Models Of Development And Rostow's Linear Stages Of Economic Development

Linear Stages of Development and Structural Changes

Two prominent models of economic development that came about in the 20th century are Rostow's linear stages of growth and Lewis' structural changes model. Each model has its own unique characteristics, limitations and certain similarities with the other.

Overview of Each Model

The core principle underlying Rostow's model is the mobilization of savings, both foreign and domestic, in order to produce sufficient capital which can then be reinvested in different sectors to accelerate economic growth. The linear stages of growth model consists of five consecutive phases which all nations are required to progress through to reach a fully developed economic system. The Harrod- Domar model describes the mechanism by which more investment leads to more growth and states that the rate of growth of a country's gross national product is determined by the national savings ratio and the national capital-output ratio. Ethiopia and Somalia are in the first phase of development, the Philippines is currently in the second phase, Vietnam and

This theory is based on shifting the emphasis that's put on traditional subsistence agriculture towards a more urbanized economy with industrially diverse manufacturing. The two major forms of structural-change theory are Lewis's and Chenery's models. According to Lewis' model an underdeveloped economy consists of an overpopulated rural sector (classified by Lewis as labour surplus since its withdrawal will not affect the sector's output) and an urban industrial sector into which labour is being gradually transferred to from the rural sector. Chenery examined different patterns of development for multiple developing countries and holds that different countries become wealthy via different trajectories depending on their size, resources, its current income level and other