Question

2a. What is meant by the term 'path dependence? (5 points) 2b. Explain, with the use of at least two historical examples, the role of colonization in creating adverse path dependence in former colonies. (10 points) 2c. What specific changes would you suggest be undertaken by now-independent countries whose economic structures have been shaped by colonization and adverse path dependence? Explain why you think these changes would be necessary. (5 points) 3. Choose THREE of the theories of development listed below. Clearly explain each theory and discuss its contribution to our understanding of the process of economic development. (60 points) • • The Harrod-Domar model of economic growth The Solow model of economic growth The Lewis model of structural change The Prebisch-Singer hypothesis Rosenstein-Rodan's 'big-push' theory of development

Answer 1

Q2a.Path dependence explains how history really matters – where we have been in the past determines where we currently are and where we can go in future.In other words, our current decision-making situations are determined by history – what happened in the past has a huge influence on today’s strategic planning.It explains how the set of decisions people face for any given circumstance is limited by the decisions they have made in the past or by the events that they experienced, even though past circumstances may no longer be relevant.

In economics,Path dependence refers to how apparently insignificant choices and events can have enormous consequences for the development of an economy or a market.

Q3.The Lewis Model of Structural change

This theory of development  was initially developed by Sir Arthur Lewis in his article, ‘Economic Development with Unlimited Supplies of Labour’. which was published in 1954.It is also known as the two sector model, and the surplus labour model.It is an early traditional model which seeks to explain how labour movement from one sector to another leads to economic development in a country, particularly developing countries.It focused on the need for countries to transform their structures, away from agriculture, with low productivity of labour, towards industrial activity, with a high productivity of labour.The Lewis Model is about how surplus labour from the traditional agricultural sector is transferred to the modern industrial sector, whose growth over time absorbs the surplus labour and as a result its promotes industrialisation as well as encourage sustainable development of an economy.

The Solow model of Economic growth

The Solow Model of economic growth, was developed by Nobel Prize-winning economist Robert Solow, was the first neoclassical growth model.It is an economic model of long-run economic growth set within the framework of neoclassical economics. It attempts to explain long-run economic growth by looking at capital accumulation, labor or population growth, and increases in productivity, commonly referred to as technological progress.Its analyzes changes in the level of output in an economy over time as a result of changes in the population growth rate, the savings rate, and the rate of technological progress.This model of economic growth says that a 'steady-state growth path' is reached when output, capital and labour are all growing at the same rate, so output per worker and capital per worker are constant.The Solow model is the basis for the modern theory of economic growth.

The Harrod Domar model of Economic Growth

The Harrod Domar model of Economic Growth was developed independently by Roy F. Harrod in 1939 and Evsey Domar in 1946. It is a Keynesian model of economic growth. It is used in development economics to explain an economy's growth rate in terms of the level of saving and of capital.This model is based on the capital factor as the crucial factor of economic growth. It concentrates on the possibility of steady growth through adjustment of supply of demand for capital.Basically, the model suggests that the economy's rate of growth depends on two factors, they are the level of national saving and .The productivity of capital investment.

According to the Harrod–Domar model there are three kinds of growth: warranted growth, actual growth and natural rate of growth.

Warranted growth rate is the rate of growth at which the economy does not expand indefinitely or go into recession. Actual growth is the real rate increase in a country's GDP per year. Natural growth is the growth an economy requires to maintain full employment.