1. Regional Disparities and economic development -neoclassicals (solow) -unbalanced growth theories(myrdal, Hirschman) -dependancy /core-periphery theories(A.G.Frank)

2. Regional Disparities and economic development – International Historical Trends The relation between regional disparity and economic development Paul Bairoch (1981) (see Bairoch and Maurice Levy-Leboyer – Disparities in Economic Development since the Industrial reviolution-1981) 1. Real GNP per capita differences between the developed and developing countries: Historical trends Gaps in terms of real GNP per capita YearGNP per capita in 1960 US dollars and prices Gaps between developed countries and Third World Developed countriesThird World TotalMost DevelopedTotalLess developed ABCDA/CB/CB/D 175018223018813011.21.8 18001982401881301.11.31.8 18302373601831301.322.8 18603245801741301.93.34.5 191366213501921303.4710.4 1950105424202031355.211.917.9 1960145328002501405.811.220 1970222936003081407.211.725.7 1977(a)273742203551457.711.929.1

3. Regional Disparities – International Historical Trends –In the early 18th century third world economies had a higher Per capita GNP than developed economies –industrial revolution in the early 19th century, drain of wealth from colonies, put the developed economies on a faster growth path than the third world. –The gap is more prominent and widening eversince 2.Disparities Within the Developed Economies. Coefficient of variation of per capita Gross National Product of developed countries(%) YearTwenty-five countries(a)Thirty countries(b) 183018.2 186034.7 191346.8 192947.5 193841 19505656.1 196045.744.5 197034.932.3 197731.229.8

4. Regional Disparities – International Historical Trends Aside 1: Coefficient of Variation unweighted CV where σ is the standard deviation, μ is the mean of the variable x Weighted CV where P is the population of the region s, n is the average, X is the variable (per capita income).

5. Regional Disparities – International Historical Trends inverted U shaped pattern, wherein there is initially a rise in Coefficient of variation among the countries, till the mid of the 20th century, thereafter the disparities tend to decline. 3. Disparities among the developing world Real GNP per capita of Third World regions (in 1960 US dollars and prices) Year Market Economy Countries AfricaAmericaAsiaTotalChinaTotal Third world 1800130245180171210188 1860130260164 195177 1913142357182195188192 1938158400187211187202 1950183467178222166203 1960220520210261230250 1970268610246309306308 1977(a)283723288359346355

6. Regional Disparities – International Historical Trends –Widening gap in Per capita income between the Asian countries and the Latin American economies till the 1950s. –There is convergence among the Asian and African economies –The convergence btw Asian and African economies are due to slowing of Asian economies. –The divergence btw the L. American and other economies is due to hastening of their growth.

7. Regional Disparities – International Historical Trends To summarize... –There is continuous widening disparity between the developed and the developing world –The disparity within the developed world is declining –The disparity within the developing world is widening.

8. Regional Disparities – International Historical Trends J.Williamson-Process of national development and regional disparity- Jeffrey Williamson, EDCC, (1965 vol 13, pp3-45) Hypothesized that at initial stages of economic development there would be a tendency for widening of regional disparity in the economy till it reaches a high point; hereafter the regional disparity tend to decline as the economy develops- the inverted U shaped curve hypothesis. The reasons for the initial divergence….. -Labour migration -high cost of migration, traditional inertia to migrate, -selective skilled labour migration -Capital Migration -under developed financial institutions -low rate of returns for capital -Central Government Policy -Interregional Linkages

9. Regional Disparities – International Historical Trends …and later convergence due to –Labour migration – wage disparities decline, reverse migration –Capital Migration, Central Government Policy Empirical evidences for the arguments put forward -Cross sectional evidence: period 1949 to 1961 International Cross-Section Country and Kuznets group of classificationYears coveredVwVuw Australia1949/50-1959/600.0580.078 New Zealand19550.0630.082 Canada1950-610.1920.259 United Kingdom1959/600.1410.156 United States1950-610.1820.189 Sweden1950, '55, '610.20.168 Group I Average 0.1390.155 Finland1950, '54, '580.3310.276 France1954, '55/56, '580.2830.215 West Germany1950-55, '600.205 Netherlands1950, '55, '580.1310.128 Norway1952, '57-'600.3090.253 Group II Average 0.2520.215

10. Regional Disparities – International Historical Trends Country and Kuznets group of classificationYears coveredVwVuw Ireland19600.2680.271 Chile19580.3270.44 Austria19570.2250.201 Puerto Rico19600.520.378 Group III Average 0.3350.323 Brazil1950-590.70.654 Italy1951, '55, '600.360.367 Spain1955, '570.4150.356 Colombia19530.5410.561 Greece19540.3020.295 Group IV Average 0.4640.447 Yugoslavia1956, '59, '600.340.444 Japan1951-590.2440.222 Group V Average 0.2920.333 Philippines19570.5560.627 Group VI Average 0.5560.627 India1950/51,1955/560.2750.58 Group VII Average 0.2750.58 Total Average 0.2990.309

11. Regional Disparities – International Historical Trends –the severity of disparity varies from region to region. –The severity of disparity is the lowest in the high income groups. –As we move to the middle income groups the severity is the highest –When we move to low income countries the severity of disparity again decreases. –Within each groups there are wide variations in disparity

12. Regional Disparities – International Historical Trends Time Series Evidences Secular Changes in Vw During The postwar Period Income ClassVw risingVw stableVw falling I AustraliaCanada United KingdomUnited States Sweden II FranceFinland West Germany Netherlands Norway III IV ItalySpain Brazil VJapan Yugoslavia VI VIIIndia

13. Regional Disparities – International Historical Trends High income countries in general had a stable or declining severity of regional disparity (group 1 and 2) Middle income countries showed a variety of trends. Italy had a stable Vw at a high level, Brazil had a declining Vw from its high level of disparity. The low income group countries had a rising degree of disparity. Country illustrations United StatesNorway Year Vw (by regio n) Vw (by state)YearVw 18400.2310.27919390.424 1860 19470.253 18800.3210.35519520.238 19000.2990.32219570.233 19200.2910.33119580.221 19400.2630.33119590.209 19600.1760.19519600.186

14. Regional Disparities – International Historical Trends United KingdomYear Vw (Taxable income per family)Vw (Personal income per capita) YearVw1864 0.26 19370.11619380.658 1949/500.07419460.436 1954/550.0641951 0.289 1959/600.0711954 0.245 Brazil1955/56 0.305 YearVw1958 0.299 19390.502Italy 19470.693YearVw 19480.68919280.313 19490.71319380.345 19500.73219510.363 19510.72519520.384 19520.78119530.323 19530.70319540.331 19540.71119550.346 19550.69219560.348 19560.6919570.344 19570.66519580.348 19580.63519590.356 19590.66319600.372

15. Regional Disparities – International Historical Trends Labour participation rates vs productivity (quantity and quality) - how much of the above observed trend is explained by productivity differentials, and how much of it is due to differences in participation rates. –An index on inequality based on productivity is constructed. The productivity differentials turn out to be much less than the per capita income index weighted by population of he region. This gives us reason to believe that participation rate differences are more important than productivity differences in explaining per capita income differences among regions. This differences in regional participation rates could be due to selective migration of workers. –Sectoral variations in regional disparity - sectoral classification of productivity differentials shows that regional disparities are higher in the agricultural sector than in the manufacturing sector. This is mainly due to the differences in natural endowments of the region