Community Economic Development ECON 3990 Economic Theory

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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