Economic Development and Growth

During the beginning of the evolution of economics of development, no distinction was drawn between the economic growth and economic development. During the seventies, the economists thought of distinguishing the economic growth and economic development. When it comes to economic development, there are two different views. The traditional view has been to interpret it in terms of changes in the structure of national product and the occupational pattern of labor force and the institutional and technological changes that bring about such changes or accompany such changes.

In this view, the share of agriculture in both national product and employment of labor force declines and that of industries and services increases. Various strategies of development which were suggested until seventies generally focused on rapid industrialization so that the structural transformation could be achieved. For this purpose, the appropriate institutional and technological changes were recommended to bring about such structural changes. According to C. P. Kindleberger, economic growth means more output and economic development implies both more output and changes in the technical and institutional arrangements by which it is produced.

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Thus according to this view, the economic development implies growth plus structural change. Structural changes refer to the changes in technology and institutional factors which cause shifts of labor from agriculture to modern manufacturing and services sectors and also general self sustaining growth of output.

An aspect of structural change which is of special mention is that during the process of economic development there occurs a shift of the working population from low productivity employment in agriculture to the modern industrial and services sectors having higher levels of productivity of labor.

It is quite interesting to note that during the process of economic development the percentage share of the working population in agriculture sharply falls whereas the percentage shares of the working population employed in modern industrial and services sectors substantially increase.

Apart from the change in the sectoral distribution of the labor force, there occurs a change in sectoral composition of national income in which while percentage contribution of agriculture to national income declines, percentage contributions to national income of industrial and services sectors increase.

This is on account of the various changes taking place namely; a change in the pattern of consumption of national income of the people; economy growing steadily and moving upwards; income level of the people is found to be increasing and various changes that are taking place in the levels of productivity in the different sectors of the economy.