1. Modern Theories: Neo-Colonial, Neo-Classical and Endogenous
Lecture 5 Don DeVoretz
Modern Theories:
Neo-Colonial,
Neo-Classical
and Endogenous

2. Neo-Colonial Dependence:1970’s
Center-Periphery is key concept
Center is developed and Periphery is LDC
Power Elites in Center
Multi-nationals, aid agencies, IMF, World Bank
Reward Power Elites in Periphery
landlords, military, public officials

3. Neo-Classical:1980’s: Underdevelopment self-induced
Too much state intervention
Wrong set of prices
Conclusion: Need free markets
Give correct price signals
reduce corruption, inefficiency
examples NICS

4. Neo-Classical Model Nr Yp Yp rate N”r Savings E f High Medium
Y/L = K/L

5. Neo-Classical Working
Growth determined by
N=Cb-Cd or population growth
r= k/l or capital labour ration of efficiency
S=savings rate= f(Y/L)
Conclusions
Level of Y/L result of n and savings rate
Y/L inverse(direct) on (n) and (s)
E (F) high (low) level equilibrium

6. Endogenous Growth Theory: 1990’s
Once you start to grow you continue
increasing returns to scale
first to the post wins
First in international trade get all rents
Gains from trade translate into further gains
Complementary investments key to growth
education, infrastructure, and R and D
Conclusion: No convergence

7. End of Show