Theories of economic development explain how economies form and thrive, and are used to create laws and policies. Social theories focus on education, poverty, and health, while neoclassical theories advocate for fewer government controls. Exogenous growth theories focus on technological advances. Harris-Todaro’s view suggests that adding urban jobs can lead to a reduction in overall jobs, especially in developing areas.
Theories of economic development are made in an attempt to explain how a country’s or region’s economy is formed and thrives, and these theories are often used to make laws and policies. Social theories of economic development focus on social issues to improve the economic status of an area. Neoclassical economic development theories usually focus on a free market with fewer government controls and restrictions to help companies grow at a faster rate. Technology often plays a role in economic development and exogenous growth theories focus on this aspect. With Harris-Todaro’s (HT) view on the economy, adding urban jobs can lead to a reduction in overall jobs, especially in developing areas.
Education, poverty, and health are some of the social issues that often impact the economy, and in social theories of economic development, these are the key issues. For example, these theories state that someone who is educated and has a family that does not live in poverty will be able to boost the economy. Using these theories, the government can create laws or acts that improve these social problems in an effort to boost the economy. These theories tend to work best in already developed areas and are usually complementary in developing areas.
In neoclassical theories, government controls and restrictions only serve to prevent the economy from developing properly. For example, if a business is able to grow at a natural rate and not a government-mandated rate, it will help the economy better. If the government agrees with these theories, it will usually impose slight restrictions on businesses.
Exogenous growth theories of economic development focus on technological advances to revive the economy. These technological advances can be as complex as a state-of-the-art computer system or as simple as a loom. Making technology better, and making new technologies more accessible to business, improves the economy within the realm of these theories.
When the government helps create new jobs, the jobs are usually done in the urban sector. While this might sound sensible, HT’s take on the economy states that adding jobs in rural areas is usually better. This is commonly true for developing countries and regions that need strong rural locations. When urban jobs are created, people in the rural area will move to the urban area, which leads to less agricultural and food production, which tends to weaken the area and the economy.
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