DEPARTMENT OF ECONOMICS
ECON 332: ECONOMIC GROWTH & DEVELOPMENT
Michaelmas Term 2006
Course Objectives
To provide an introduction to the theories of economic growth and the problems of economic
development. The course covers conceptual issues in development, theories of economic
growth, the agricultural sector, industrialisation and trade policies for growth. The focus of
the course then shifts to the application of theory to the analysis of the growth success of
several emerging economies in Asia, notably China and India.
Key Skills
To provide appropriate theoretical and analytical tools to facilitate a broad understanding of
economic development, with particular emphasis on developing and emerging economies.
Course Structure
The course comprises ten lectures and ten seminars of one hour duration each, one of each
per week, during the Michaelmas Term. Seminars are compulsory and, as always, commence
in Week 1.
Learning Outcomes
By the end of this course students should have an understanding of:

Basic economic theories of growth and development.

The application of relevant theories to the growth experience of several economies.

The range of alternative growth policies that may be used to achieve development.

The inter-disciplinary nature of the subject of development economics.

Themes in micro- and macro-economics on the basis of specialist knowledge and
understanding.
By the end if this course, students should be able to:

Plan and manage their time effectively in relation to deadlines whilst displaying
individual initiative and enterprise.

Conduct individual assignments and perform effectively in a group environment by
demonstrating leadership and team-building qualities.

Communicate and present complex arguments in oral and written form with clarity and
succinctness.

Work effectively, both individually and within a team environment.
Course Personnel
Lectures 1-7 and 9-10 are given by the Course Director, Dr. Robert Read
(r.read@lancaster.ac.uk, Room B13 MS, ext 94233). Lecture 8 is given by Professor V.N.
Balasubramanyam (v.balasubramanyam@lancaster.ac.uk, Room B45 MS, ext 94231).
Course Assessment
This comprises one compulsory essay of no more than 1,500 words (details at the end of this
course paper), to be submitted by 4pm, Thursday 14 December (Week 10) and a Final
Examination in May 2006 covering all aspects of the course. The final mark for this course is
one third that of the essay and two thirds that of the exam. Coursework will be marked and
available for collection from the Economics Department Office before the end of Week 1 of
the Lent Term.
Late Coursework Submission
Coursework submitted up to seven days after the essay deadline is subject to a ten-mark
penalty. Coursework submitted later than seven days after the deadline is given a mark of
zero. Reasonable requests for an extension beyond the coursework deadline require the
completion of an Extension Request Form, obtainable from Sue Coughtrey (in Room B34
MS) and must be signed by the Head of Department or nominee.
Communication with Students
The principal means of communication between staff and students concerning administrative
matters and to communicate urgent messages will be via university e-mail.
Course Reading
There is no single text that provides the appropriate breadth and depth of coverage required
by this course. Instead, students are expected to make good use of the recommended
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readings. For more recent events and developments, students should read more up-to-date
publications such as The Economist, The Financial Times and other sources of current
information including the quality press and other media. Students may find the following to
be useful supporting texts:
Islam, I & A Chowdhury (2000), Asia-Pacific Economies: a Survey, Routledge, 2nd edition.
Perkins, D.H., et al. (2001), Economics of Development, Norton & Co., 5th edition.
Thirlwall, A.P. (2006), Growth & Development, Macmillan, 8th edition.
van den Berg, H (2001), Economic Growth & Development, McGraw-Hill.
Data & Information Sources
World Bank, The World Development Report (WDR). An annual publication with useful data
and information on special issues.
World Bank, Human Development Report. An annual publication with useful health,
education and social data that includes the human development indices (HDI).
World Bank, World Development Indicators, includes useful country-level data on CD-ROM.
Part I: Economic Growth & Development
LECTURE 1: INTRODUCTION TO ECONOMIC GROWTH & DEVELOPMENT
Conceptual and definitional issues. Are growth and development synonymous? Indicators of
growth and economic and social development: GDP, human development indices, income
distribution and nutrition. Measurement issues.
Perkins, chs. 1, 4 & 7.
Thirlwall, chs. 1-3.
van den Berg, chs. 1 & 2.
*The Economist, ‘More or less equal’, 31 March 2004.
*WDR, World Development Indicator Tables.
Sen, A.K. (1999), ‘The concept of development’, in H.B. Chenery & T.N. Srinivasan (eds.),
Handbook of Development Economics, Volume 1.
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Seminar Topics
1.1
Define the various measures of poverty? How do they differ from each other and what
are their implications for policy?
1.2
Distinguish between economic and social measures of development. To what extent
does economic growth mean social development?
1.3
Is industrialisation the key to growth?
LECTURE 2: THE NEO-CLASSICAL THEORY OF ECONOMIC GROWTH
The general characteristics of emerging economies. An introduction to the neo-classical
theory of economic growth: the Harrod-Domar and Solow-Swann models.
Perkins, ch. 2.
Thirlwall, ch. 4.
van den Berg, chs. 3-5.
*Harrison, A et al. (2000), International Business, ch. 9 (The Emerging Economies).
*Baumol, WJ (1970), Economic Dynamics: an Introduction, ch. 4 (Mr Harrod’s Model).
Seminar Topics
2.1
Appraise the underlying view of the Harrod-Domar model that a high savings rate
ensures rapid economic growth.
2.2
What is meant by the ‘steady-state’ rate of growth in the Solow-Swann model? When
is its value non-zero? (Final Examination question, 2006)
2.3
Distinguish between the concepts of ‘capital-widening’ and ‘capital-deepening’. What
are the implications for economic growth?
LECTURE 3: NEW (ENDOGENOUS) GROWTH THEORY
Why don’t countries grow in the same way to the same extent – a critique of neo-classical
growth theory? Absolute and conditional convergence distinguished. Romer and endogenous
explanations of economic growth: total factor productivity (TFP), human capital, trade and
foreign direct investment (FDI).
Thirlwall, ch. 4.
van den Berg, ch. 10
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*Edwards, S (1993), ‘Openness, trade liberalisation and growth in developing countries’,
Journal of Economic Literature, vol. 31.
*Romer, P.M. (1994), ‘The origins of endogenous growth’, Journal of Economic
Perspectives, Winter.
*Pack, H. (1994), ‘Endogenous growth: intellectual appeal and empirical shortcomings’,
Journal of Economic Perspectives, vol. 8, no. 1, pp. 55-72.
Kenny, C. (2001), ‘What do we know about economic growth? Or why don’t we know very
much’, World Development, vol. 29, no. 1, pp. 1-22.
Scott, M.F.G. (1992), ‘Policy implications of a new view of economic growth’, Economic
Journal, vol. 102, pp. 622-32.
Shaw, G.K. (1992), ‘Policy implications of endogenous growth theory’, Economic Journal,
vol. 102, pp. 611-21.
Stern, N. (1991), ‘The determinants of growth’, Economic Journal, vol. 101, no. 404, pp.
122-33.
Seminar Topics
3.1
‘While new growth theory provides a better explanation of the growth process than
the neo-classical theories, both are of little use in the formulation of growthpromoting policies’. Discuss.
3.2
Growth success is not conditional upon a magic formula but upon being flexible, so as
to adapt to developments in domestic and global economic conditions. (Final
Examination question, 2002)
3.3
Outline the concept of total factor productivity (TFP) and its associated measurement
problems.
Part II: Issues in Economic Growth & Development
LECTURE 4: AGRICULTURE & ECONOMIC DEVELOPMENT
Agricultural reforms and growth and development: land reform, the ‘Green Revolution’ and
terms of trade issues. Agricultural protectionism in the developed countries and its impact on
agriculture in developing countries.
Perkins et al., ch. 15.
Thirlwall, ch. 5.
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*Ghatak, S. (1987), ‘Agriculture and economic development’, in N. Gemmell (ed.), Surveys
in Development Economics.
Schultz, T.W. (1961), Transforming Traditional Agriculture, chs. 1-4.
Seminar Topics
4.1
Define the notion of self-sufficiency in food. Is self-sufficiency a valid argument for
agricultural protectionism in developing countries?
4.2
Why is land reform successful in some countries but not in others?
4.3
Was the ‘Green Revolution’ a success? Discuss with reference to evidence drawn
from one or more developing countries.
LECTURE 5: GROWTH, INDUSTRIALISATION & STRUCTURAL TRANSITION
Models of structural transition. Industrialisation with an unlimited supply of labour. The
Harris-Todaro model of rural-urban migration and urbanisation.
Perkins, chs. 3, 8 & 17.
Thirlwall, ch. 5.
*Lewis, W.A. (1954), ‘Economic development with unlimited supplies of labour’, The
Manchester School, see also Meier & Rauch, Section III, Nurkse, Lewis, Todaro and
Section IIID, ‘The Lewis Model in retrospect – note’.
Schultz, T.W. (1961), Transforming Traditional Agriculture, chs. 1-4.
Seminar Topics
5.1
Is industrialisation a necessary and sufficient condition for economic growth?
5.2
Define disguised unemployment. Does the Lewis model suggest that the larger is the
volume of disguised unemployment, the better are the prospects for industrialisation?
5.3
What are the implications of the Harris-Todaro model of rural-urban migration for
income disparities in developing countries?
LECTURE 6: TRADE POLICY, OPENNESS & GROWTH IN DEVELOPING COUNTRIES
Trade as the ‘engine of growth’. Industrialisation, comparative advantage and trade policies
in developing counties: import-substituting industrialisation (ISI) versus openness to trade.
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Perkins, chs. 18 & 19.
Thirlwall, ch. 16.
van den Berg, ch. 9.
*Edwards, S. (1993), ‘Openness, trade liberalisation and growth in developing countries’,
Journal of Economic Literature, vol. 31.
*Greenaway, D. et al. (1998), ‘Trade reform adjustment and growth: what does the evidence
tell us?’, Economic Journal, vol. 108, no. 450, pp. 1547-61.
Dollar, D. (1992), ‘Outward-oriented developing economies really do grow more rapidly:
evidence from 95 LDCs, 1976-85, Economic Development & Cultural Change.
Riedel, J. (1988), ‘Trade as an engine of growth: theory and evidence’, in D. Greenaway
(ed.), Current Issues in International Trade & Development.
*Krueger, A.O., ‘Trade policies in developing countries’, in R.W. Jones & P.B. Kenen (eds.)
Handbook of International Economics Volume I.
Lewis, W.A. (1980), ‘The slowing down of the engine of growth’, American Economic
Review, vol. 70.
Krueger, A.O. (1998), ‘Why trade liberalisation is good for growth’, Economic Journal, , vol.
108, no. 450, pp. 1513-22.
Rodriguez, F. and Rodrik, D.R. (1999). ‘Trade policy and economic growth: a sceptic’s guide
to the cross-national evidence’, National Bureau of Economic Research Working Paper,
No. 7081.
Subasat, T. (2002), ‘Does export promotion increase economic growth: some cross-section
evidence’, Development Policy Review, vol. 20, no. 3, pp. 333-49.
Seminar Topics
6.1
Define and explain the concept of import-substituting industrialisation. Does it imply
complete autarky (self-sufficiency) in trade?
6.2
Are ISI policies to promote development counter-productive? Under what
circumstances might they be economically justified?
6.3
Compare and contrast the implications of laissez faire and interventionist EP policies.
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Part III: The Growth Experience of Emerging Economies
LECTURE 7: GROWTH IN THE EAST ASIAN ECONOMIES
Models of East Asian growth. The record of growth and development in East Asia: is their
growth performance a miracle? Can the theoretical growth models explain the growth
performance of these countries? What growth lessons does East Asia provide for other
developing countries?
*Islam & Chowdhury, chs. 9-12.
*Baer, V., W.R. Miles & A.B. Moran (1999), ‘The end of the Asian myth: why were the
experts fooled?’, World Development, vol. 27, no. 10, pp. 1735-47.
*Collins, S.M. & B.P. Bosworth (1996), ‘Economic growth in East Asia: accumulation
versus assimilation’, Brookings Papers on Economic Activity, no. 1, pp. 135-91.
*Drysdale, P. & Y. Huang (1997), ‘Technological catch-up and economic growth in East
Asia and the Pacific’, Economic Record, vol. 73, no. 222, pp. 201-11.
*Krugman, P. (1994), ‘The myth of Asia's miracle’, Foreign Affairs, Nov/Dec or
http://www.wws.princeton.edu/~pkrugman/
*Stiglitz, J.E. (1996), ‘Some lessons from the East Asian miracle’, World Bank Research
Observer, vol. 11, no. 2, pp. 151-77.
Feenstra, R.C. et al. (1999), ‘Testing endogenous growth in South Korea and Taiwan’,
Journal of Development Economics, vol. 60, pp. 317-41.
Ito, T. (1997), ‘What can developing countries learn from East Asia's economic growth?’,
Annual World Bank Conference on Development Economics, pp. 183-200.
Journal of Development Studies (1998), East Asian Development: New Perspectives, Special
Issue, vol. 34, no. 6.
Nelson, R. & H. Pack (1999), ‘The Asian miracle and modern growth theory’, Economic
Journal, vol. 109, pp. 416-36.
Hsiao, F.S.T. & M-C.W. Hsiao (2002), ‘“Miracle” growth in the twentieth century:
international comparison of East Asian development’, World Development, vol. 31, no.
2, pp. 227-57.
Rodrik, D. (1995), ‘Getting interventions right: how South Korea and Taiwan grew rich’,
Economic Policy, April.
Leipziger, D.M. (ed.) (2000), Lessons from East Asia, Ann Arbor, chs. 1-4 & 9.
Ito, T. (1996), ‘Japan and the Asian economies: a “miracle” in transition’, Brookings Papers
on Economic Activity, no. 2, pp. 205-60.
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Seminar Topics
7.1
Discuss the relevance of ‘New Growth theory’ to explanations of the growth
performance of the East Asian countries.
7.2
Compare and contrast the growth strategy of Korea and Japan: to what extent has the
former imitated the latter's strategy?
7.3
Compare and contrast the growth strategy of Korea and Taiwan. Are there any lessons
to be derived from this comparison?
LECTURE 8: INDIA AS AN EMERGING ECONOMY
The IS phase in India; why was it adopted and sustained for 30 years - consequences and
lessons for other economies. Why did the last dirigiste Asian economic regime succumb to
the ‘so-called’ open economy philosophy? The Indian route to liberalisation - is it different
from the East Asian Model and the Chinese Model?
Balasubramanyam, V.N. (1982), India, chs. 1, 2 & 3.
Balasubramanyam, V.N. (ed.) (1995), ‘India: trade policy review, World Economy, Annual
Trade Policy Review Issue.
*Balasubramanyam, V.N. (1999), Conversations with Indian Economists, Introduction.
Balasubramanyam, V.N. (2004), ‘FDI in India’, in A. Wei & V.N. Balasubramanyam (eds.)
Foreign Direct Investment: Six Country Case Studies, Edward-Elgar.
*Bhagwati, J.N. (1993), India In Transition.
*Dreze, J. & A.K. Sen (1998), India: Economic Development & Social Opportunity.
Joshi, V.J. & I.M.D. Little (1997), India’s Economic Reforms, 1991-2001.
*Lal, D. (1995), ‘India and China: contrasts in economic liberalization?’, World
Development, vol. 23, no. 9, pp. 1475-94.
Financial Times, Special supplement on India, 1999.
*Srinivasan, T.N. (2004), ‘China and India: economic performance, competition and
cooperation: an update’, Journal of Asian Economics, vol. 15, no. 4, pp. 613-36.
Seminar Topics
8.1
‘Human beings matter, commodities don’t’. Discuss in the context of A.K. Sen’s
thesis that investment in health and education is vitally important.
8.2
Discuss the role of financial factors in India’s development.
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8.3
Compare and contrast the industrialisation policies of India and the East Asian
economies. How successful have they been?
LECTURE 9: ECONOMIC GROWTH IN CHINA SINCE 1978
The ‘Open Door Policy’ and growth and industrialisation since 1978. The role of
international trade and foreign direct investment in China’s economic growth.
*Islam & Chowdhury, ch. 17.
*Chow, G.C. & K. Li (2002), ‘China’s economic growth: 1952-2010’, Economic
Development & Cultural Change, pp. 247-56.
*Fleischer, BM & J Chen (1997), ‘The coast – non-coast income gap, productivity and
regional economic policy in China’, Journal of Comparative Economics, vol. 25, pp.
220-36.
*Young, A (2003), ‘Gold into base metals: productivity growth in the People’s Republic of
China during the reform period’, Journal of Political Economy, vol. 111, no 6, pp 122061.
Berthelemy, J. & S. Demurger (2000), ‘Foreign direct investment and economic growth:
theory and application to China’, Review of Development Economics, vol. 4, no. 2, pp.
140-55.
Borensztein, E. & J.D. Ostry (1996), ‘Accounting for China’s growth performance’,
American Economic Review, vol. 86, no. 2, pp. 224-8.
Fan, S., X. Zhang & S. Robinson (2003), ‘Structural change and economic growth’, Review
of Development Economics, vol. 7, no. 3, pp. 360-77.
Ge, W. (1999), ‘Special Economic Zones and the opening of the Chinese economy: some
lessons for economic liberalisation’, World Development, vol. 27, no. 7, pp. 1267-85.
Hu, Z.F. and M.S. Khan (1997), ‘Why is China growing so fast’, IMF Staff Papers.
Martin, W. & .E Ianchovichina (2001), ‘Implications of China's accession to the World Trade
Organisation for China and the WTO’, World Economy, vol. 24, no. 9, pp. 1205-19.
McKibbin, W.J. & K.K. Tang (2000), ‘Trade and financial reform in China: impacts on the
world economy’, World Economy, vol. 23, no. 8, pp. 979-1003.
Naughton, B. (1996), ‘China's emergence and prospects as a trading nation’, Brookings
Papers on Economic Activity, no. 2, pp. 273-344.
Pomfret, R. (1997), ‘Growth and transition: why has China's performance been so different?’
Journal of Comparative Economics, vol. 25, pp. 422-40.
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Seminar Topics
9.1
Assess the extent to which China has followed its own ‘special’ growth strategy, as
opposed to imitating the success of Japan and other leading East Asian NICs.
9.2
How has foreign direct investment (FDI) affected economic growth in China?
9.3
Discuss the view that China will face a financial crisis in the future because of the
country’s heavy dependence upon international trade and international investment.
LECTURE 10: LIBERALISATION & THE QUEST FOR GROWTH IN AFRICA
The nature and extent of Africa’s economic problems. Why is Africa a laggard? Is there an
‘Africa effect’? Economic reforms and liberalisation efforts in Africa. What has gone wrong?
*Collier, .P & J.W. Gunning (1999), ‘Explaining Africa’s economic performance’, Journal of
Economic Literature, vol. XXXVII, no. 1, pp. 64-111.
*Sachs, J.D. & A.M. Warner (1997), ‘Sources of slow growth in Africa’, Journal of African
Economies, vol. 6, no. 3, pp. 335-76.
Block, A (2001), ‘Does Africa grow differently?’, Journal of Development Economics, vol.
65, no. 2, pp. 443-67.
Bloom, D.E. & J.D. Sachs (1998), ‘Geography, demography and economic growth in Africa’,
Brookings Papers on Economic Activity, vol. 2, pp. 207-95.
Collier, P. & J.W. Gunning (1999), ‘Has Africa grown slowly?’, Journal of Economic
Perspectives, vol. 13, no. 3, pp. 2-22.
Easterly, W. & R. Levine (1999), ‘Africa’s growth tragedy: policies and ethnic divisions’,
Quarterly Journal of Economics, pp 1202-50.
Hoeffler, A.E. (2002), ‘The augmented Solow Model and the African growth debate’, Oxford
Bulletin of Economics & Statistics, vol. 64, no. 2, pp. 135-58.
World Bank (1994), Adjustment in Africa: Reforms, Results & the Road Ahead.
Asiedu, E. (2002), ‘On the determinants of foreign direct investment to developing countries:
is Africa different?’, World Development, vol. 30, no. 1, pp. 107-19.
Pinto, B. (1987), ‘Nigeria during and after the oil boom: a policy comparison with Indonesia,
World Bank Economic Review, vol. 1, no. 3, pp. 419-45.
Sala-i-Martin, X. & A. Subramanian (2003), ‘Addressing the natural resource curse: an
illustration from Nigeria’, IMF Working Paper WP/03/139.
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Seminar Topics
10.1
Provide a critique of the ‘Africa effect’. What empirical support is there for this
effect?
10.2
Many African countries have taken major steps to liberalise their international trade
and investment policies and yet the much hoped for FDI has not been forthcoming.
What factors might account for such an unfavourable response?
10.3
In spite of the poor economic performance of many African economies, Botswana is
often cited as an exceptional case on most indicators of growth and development.
How and why did Botswana become a success story?
Essay Titles
Write an essay of not more than 1,500 words, not including supporting tables, diagrams etc,
on one of the following topics. All essays should be word-processed, well-presented (spellchecked) with clearly drawn diagrams and a full bibliography. They should be handed in no
later than 4pm on Thursday 14 December.
1.
‘Industrialisation in developing countries is founded upon the redistribution of income
and resources away from the impoverished peasantry to the urban elite.’ Discuss.
2.
Compare and contrast the process of liberalisation and subsequent growth success in
China and India.
3.
Do economic growth models provide an explanation for Africa’s poor performance?
What, if anything, can the African countries learn from the growth success of the rapidly
industrialising East Asian economies?
4.
Evaluate the growth implications of the adoption of outward-oriented trade policies by
developing countries in the light of the experience of at least two examples.
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