A General Model of Growth and Development on Kaldorian Lines

Arthur Lewis says in his Presidential Address to the American Economic Association: “the economist’s dream would be to have a single theory of growth that took an economy from the lowest level of say $100 per capita, past the dividing line of $2,000 up to the level of Western Europe and beyond. Or to have, since processes may differ at different stages, a set of theories growing out of each other longitudinally, and handing over to each other. Or putting aside what happens after $2,000 is passed, to have at least one good theory for the developing economy from $100 to the dividing line”. (Lewis, 1984). Lewis’s dream will probably remain as such, but I believe we know enough about the development process to provide the basis for his second best—namely a set of theories growing out of each other longitudinally and handing over to each other. Such a model would give pride of place to agriculture, and its complementarity with industry, in the early stages of development, with export growth taking over in the later stages. There can be little doubt from the empirical evidence (see Kaldor, 1966, 1967 and Sen, 1983) that the pace of long run growth and development is closely associated with the growth of industrial activities. The fundamental question is what determines the growth of industrial output?