MGEC81H3 Lecture Notes - Lecture 5: One Unit, Big Push Model, Mechanical Equilibrium
1 May 2016
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Document Summary
Underdevelopment as a coordination failure: influential during 1990- early 2000, emphasizes that complementarities between several conditions is necessary for economic development. Growth requires complimentary conditions and all those have to be coordinated. Middle income like india was- not very poor, middle income lower, growing 2-3 % If you want to move, several conditions need to exist need to be coordinated. Hard to go to upper income, you sustain it. Middle sustain coming from middle to hard and low to middle very hard: development become a chicken and egg problem, deep interventions by the government can move an economy to a preferred equilibrium. Rumer govt had to intervene didn"t say how. These models say govt needs to intervene - china, singapore income levels moved big govt intercention. Walmart if you expect economy to grow 2 % - everything will go smoothly , rush in, add production, move to equilibrium, acc. to expectations, if not you adjust.
