Lesson 3

is an economic theory that explains long-term economic growth as a result of internal factors, rather than external influences.

focuses on how innovation, knowledge, and human capital drive sustainable growth from within the economy.

Key Concepts of Endogenous Growth Theory

knowledge, education, and skills of the workforce—plays a central role in this theory. Investments in education and training lead to continuous innovation and productivity improvements.

is crucial for sustaining long-term growth. Endogenous growth theory posits that _________ is not random or external but is influenced by intentional actions within the economy, such as research and development (R&D).

when one firm invests in R&D, the knowledge gained may be adopted by other firms, fostering broader growth across industries.

Governments can promote economic development by investing in education, infrastructure, and R&D, and by creating an environment conducive to innovation and entrepreneurship.

To boost long-term growth, the Philippines must focus on enhancing the _______ and increasing access to higher education and skills training. This will improve the workforce's productivity and innovation capabilities.

can help drive sustainable growth. The government can provide incentives for businesses to invest in R&D and develop new technologies that improve efficiency.

suggests that government policies should focus on supporting innovation, improving education, and fostering entrepreneurship. Initiatives like tax incentives for startups, funding for science and technology, and investments in infrastructure are vital.

highlights that sustained economic growth comes from within, driven by investments in human capital, innovation, and technological progress.

In the study of economic development, _______ and ________ provide alternative perspectives to classical and neoclassical theories, focusing on the dynamics between developed and developing nations, and the internal structures of economies

emerged in the mid-20th century, particularly from Latin American economists. It focuses on the structural challenges within developing economies that prevent them from achieving sustainable development.

Key Concepts of Structuralist theory

Developing economies are often characterized by a dual structure, where a small modern, industrialized sector coexists with a large traditional agricultural sector. This leads to inequalities and slow development.

Structuralists argue that developing countries face ________ (e.g., monopolies, rigid labor markets, and unequal land distribution) that hinder economic progress. These prevent developing nations from benefiting from free trade and industrialization.

Example of market imperfections

Instead of relying on imports, developing countries should focus on building their own industries to reduce dependence on external markets.

Structuralists argue that _________ is necessary to correct market failures and promote industrialization, protect nascent industries, and create policies that support long-term growth.

was developed in the 1960s and 1970s, with roots in Marxist thought. It focuses on the unequal economic relationships between developed (core) and developing (periphery) nations, arguing that global capitalism perpetuates the underdevelopment of poorer nations.

Key Concept of Dependency theory

Dependency theory views the world economy as divided into the "core" (developed, industrialized nations) and the "periphery" (developing nations). The core exploits the periphery by extracting raw materials and exporting manufactured goods back to them at higher prices.

Developing countries are dependent on exporting raw materials and agricultural products, leaving them vulnerable to fluctuations in global prices and exploitation by more powerful economies. This reliance on exports keeps them in a cycle of poverty.

Dependency theory argues that developing nations are economically dependent on the core countries for capital, technology, and markets. This dependence reinforces underdevelopment by keeping developing countries subordinate and unable to fully industrialize.

dependency theorists advocate for policies that reduce reliance on foreign capital, promote self-reliance, and emphasize regional cooperation among developing nations.

The Capability Approach to economic development was introduced by?

represents a modern approach that shifts the focus from traditional economic indicators, such as GDP, to human well-being and the expansion of individual freedoms and capabilities

Key Concepts of Amartya Sen’s Capability Approach

Sen argues that development is not merely about economic growth but about expanding the freedoms that individuals enjoy. These freedoms include political freedom, access to education and healthcare, and the ability to participate in economic and social life.

According to this approach, economic development should enable individuals to live lives they value by removing obstacles such as poverty, illiteracy, and poor health.

The focus is on what individuals can achieve with the resources available to them, rather than just accumulating wealth or goods.

goods and services

what people are actually able to do or be

refer to the various things a person may value being or doing, such as being healthy, being educated, participating in the community, and having meaningful employment.

play a crucial role in expanding people's capabilities. Sen emphasizes the need for governments to invest in healthcare, education, and social welfare, ensuring that individuals have the necessary conditions to expand their freedoms and capabilities.Social safety nets and equal opportunities are essential to enable people to reach their full potential.

The Philippine Development Plan aligns with Sen's Capability Approach by focusing on improving education, healthcare, and social services, which help people develop their skills and lead healthier, more fulfilling lives.

is not just about increasing income but also about improving people's ability to access opportunities (e.g., education, healthcare). Programs like the Pantawid Pamilyang Pilipino Program (4Ps) aim to improve the well-being of vulnerable families by investing in their capabilities.

The Philippine government can further promote economic development by ensuring equal access to resources and opportunities, reducing inequality, and enhancing the ability of all Filipinos to participate fully in society

Implications for the Philippines of Amartya Sen’s Capability Approach