Other books by A.P. Thirlwall Inflation, Saving and Growth in Developing Economies Regional Growth and Unemployment in the United Kingdom (with R. Dixon) Financing Economic Development Balance-of-Payments Theory and the United Kingdom Experience (Fourth Edition with H. Gibson) Nicholas Kaldor UK Industrialisation and Deindustrialisation (Third Edition with S. Bazen) The Performance and Prospects of the Pacific Island Economies in the World Economy Economic Growth and the Balance-of-Payments Constraint (with J. McCombie) The Economics of Growth and Development: Selected Essays, vol. 1 Macroeconomic Issues from a Keynesian Perspective: Selected Essays, vol. 2 The Euro and ‘Regional’ Divergence in Europe The Nature of Economic Growth: An Alternative Framework for Understanding the Performance of Nations Trade, the Balance of Payments and Exchange Rate Policy in Developing Countries Essays on Balance of Payments Constrained Growth: Theory and Evidence (with J. McCombie) Trade Liberalisation and the Poverty of Nations (with P. Pacheco-López) Economic Growth in an Open Developing Economy: The Role of Structure and Demand Essays on Keynesian and Kaldorian Economics Edited works Keynes and International Monetary Relations Keynes and Laissez-Faire Keynes and the Bloomsbury Group (with D. Crabtree) Keynes as a Policy Adviser Keynes and Economic Development Keynes and the Role of the State (with D. Crabtree) European Factor Mobility: Trends and Consequences (with I. Gordon) The Essential Kaldor (with F. Targetti) Further Essays in Economic Theory and Policy, vol. 9, Collected Economic Papers of N. Kaldor (with F. Targetti) Causes of Growth and Stagnation in the World Economy (the Mattioli Lectures of N. Kaldor with F. Targetti) Economic Dynamics, Trade and Growth: Essays on Harrodian Themes (with G. Rampa and L. Stella) Other books by Penélope Pacheco-López Trade Liberalisation and the Poverty of Nations (with A.P. Thirlwall) Strategic Directions on Industrial Policy in Mongolia Greenland Faroe (Den) Islands (Den) Iceland United Kingdom Isle of Man Canada Ireland Netherlands Belgium Luxembourg France Switzerland Monaco United States Spain Bermuda Portugal Andorra Morocco Mexico Cay(UmKa)n Is. The Bahamas WSeashtaerran Algeria JamaicaHaiti Cape Verde Mauritania Mali Guatemala Senegal Burkina El Salvador The Gambia Faso HonNdiucraarsaCgousataP Raincaama ColombVieanezuela GuyaSnuariFnraemnch Guiana GuiSneiearG-rBau isLiLnseieaboauenreia Togo Kiribati Ecuador Côte d’IvoGirheana Benin Peru Equatorial Guinea Samoa French Polynesia Brazil American Samoa (US) Bolivia FFiijjii Tonga Chile Paraguay Puerto Rico (US) Antigua and Uruguay Barbuda Dominican Argentina Republic Guardeloupe (Fr) US Virgin Dominica Islands (US) Sant dK iNttsevis Martinique (Fr) Aruba Netherlands St Lucia (Neth) Antilles (Neth) Barbados Grenada St Vincent and the Grenadines Trinidad Venezuela and Tobago The world by income group (GNI/US$): Source: International Bank for Reconstruction and Development, the World Bank Low Income < $1025 Lower-middle Income $1026–$4035 Upper-middle Income $4036–$12,475 High Income > $12,476 No data Income group classified according to the 2015 GNI per capita, calculated using the World Bank Atlas method. Norway Sweden Finland Estonia Russian Federation Latvia Denmark Lithuania Germany Belarus Ukraine Kazakhstan Moldova Mongolia Georgia Azerbaijan Uzbekistan KRyregpy.z Dem. People’s LMibaylGtaareeceLeRIbCAsearyrpanap.eob rToulnufsrkJeoSyrydraiAanrImraeqnia IKrauTnBwuarahkimtraQeinanAtiafsgrtahnaniPsTtaaaknjiiksitsatnan NepalBhutan P.LDCa.ohRin.a Rep.R Koeofp rK.e ooarfea Japan Egypt Saudi United Arab Arabia Emirates India Myanmar Vietnam Niger Oman N. Mariana Islands (US) Chad Sudan Eritrea Rep. of Yemen Bangladesh Thailand Philippines Nigeria Cambodia Guam (US)(Federated States of CAefrnictaranl Ethiopia Sri Lanka MalaysiaBrunei Micronesia Marshall Islands CameroonRepublic Uganda Somalia Maldives Palau GabonCongoDoef mC.o Rngeop. Kenya RwBaunrudnadi Singapore Papua Kiribati Tanzania ComorosSeychelles Indonesia New Guinea Solomon Islands Angola Zambia Mayotte Fiji Vanuatu Namibia Zimbabwe Malawi Mauritius Botswana Madagascar Reunion (Fr) Australia Mozambique New Caledonia (Fr) South Africa Swaziland Lesotho Germany Poland Czech Republic Slovak RepublicUkraine New Zealand Austria Hungary Slovenia Romania Croatia SSaann Bosnia and MMaarriinnoo Herzegovina Serbia Montenegro Bulgaria Italy FYR Macedonia Albania Greece This is a Blank Page ECONOMICS OF DEVELOPMENT THEORY AND EVIDENCE TENTH EDITION A.P. Thirlwall Professor of Applied Economics, University of Kent, UK Penélope Pacheco-López Consultant to Development Agencies BLOOMSBURY ACADEMIC Bloomsbury Publishing Plc 50 Bedford Square, London, WC1B 3DP, UK 1385 Broadway, New York, NY 10018, USA 29 Earlsfort Terrace, Dublin 2, Ireland BLOOMSBURY, BLOOMSBURY ACADEMIC and the Diana logo are trademarks of Bloomsbury Publishing Plc First edition 1972 Second edition 1978 Third edition 1983 Fourth edition 1989 Fifth edition 1994 Sixth edition 1999 Seventh edition 2003 Eight edition 2006 Ninth edition 2011 Tenth edition 2017 Reprinted by Bloomsbury Academic, 2022 Copyright © A.P. Thirlwall 1972, 1978, 1983, 1989, 1994, 1999, 2003, 2006, 2011 © A.P. Thirlwall and P. Pacheco-López 2017 A.P. Thirlwall and Penélope Pacheco-López have asserted their right under the Copyright, Designs and Patents Act, 1988, to be identified as Authors of this work. For legal purposes the Acknowledgements on pp. xxxv-xxxvii constitute an extension of this copyright page. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. Bloomsbury Publishing Plc does not have any control over, or responsibility for, any third-party websites referred to or in this book. All internet addresses given in this book were correct at the time of going to press. The author and publisher regret any inconvenience caused if addresses have changed or sites have ceased to exist, but can accept no responsibility for any such changes. A catalogue record for this book is available from the British Library. A catalogue record for this book is available from the Library of Congress. ISBN: PB: 978-1-1375-7794-8 ePDF: 978-1-1375-7795-5 ePub: 978-1-3503-0613-4 Printed and bound in Great Britain To find out more about our authors and books visit www.bloomsbury.com and sign up for our newsletters. To Oliver from Mum and Dad This is a Blank Page A PERSONAL MESSAGE FROM THE AUTHORS The economic and social development of poor countries and redu- cing divisions in the world economy between rich and poor are two of the greatest challenges facing mankind. Vast differences in income and wealth between countries and peoples are not only morally indefensible but also pose a grave threat to peace and stability in the world. John Maynard Keynes, the great English economist, once described what drew him to economics; he said, it was ‘its intellectual rigour com- bined with its potentiality for good’. He treated the subject of econom- ics as a moral science, the purpose of which is to understand economic behaviour and thereby be able design policies to make the world a (Courtesy of Spencer Scott of the University of more civilized place in which to live. It is this ‘potentiality for good’ that Kent photographic unit) attracts so many of today’s top economists to development economics. We have written this textbook on the economics of development so that students can apply their knowledge of economics to the plight of poor developing countries in the hope that they will better understand the divided world in which we live and think about issues of develop- ment in whatever capacity they may subsequently work. We have been teaching and practising development economics for many years and have encountered thousands of students in different parts of the world and from different countries, many of whom have gone on to work in the development field – as employees in international institutions and nongovernmental organizations concerned with economic and social development, or as teachers and researchers in poor countries. If new generations of students study- ing development economics are inspired to do the same, this volume will have achieved its purpose. We hope you will enjoy the book, and that when you reach the end, you will feel that the study of the economics of development has enriched your experience as an economist and as a citizen of the world. Wherever you live, we wish you good luck in your studies. Anthony Thirlwall and Penélope Pacheco-López