1. Community Economic Development ECON 3990
Economic Theory

2. Introduction Survey of existing economic theories Two areas of theory
Regional Development Theory
Economic Development Theory

3. Economic Development Theories
Development Stages Theory
Staple Theory
Big Push Theory
Convergence Theory

4. Regional Development Theories
Development Stages Theory
Export Base Theory
Location Theory
Attraction Model Theory

5. Theories
Post World War II: theories emerged to explain economic development
Two opposing theories of regional growth
Development Stages Theory
Export Base Theory

6. Development Stages Theory
Sequential path of development
Theory proposes three stages:
Primary Secondary Tertiary

7. Export Base Theory Regional growth is dependent on the export base
“Exportable Commodities”

8. Staple Theory of Economic Growth
Staple theory explains economic growth as a process of diversification around the base
Central concept, examines the spread effects of the export sector

9. Staple Theory
Impact of export activity on the domestic economy and society
The construction of a staple theory involves classifying the spread effects

10. Staple Theory: Linkages
Backward Linkages: a measure of the extent that a sector’s output depends on inputs purchased from other sectors in the region.
Forward Linkages: a measure of the extent that a sector’s output is sold as inputs to other sectors of the region

11. Staple Theory: Linkages
Final Demand Linkage: amount that investment in domestic sectors is producing consumer goods for the export sector
Linkages have a multiplier effect

12. Staple Theory: Leakages
Leakages measure income flows leaving a region
Examples include migratory labour and servicing capital imports

13. The Staple Trap
over-concentration of resources devoted to the export sector

14. Big Push Theory development requires a series of projects
Complementarity of industries

15. Location Theory
Regions best suited to industrialization are predisposed to higher rates of growth and development
Location location location!

16. Attraction Models
Community can alter its position by offering incentives and subsidies

17. Convergence Theory
Underdevelopment is a consequence of increasing divergence and unresponsiveness of domestic production to respond to the needs of the local population

18. Two stage strategy of convergence
Convergence of domestic resource use and domestic demand
Convergence of domestic demand and domestic need