Growth_Theories_Flashcards

Question 1

What are the four key approaches to growth theories?

Answer 1

1. Linear-Stages-of-Growth Models 2. Structural Change Models 3. International Dependence Models 4. Neoclassical Models

Question 2

What are Rostow’s five stages of growth?

Answer 2

1. Traditional Society 2. Preconditions for Take-Off 3. Take-Off 4. Drive to Maturity 5. Age of High Mass Consumption

Question 3

What is the Harrod-Domar growth formula?

Answer 3

ΔY/Y=s/c (Savings rate divided by capital-output ratio)

Question 4

What are the assumptions of the Harrod-Domar model?

Answer 4

• Fixed capital-output ratio - All savings fund investment

Question 5

Key idea of the Lewis Two-Sector Model

Answer 5

Surplus labor from agriculture moves to the industrial sector, where profits are reinvested for growth.

Question 6

Stylized facts of structural change

Answer 6

1. Shift from agriculture to industry and services 2. Urbanization 3. Declining family sizes 4. Accumulation of physical and human capital

Question 7

What is the neocolonial dependence model?

Answer 7

Developing nations remain underdeveloped due to exploitative relationships with developed countries and local elites.

Question 8

What are the key criticisms of dependency models?

Answer 8

1. Lack of solutions for growth 2. Some integrated countries show success, countering dependency theory.

Question 9

Formula for Solow Model’s production function

Answer 9

Y=F(K,L), where Y=output, K=capital, L=labor

Question 10

What drives long-term growth in the Solow Model?

Answer 10

Exogenous technological progress.

Question 11

What are endogenous growth models?

Answer 11

Models where innovation, knowledge spillovers, and human capital internally drive sustained growth.

Question 12

Romer’s model emphasizes what factors?

Answer 12

Innovation, knowledge spillovers, and increasing returns to scale.

Question 13

Key difference between linear stages and structural models

Answer 13

Linear stages focus on savings/investment, while structural models emphasize sectoral transitions like agriculture to industry.

Question 14

What is the incremental capital-output ratio (ICOR)?

Answer 14

ICOR=ΔK/ΔY: Measures how efficiently new capital generates output.

Question 15

Explain the dualistic development thesis.

Answer 15

Wealthy and poor sectors coexist, and superior sectors rarely uplift the inferior ones.

Question 16

What are the limitations of the Lewis Model?

Answer 16

1. Assumes labor surplus exists 2. Neglects human capital and inequality 3. Doesn’t fully account for institutional factors.

Question 17

Criticism of the Solow Model

Answer 17

Fails to explain technological progress or differences in productivity across countries.

Question 18

What is the equation for steady-state growth in the Solow model?

Answer 18

Growth rate of GDP: g=s/c

Question 19

What are the exam questions derived from these theories?

Answer 19

1. Compare Rostow and Lewis models. 2. Explain limitations of structural change models. 3. Discuss innovation’s role in Romer’s model.

Question 20

Neoclassical vs. Endogenous Growth Models: Key difference

Answer 20

Neoclassical: Exogenous technological progress. Endogenous: Growth driven by internal factors like innovation and human capital.

Question 21

What is the role of policy in endogenous growth theory?

Answer 21

Promote education, R&D, and infrastructure for sustained growth.

Question 22

What does A represent in growth models?

Answer 22

Total Factor Productivity (TFP): The efficiency with which labor and capital are used.

Question 23

How do structural models view savings?

Answer 23

Necessary but not sufficient; transformation requires broader socioeconomic changes.

Question 24

What is a dependency relationship in the global economy?

Answer 24

Exploitative trade, investment, and aid systems that reinforce underdevelopment in poorer nations.

Question 25

Example of a sectoral transition in development

Answer 25

Agriculture → Industry → Services.

Question 26

What drives growth in endogenous models?

Answer 26

Innovation, education, human capital, and knowledge spillovers.

Question 27

What are the criticisms of Rostow's stages of growth?

Answer 27

Assumes all countries follow the same path, ignores unique local factors.

Question 28

Policy implications of Harrod-Domar Model

Answer 28

Foreign aid and investment are necessary to close savings gaps in low-income countries.

Question 29

Formula for per-worker output in Solow Model

Answer 29

y=f(k), where y is output per worker and k is capital per worker.

Question 30

What are the drivers of Total Factor Productivity (TFP)?

Answer 30

Innovation, human capital, efficient resource allocation, and governance.

Question 31

Define 'knowledge spillovers.'

Answer 31

Benefits of innovation shared across the economy, boosting productivity.

Question 32

Explain 'balanced growth' in Solow's model.

Answer 32

Output, capital, and labor grow at the same rate in steady state.

Question 33

What limits growth in the Solow model?

Answer 33

Diminishing returns to capital and reliance on exogenous technological progress.

Question 34

Romer's equation for endogenous growth

Answer 34

Y = K^α (AL)^(1-α), where AL represents effective labor augmented by technology.

Question 35

What is the 'take-off' stage in Rostow's model?

Answer 35

Accelerated industrial growth driven by investment and technology.

Question 36

Role of foreign aid in Harrod-Domar Model

Answer 36

Bridges the savings-investment gap to enable growth in low-income countries.

Question 37

capital output ratio

Answer 37

C=K/Y where: GNP = Y capital stock=K

Question 38

Savings ratio

Answer 38

S = total savings/Y GNP = Y

Question 39

AK model

Answer 39

Y=AK Investment = K Technological advanement= A