36; environment and, 521; extent of, 19­20; health and, 259; income inequality, economic development and, 387­90; in India, 18, 36, 61; in Latin America, 54­57; women and, 18, 215, 275­79 Poverty gap, 19 Poverty line, 6, 18, 19, 54­55, 115 Prebisch, Raul, 52 Predation, 476, 479­80, 481, 487, 491 Price controls, 451 Price distortions, 36­37, 526 Prices: agricultural, 331, 337­38, 366­67, 368­69, 448; factor, 175, 176, 178; food, 254­55; in India, 448­449; service, 13­17 Primary export substitution (PES), 171, 173 Primary import substitution (PIS), 171, 173 Primary products, 155­56 primary school education, 234, 237­39, 240, 263­64, 265, 266 Primary sector surplus, 180 Principle-agent approach, 508, 509 Privatization, 96 Probabilistic migration model, 292, 323­27
576 INDEX Producer-driven chains, 204 Productivity. See also Agricultural productivity: factor proportions explanations, 17; growth accounting with human capital stocks in, 220­22; KravisHeston-Summers explanation for, 13­15 Profit effect, 366 Programa de Integracao Nacional (PIN), 418 Programa de Integracao Social, 418 PROKASIH, 545 Property rights, 442, 444, 518, 526, 527, 532, 535, 539­41 Prussia, 383 Public choice school, 443 Public goods, 259, 336 public sector: economic growth and, 90, 91­92; investment and, 199­200, 446­47 Puerto Rico, 307, 310 Pulp and paper plants, 544, 549­51 Punjab, 523 Putting-out system, 84, 85, 271 Quantitative restrictions, 157, 188­90, 191 Railroads, 85­86, 90, 97, 98 Rao-Manmohan Singh, 62­63 Rationality hypothesis, 354, 355 RCA, 199 Regression analysis, 458­60, 463­64 Regression tables, reading, 561­66 Rent control, 448­49 Rent seeking, 422­24, 427, 444, 476; competitive, 437­39; corruption and, 440­41; defined, 434­36; in Harris-Todaro model, 440; political economy of, 437­40; quantitative importance of, 438­39 Rhee Syngman, 482, 484, 485, 497, 499 Ricardo, David, 73, 298 Risk, 337­38, 478 Risk aversion, 352, 357, 358 RKF assumptions, 395­96 Rule of law, 471, 535­43 Rural sector. See also Agriculture: contractual arrangements in, 330, 356­58; credit in, 361­63, 447; informal, 314­15, 316­17; investment in, 332, 448; microeconomics of, 330, 352­67; new development economics and, 352­55; new institutional economics and development theory in, 359­60; recent tenancy models in, 356­58; reform in, 49­50; strategies for welfare improvement in, 343­45 Rural-urban divide, 373­74
Rural-urban migration, 289­327; demographic reappraisal of urban growth and, 293­94; econometric studies of, 312; informal sector role in, 292, 323­27; model of urban unemployment and, 300­301; unlimited labor supply and, 297­99 Russia, 139 Sanitation, 521 Saudi Arabia, 165, 166 Savings: in AK model. See AK model; in East Asia, 36, 42; as engine of growth, 119­22; financial liberalization and, 133­37; genuine, 559; in India, 63; women and, 280­81 Savings clubs, 280 Saxony, 383 Schultz, Theodore, 300 Secondary export substitution (SES), 171­72, 173 Secondary import substitution (SIS), 171­72, 173 secondary school education, 237­39, 265, 266 Second best solutions, 337 Second Indian Plan, 371 Secular levels of income, 382, 383, 384, 386 Seemingly-unrelated-regression (SUR) technique, 234 Self-employment, 295­96, 313, 318, 319, 397 Semi-democracies, 404 Service prices, 13­17 Shaman Pharmaceuticals, 532 Sharecropping, 330, 351, 352­55, 356­57, 358, 359 Shocks, 147­53 Sierra Leone, 254 Singapore, 2, 3; economic crisis in, 43; economic development in, 52; economic environment in, 430; economic growth in, 36, 39, 40, 94; education in, 237; environment and, 527; interest rates in, 124, 133; natural resources and, 164; technology and, 207; trade and, 184, 185; women in, 273 Sino-Japanese War, 86 Small Farmers Development Agency (SFDA), 447 Smith, Adam, 69, 72, 75, 98, 494 Social indicators, 56 Social insurance, 258 Soft states, 496 Sogo shosha, 102 Soil quality, 522­23 Somalia, 115, 263 Somprasong Land, 46 South Africa, 97, 99, 273 South America, 345 South Asia: economic growth in, 91;
health in, 258; import substitution and, 181; industrialization and, 182; pollution abatement in, 544­53; population of, 244; poverty in, 18, 19; women's education in, 263, 266 Southeast Asia: economic growth in, 36, 92; pollution abatement in, 544­53; women in, 271 Southern Europe, 98, 99 Southern Rhodesia. See Zimbabwe (Southern Rhodesia) Soviet Union, 2, 181, 526 Spanish-American War, 86 SPPM, 549 Sri Lanka: development measures in, 7; economic growth in, 89, 91, 93; environment and, 528; health in, 254, 427­29; women in, 271, 275, 276 State autonomy, 496 State intervention, 432­33. See also Policies; in African agricultural markets, 450­55; arguments for, 426; in health care, 259­60; in Korea, 157, 195­201, 482­84, 485, 487; market failure and, 431; neoclassical economics and, 442­45; as problem and solution, 476­94; in Taiwan, 157, 195­201, 482, 484­86, 487 State-owned enterprises (SOEs), 96, 485, 493, 551 Strong states, 496 Strong sustainability, 555, 559 Structuralist analysis, 70 Structural transformation, 478­79, 489­90 Sub-Saharan Africa, 2, 3, 4, 422­24; economic development in, 65­68; economic growth in, 80, 456­70; education in, 65, 68, 237, 238, 429; environment and, 523, 527; ethnic diversity in, 423­24, 456­58, 460­66; income distribution in, 407; personal rule effects in, 67; poverty in, 18, 19; women in, 271, 272, 283, 284; women's education in, 263, 266, 269 Subsistence income, 115 Sudan, 65, 88, 95, 263, 273 Suez Canal, 86 Sukarno administration, 88 Sukhatme-Srinivasan-Seckler-Payne hypothesis, 255 Sulfur dioxide, 522 Sun Yat Sen, 484 Supply elasticity of agricultural production, 366­67 Supply-leading phenomenon, 139­40 Suspended particulate matter, 521 Sustainable development, 519, 554­59
Sweden, 419, 527 Switzerland, 107 Synthesis model, 243, 244 Taiwan, 2, 3, 51, 168, 480; agriculture and, 340, 344, 348, 412­14; economic crisis in, 43, 45; economic development in, 52; economic environment in, 430; economic growth in, 36, 39, 86, 87, 89, 91, 93, 94, 403, 409­16; income distribution in, 378, 403, 409­16; industrialization and, 111, 414­16; interest rates in, 124, 133; state intervention in, 157, 195­201, 482, 484­86, 487; technology and, 206­8; trade and, 184, 185, 202; typology of development in, 170­74; women in, 275 Taiwan Agriculture and Forestry Development Corporation, 415 Taiwan Cement Corporation, 415 Taiwan Industrial and Mining Corporation, 415 Taiwan Pulp and Paper Corporation, 415 Taiwan Sugar Corporation, 410 Tanganyika, 86, 87 Tanzania, 18, 115, 280, 451 Tariff Refund Certificate (CRA), 503 Tariffs, 435­36, 437; agricultural trade and, 338; concertina approach to, 192; industrialization and, 180, 182; Latin America and, 54; reforming, 191­92; replacing quantitative restrictions, 191 Taxes, 406, 500; in Africa, 450­51; agricultural, 368; carbon, 527; direct, 368, 386, 418; income, 124, 125, 386; in India, 448­49; indirect, 368, 449 Technology: agriculture and, 332, 350­51, 352, 353­54; economic growth and, 152; gaps between countries, 206­8 Technology transfer, 157­58, 204­12 Tenancy ladders, 330, 358 Textiles, 84, 89, 98, 99, 168, 485­86 Thailand, 3; agriculture and, 342, 414; economic crisis in, 42, 43, 44, 45, 46, 47; economic growth in, 36, 39, 84, 86, 89, 91, 93, 94; education in, 216, 230, 237; environment and, 526, 529; industrialization and, 98, 99; pollution abatement in, 544, 545, 546, 549­51 33/50 program, 548 Todaro paradox, 396 Trade, 155­212; Africa and, 451­52; agricultural, 332, 337­38; China and, 50­51; classical growth theory on, 72, 73; control of,
187­90; division of world in, 97­99; economic growth and, 81, 82, 84, 85­86, 87, 89, 90, 149­51, 187­90; as enemy, handmaiden, and engine of growth, 211­12; environment and, 518, 531­34; factoral terms of, 99­101; India and, 61, 188, 191; in intermediate goods, 202­3; Krueger's model of, 175­78, 179; Latin America and, 53, 202; liberalization of, 187­90, 192­94; policy reform in, 191­94; rural-urban terms of, 373; technology transfer and, 157­58, 204­12 Trade unions, 301, 307, 396 transaction costs, 355, 357, 359, 360, 361 Transportation costs, 6, 85­86, 89 Trickle down process, 389 Trinidad, 307 TSPC, 549 Tunisia, 6 Turkey, 102; economic growth in, 84, 85, 88, 91, 93, 94; export subsidies and, 503­5; rent seeking in, 438­39; trade and, 188; women's education in, 263 Two-sector model of endogenous growth, 107­9 Typology of development, 170­74 UFF, 549 Uganda, 86, 87, 95, 99, 115 Uncertainty, 406 Underemployment. See also Unemployment: econonic development, income inequality and, 395­99; Harris-Todaro model of, 291, 302­6, 396, 399; Lewis model of, 291, 302­6 Unemployment. See also Employment; Underemployment: disguised, 297, 317; in East Asia, 47; in Jamaica, 291, 307­11; model of labor migration and, 300­301 Unimodal agricultural strategy, 330, 340­43, 345, 347 United Kingdom. See Great Britain/United Kingdom United States, 88, 90, 97, 100, 101, 104, 139, 170; agriculture and, 332; divergence and, 116, 117; education in, 229, 230; environment and, 528, 532; financial development in, 145; health systems of, 258; income distribution in, 375­76, 382­83, 384, 385, 386, 417, 419; industrialization and, 107, 111; Latin America and, 52, 54; pollution abatement in, 548; technology transfer and, 204;
INDEX 577 trade and, 183, 184, 202; women in, 283 Unorganized money markets, 129­31 Unpaid family workers, 295­96, 319, 397 Upper-middle-income economies: basic indicators in, 10­11; health indicators in, 251­52; income inequality in, 397; population and labor force in, 33­34; selfemployment and unpaid family workers in, 295; women's education in, 265, 267 Urban bias, 331, 370­74 Urban sector, 395­99. See also Informal sector; Rural-urban migration Urban traditional sector, 291, 300 Uruguay, 52, 55, 58, 192 Venezuela: economic development in, 52; economic growth in, 86, 87, 89, 91; economic reforms in, 58; education in, 237; environment and, 533; foreign direct investment and, 157, 209­10; political system of, 406 Vietnam, 42, 48 Wage-gap model, 308­9 Wage-rental ratio, 13, 14­15, 16 Wages/earnings: in agricultural labor, 341; in informal sector, 319, 327; in Jamaica, 307­11; in Krueger's trade model, 175­76, 178; minimum, 448; in rural sector, 356­58; rural-urban migration and, 300; underemployment and, 302, 304­5; unlimited labor supply and, 297; for women, 243, 266, 271, 275­77 Water quality, 521, 522­23, 524, 525, 532, 545­47, 551 Weak states, 496, 504, 506 Weak sustainability, 555, 559 Weber, Max, 477­78, 481, 494, 508 Weberian state hypothesis, 508, 509, 510, 511­14 West Africa, 81­82, 273 Western Europe, 97, 98, 99, 104; agriculture and, 333; divergence and, 115; economic growth in, 81; income distribution in, 417 Wigs, 184 Women, 215, 263­88. See also Women's education; asymmetric rights and obligations of, 281­82; balance sheet of human development, 35; credit and, 280­81, 285­86; Grameen Bank and, 215, 285­88; in the labor force, 243, 269­70, 271­74, 297­98, 307; missing, 283­84;
578 INDEX poverty and, 18, 215, 275­79; role models for, 281; savings and, 280­81 Women-headed households, 215, 273, 275 Women's education, 263­70, 277, 279, 280; benfits at work and home, 269­70; costs, benefits
and gender differentials, 264­67; economic impact of, 225­26; financial, opportunity, and psychic costs of, 267­69; health and, 254, 255; labor force participation, wages and, 243 Wood pulp plants, 544, 548­49 World conservation strategy, 555
Yunus, Muhammad, 285 Zaire, 65, 88, 95, 263, 479­80 Zambia, 87, 275 Zimbabwe (Southern Rhodesia), 86, 87, 258

GM Meier, JE Rauch

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