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Review of the Economic Development Theories in Africa - Essay Example

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This paper thematically describes the four development theories and their applications on the African Countries. It includes a case study, that was carried out on Libya, Ethiopia and Kenya on how development processes were affected by internal and external factors to realize their development goals…
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Review of the Economic Development Theories in Africa
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Download file to see previous pages This paper offers an analysis of practical implementation of the four models of development in African countries. These models includes Harrod-Domar Model, Exogenous Growth model, Surplus Labor Model, and Harris-Todaro Model.
Economic development theories and models are built on three main blocks; the saving function, the production function and labor supply function. Growth rate and saving function are equal to s/AY (where s is the saving rate and AY is the output ratio).
South Africa is one of the developing countries in Africa that has implemented the Exogenous Growth Model since it has acknowledged the inclusion of technology and innovation in its plans. This model explains the importance of technological change (and capital accumulation in an economic growth.
In Ethiopia Harrod-Domar model applies where high population growth rate is constraint to the rate of technological change. Harrod-Domar model outlines an economic function relationship in which the “growth rate of gross domestic product (g) depend directly on the national saving ratio (s) and inversely on the national capital/output ration ratio (k)
Libya is one of the developing countries in Africa with the highest income per capita GDP, however, most of its population still remain poor and unemployed because of the rural-urban migration in accordance to the Harris-Todaro Model. This is a theory of rural-urban migration and it is strives to address the high rates of unemployment problem issue in the developing countries
(Ezeala-Harrison,p3). Rural to urban migration is mainly fueled by the creation of more employment opportunities in the urban areas than the rural areas. This is the reason why most of the Africa’s developing countries such as Kenya have introduced policy of rural industrialization and development to help deal with the problem of high population and unemployment rates in the urban areas. Creation of more industries and other employment opportunities in the rural areas has attracted more people to the rural areas and this is one of the policies required for a balanced development in any country. In developing countries such as Algeria and Tunisia most of the citizens move from their rural homes to urban areas in search of education, employment and high living standards. Some people are also driven away by the poor status of their lands which are unproductive. The current surveys show that about 53 per cent of the populations of Kenya, Tunis, Algeria and South Africa reside in the urban areas. Rapid urban growth rate in the current economic status of the developing countries is a strain to the level of national and local governments to provide basic necessities such as electricity, sewerage, water and adequate health facilities. In such situations, squatter settlements and over crowded slums begin sprawling up. In a country like Kenya over-crowded slums are the homes to millions of the citizens. In most developing countries, this growth rate reflects rural crisis other than urban-based development (Ezeala-Harrison, p5). Harrod-Domar Model Harrod-Domar model outlines an economic function relationship in which the “growth rate of gross domestic product (g) depend directly on the national saving ratio (s) and inversely on the national capital/output ration ratio (k) (Jurgen & Paul, p257). Mathematically it is expressed as g= s/k. This equation derived its name from two economists (E.V Domar of U.S and Sir Roy Harrod of Britain) who proposed it. This theory has been majorly utilized by the developing countries in planning their economy in the early post wars. For a targeted growth rate to be realized, a required growth rate must be set. Countries which are unable to set this require savings can resort to a jurisdiction for borrowing from international agencies such as International Monetary Funds and World Bank. Most of the African countries are developing countries which are unable to set the required savings to meet the targeted growth rate. They therefore resort to borrowing from international agencies. Huge debts are disadvantages to developing countries because of the higher interest rates and poor credit (Jurgen & Paul, p257). Problems usually a rise when these countries make irregular loan payment and underestimate the project cost. Every country ...Download file to see next pages Read More
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