Growth Strategies and Linkages Explained
This question relates to economic development strategies. Understanding the concepts of backward and forward linkages is key to identifying the correct growth strategy.
Defining Linkages
- Backward Linkages: Occur when an increase in the production of a commodity stimulates the production of inputs needed for it. For example, increased car manufacturing boosts demand for steel, tires, and electronics.
- Forward Linkages: Occur when an increase in the production of a commodity stimulates the production of other commodities that use it as an input. For example, increased production of steel might lead to increased manufacturing of machinery or construction materials.
Relevance to Growth Strategies
The concept of strategically developing specific sectors to maximize these backward and forward linkages is central to the strategy of unbalanced growth. This approach, often associated with Albert Hirschman, argues that deliberately creating imbalances by investing in certain industries can stimulate wider economic activity through these linkages.
Other strategies are less focused on this specific mechanism:
- Balanced Growth involves simultaneous investment across many sectors, potentially diluting the impact of specific linkages.
- Trickle-down Growth assumes benefits spread indirectly, not necessarily driven by planned linkages.
- Equilibrium Growth describes a stable state rather than an active development strategy utilizing linkages.
Therefore, backward and forward linkages are most relevant for an unbalanced growth strategy, where targeted investment aims to generate these inter-industry demands.
Conclusion
The strategy that explicitly leverages backward and forward linkages to stimulate economic activity is unbalanced growth.
Important Questions from Economic Growth & Development
- According to Rostow, any industry can play the role of leading sector in the take-off stage provided following conditions are met.
A. The market for the product is expanding rapidly
B. The leading sector generates secondary expansion
C. The sector has an adequate and continual supply of capital from ploughed-back profits.
D. Introduction of new techniques into the sector to increase productivity
Ε. Changes in industrial structure should be structural ones
Choose the most appropriate answer from the options given below : Match List-I with List-II:
List-I
(Concepts)List-II
(their expression)
(where, gm=manufacturing output growth, gGDP=GDP growth, Pnm=productivity in outside manufacturing,
Pm=Productivity in manufacturing)A. Kaldor's first law of growth I. Pnm = f(gm), f' > 0 B. Kaldor's second law of growth II. ȳ = ε · (u − u*) C. Kaldor's third law of growth III. gGDP = f(gm), f' > 0 D. Okun's law IV. Pm = f(gm), f' > 0 Choose the correct answer from the options given below :
- The idea of constructing poverty-weighted indices of growth is.
- In the context of neoclassical growth model, the effects of an increase in population growth rate is/are.
A. Reduction in steady-state level of capital per head
B. Increase in per capita output
C. Increase in steady state rate of growth of aggregate output
D. Decrease in capital-output ratio
Ε. An inward shift in production possibility curve.
Choose the most appropriate answer from the options given below: - Arrange the following publications in chronological order starting from the oldest to the latest.
A. "Theory of Economic Growth" by Arthur Lewis
B. "A Contribution to the Theory of Economic Growth" by Robert Solow
C. "The Stages of Economic Growth: A Non Communist Manifesto" by Walt Rostow
D. "Asian Drama: An Inquiry into the Poverty of Nations" by Gunnar Myrdal
Ε. "Strategy of Economic Development" by Albert Hirschman
Choose the correct answer from the options given below :
