ECON 313 Chapter Notes - Chapter 3: Surplus Labour, Capital Accumulation, Diminishing Returns
3 May 2016
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3. 2 development as growth and the linear-stages theories. Rostow"s stages of growth: transition from underdevelopment to development in series of stages through which all countries must proceed. Traditional society, pre-conditions for self-sustaining growth, take-off, drive to maturity, age of high mass consumption. One of principle strategies necessary for any takeoff is mobilization of domestic & foreign savings to generate sufficient investment to accelerate economic growth described by h-d model. Harrod-domar growth model (ak model): linear production function - output is capital stock k x constant a c also k (capital-output ratio) fixed. Gdp growth rate determined by s & c. With no g"vt, gdp growth rate +vely related to savings ratio: save more invest more more. If want growth but can"t generate enough savings & investment: savings gap, fill through foreign aid or private foreign investment: capital constraint (because k too high) & low level of new capital formation.
