My academic experience reveals that many youngsters and students at post-graduate level are struggling with Economics and Econometrics. Keeping in view all this, I started this RU-vid Channel "Research Made Easy with Himmy Khan". I have been uploading a wide variety of videos from basic to advanced level using STATA, E-views, SPSS, MS-Excel, etc. These videos address needs of the students, teachers, researchers and others. Topics are related to Economic Theory, Applied Econometrics, Statistics, Mathematics and other Social Sciences that may be of help to students in general and that of Economics in particular.These videos are very useful. Kindly, subscribe to the channel and share these videos in various WhatsApp groups and other social media platforms for the welfare of the student community and young faculty. Follow me on Linkedin at: www.linkedin.com/in/himayatullah-khan-8554a087/ Thanks 🙏 www.teacheron.com/tutor-profile/9b2z?r=9b2z
In Sets derived from preference relation... You have done wrong in 2 and 3 condition. In 2nd condition ( x⁰ is atleast as good as x) & x⁰ is no better than x set. In 3rd x⁰ is worse set and here x⁰> x called worse than set
Sir, I used the stochastic frontier model to measure tax efficiency. After running this model, which test should I use to verify the results? Should I go for post-estimation tests?
Excuse me Professor, actually for unordered multiple categories depend variable, there are two alternative models, which are multinomial logit (MNL) and multinomial probit (MNP). How to choose the suitable model ?
If the Hausman statistic is significant (p-value is low, typically < 0.05), it indicates that the fixed effects model is preferred, suggesting the presence of endogeneity. If the Hausman statistic is not significant, it implies that the random effects model is appropriate, and there is no evidence of endogeneity.
Sir, your videos are so informative. however, you are too fast. i suggest you consider taking these lessons slower and more of explanation than reading the notice
Thankyou very much for the video! How do we correct the problems of heteroskedasticity and autocorrelation in our model? I will be extremely thankful if you could answer this please!
very well explained sir. Hirschman's theory also emphasizes the role of "linkages" between different sectors or regions in driving economic development. Adeel Bahadur
By looking at the theory, does this mean that the unbalanced trends in the economic sectors of Pakistan is a sign of a healthy or rapidly expanding economy?
According to Hirschman, “Development is a chain of disequilibria that must be kept alive rather than eliminate the disequilibrium of which profits and losses are symptoms in a competitive economy. If economy is to keep moving ahead, the task of development policy is to maintain, tension, disproportions and disequilibria.” This theory revolves around one key question i.e. (Why does economic development proceed cyclically rather than evenly?). Unbalancing the Economy: Development, according to Hirschman, can take place only by unbalancing the economy. This is possible by investing either in social overhead capital (SOC) or indirectly productive activities (DPA). Social overhead capital creates external economies whereas directly productive activities appropriate them. (i) Excess of investment in Social Overhead Capital: Social over-head capital is concerned with those series without which primary, secondary and tertiary services cannot function. In SOC we include investment on education, public health, irrigation, water drainage, electricity etc. Investment in SOC favorably affect private investment in directly productive activities (DPA). Investment in SOC is called autonomous investment which is made with the motive of private profit. Investment in SOC provide, for instance, cheap electricity, which would develop cottage and small-scale industries. Similarly, irrigation facilities lead to development of agriculture. As imbalance is created in SOC, it will lead to investment in DPA. (ii) Excess of Investment in Directly Productive Activities: Directly productive activities include those investments which lead to direct increase in the supply of goods and services. Investment in DPA means investment in private sector which is done with a view to maximize profit. In those projects, investment is made first where high profits are expected. In this way, DPA are always induced by profits. Priorities: Excess SOC or Excess DPA: (a) Unbalancing the economy with SOC: Imbalance can be created both by SOC and DPA. But the question before us is that in which direction the investment should be made first to achieve continuous and sustained economic growth. The answer is quite simple. The government should invest more in order to reap these economies, the private investors would make investment in order to enjoy profits. This would raise the production of goods and services. Thus, investment in SOC would bring automatically investment in DPA. (b) Unbalancing the economy with DPA: In case investment is made first in DPA, the private investors would be facing a lot of problems in the absence of SOC. If a particular industry is setup in a particular region, that industry will not expand if SOC facilities are not available. In order to have SOC facilities, the industry has to put political pressure. That is really a tough job. Thus, excess DPA path is full of strains or pressure- creating whereas excess SOC path is very smooth or pressure relieving. Main Features of Unbalanced Growth Theory The theory emerged from recognizing the scarcity of resources in developing economies. It emphasizes: • Prioritization: Limited resources necessitate focusing on a few key sectors (e.g., infrastructure, manufacturing) with high growth potential and strong linkages to other industries. • Linkage Effects: Investments in leading sectors create demand for goods and services from other sectors, stimulating their growth (backward and forward linkages). • Disequilibrium: Unbalanced growth is not a permanent state but a catalyst for further development. Success in leading sectors creates profits that can be reinvested in a broader range of industries over time. Application in Developing Countries: The Case of Pakistan Pakistan, like many developing economies, grapples with limited resources and a need to diversify its economic base. Unbalanced Growth Theory offers a strategic approach. Targeted investments in infrastructure development (energy, transportation) or specific industries with high export potential (textiles, IT) can create a ripple effect. This strategy complements policies fostering entrepreneurship and innovation within the chosen sectors. Critique of the Unbalanced Growth Theory While offering a pragmatic approach, the theory has limitations: • Sector Selection: Choosing the right leading sectors is crucial but challenging. Mistakes can lead to wasted resources and uneven development. • Neglect of Agriculture: Overemphasis on industry can neglect the critical role of agriculture in developing countries, particularly for food security and rural employment. • Regional Imbalances: Focusing on specific sectors or regions can exacerbate existing regional inequalities. Strategies are needed to ensure benefits are distributed more broadly. Conclusion The Unbalanced Growth Theory offers a development strategy designed to resource constraints faced by developing countries like Pakistan. However, a new approach is crucial. Sector selection should be based on a careful analysis of linkages and potential for spillover effects. Policies promoting technology transfer, skills development, and infrastructure access across regions can mitigate potential inequalities. Ultimately, Unbalanced Growth is a steppingstone, requiring long-term strategies for balanced and inclusive development.
The theory of Big Push has been outlined by Paul Rosenstein-Rodan in 1943. The basic preposition of the theory is that a certain minimum level of investment is required for the developmental programs to be successful and sustained. This theory is of the view that piece-meal efforts of resource allocation would be able to move a country on the path of economic development rather a certain minimum amount of investment is required for economic development. The theory of Big Push is based on balanced growth strategy of development that propagates that the need for simultaneous investment in a large number of industries to cater to complimentary of demand as a solution to push the UDCs to higher trajectories of income. Main Features of the Big Push Theory The Big Push theory emerged from the recognition of indivisibilities in the development process. Indivisibility refers to a high minimum package of investment cannot be undertaken without an adequate supply of savings. Three key concepts underpin the theory: • Indivisibilities of infrastructure: Building essential infrastructure like transportation networks requires a significant upfront investment, which may not be profitable for individual firms but becomes crucial for overall economic activity. • Indivisibilities of demand: Small, isolated markets in underdeveloped economies limit production efficiency. Investments in multiple complementary industries can create a larger market, allowing economies of scale and cost reductions. • Indivisibilities of externalities: Certain investments like education and research generate positive spillover effects across industries, justifying a coordinated effort beyond individual firms' capabilities. The Big Push theory advocates for a large-scale, coordinated investment in various sectors (infrastructure, industry, education) to overcome these indivisibilities. This creates a virtuous cycle of increasing demand, productivity gains, and further investment, propelling the economy towards sustained growth. Application in Developing Countries: The Case of Pakistan Developing countries like Pakistan face challenges of low investment, underdeveloped infrastructure, and limited industrial diversification. The Big Push theory offers a potential roadmap for overcoming these hurdles. Large-scale government investment in infrastructure development (roads, power grids), coupled with targeted incentives for key industries with high growth potential, can create a foundation for economic take-off. Critique of the Big Push Theory While the Big Push theory offers a bold approach, it faces several criticisms: • Resource constraints: Mobilizing the substantial resources required for the Big Push can be challenging for developing countries, often reliant on foreign aid or borrowing, which can lead to debt burdens. • Government effectiveness: The theory relies on efficient government intervention in resource allocation and coordination. However, corruption and bureaucratic inefficiencies in developing countries can hinder effective implementation. • Neglecting market forces: The Big Push focuses on top-down planning and may overlook the potential of unleashing private sector dynamism and entrepreneurial innovation. Conclusion The Big Push theory provides a valuable framework for development strategies in countries like Pakistan. However, a balanced approach is crucial. Investment decisions should consider market signals and private sector participation alongside strategic government intervention. Furthermore, ensuring transparency and accountability is essential for successful implementation of the Big Push strategy. While large-scale infrastructure projects can act as a catalyst, long-term growth will depend on fostering a dynamic and competitive private sector.
This theory was outlined by Harvey Leibenstein in his book ‘Economic Backwardness and Economic Growth’. This theory stresses on the fact that underdeveloped countries are in the firm grip of poverty due to which they are trapped in the equilibrium at subsistence levels. Any small change to move the economy to higher levels of growth are counter acted by certain forces that are pertinent to developing economies only, despite increased capital accumulation and rising manpower. So, there is a sort of self-defeating mechanism that prevails in the underdeveloped countries which seem to limit its growth at the subsistence level of output. Professor Leibenstein suggested that: “If sustained development is to be generated it is necessary that the initial effort or initial series of efforts must be above a certain magnitude. Not all efforts to raise per capita income led to economic development. There are some that are too small to do so.” In the underdeveloped countries, the equilibrium levels are Quasi-stable with respect to per capita income. It is a condition under which, after any disturbance (in every economy there are two types of disturbances that are operative stimulants that impart dynamism to the system and shocks that act as bottlenecks), some variables come back to their previous values and others are settled down at new values. Main Features of CMET Prof. Leibenstein classified two types of incentives influencing the growth- expanding factors. They are- (i) Zero-sum incentives which do not have any effect on national income. They include trading risk, non-trading or speculative activities and transfer of income from one section of people to another. They have only a distributive effect. They are carried on securing greater monopolistic position, political power and local prestige. They do not add to aggregate resources of the economy. We can thus say that they are wastage of scarce economic resources of a country. (ii) Positive-sum incentives that lead to an expansion of national income and hence economic growth. These activities consist of the increases in productive investment, application of technical knowledge, exploration of new sources of raw-materials, exploration and use of new markets and use of scientific discoveries and innovations to stimulate the process of economic growth and development. Leibenstein is of the opinion that minimum effort should be made to create such a favorable environment congenial for the expansion of these positive sum incentives, counteracting the zero-sum activities, so that they could be directed towards raising the level of income, output, savings, investment and employment in an economy. CMET and Pakistan's Development Pakistan, like many developing countries, faces challenges of low income and limited investment. CMET offers a framework for overcoming these hurdles. Large-scale infrastructure projects, investments in human capital through education and healthcare, and targeted support for entrepreneurship could act as critical minimum efforts. Ishrat Hussain, a prominent Pakistani economist, has also emphasized the role of "shocks" in driving change ([Hussain, 2014]). These shocks, similar to CMET's critical effort, can be planned interventions or unforeseen events that disrupt the status quo and create opportunities for growth. Critique of CMET While CMET offers a compelling solution, it faces limitations. Determining the exact size and nature of the critical minimum effort is challenging. Additionally, the theory assumes efficient allocation of resources, which can be difficult to achieve in developing countries with governance issues and corruption. Furthermore, CMET focuses on the initial push but neglects the importance of long-term strategies for sustaining growth and ensuring equitable distribution of benefits. Conclusion CMET provides a valuable framework for development strategies in countries like Pakistan. However, a new approach is necessary. The critical minimum effort should be fitted to address specific national circumstances. Effective governance, along with long-term policies promoting education, innovation, and social inclusion, are crucial for sustaining growth beyond the initial push. Integrating CMET with insights from scholars like Ishrat Hussain on the role of "shocks" can further refine development strategies.
Review on the Schumpeter's Theory of Economic Development in the Context of Developing Countries Introduction: This review and summary of the Schumpeter’s theory is based on the listening of the video of Prof. Himayat Ullah Khan (course instructor) and other related materials for understanding the main theme of his theory. Economist Joseph Schumpeter's theory of economic development, outlined in his seminal work "Theory of Economic Development" (1911), challenged the prevailing view of smooth, gradual progress. Schumpeter argued that innovation, driven by the figure of the entrepreneur, is the engine of economic growth (Schumpeter, 1911). This innovation, however, comes through a process of "creative destruction" (Schumpeter, 1934), where new technologies and business models disrupt existing industries, leading to both progress and instability. Main theme of the theory: Schumpeter's theory emerged in the early 20th century, a period of rapid technological advancement and economic dynamism. It offered an alternative to classical theories that focused on factors like resource accumulation. In the context of developing countries like Pakistan, Schumpeter's emphasis on innovation holds promise. Pakistan can foster entrepreneurship through initiatives that promote research and development, create a supportive regulatory environment for startups, and invest in education to build a skilled workforce (Ayyagari & Demirgüç-Kunt, 2013). Core Concepts: 1. Role of Innovation: Schumpeter posits that economic development is primarily driven by innovations-new products, new methods of production, new markets, and new forms of organization. These innovations disrupt the equilibrium in the economy and create new opportunities for profit and growth. 2. Entrepreneurship: Central to Schumpeter's theory is the figure of the entrepreneur. Entrepreneurs are seen as agents of change who introduce innovations into the market. They are motivated not just by profit but also by the desire to create and leave a legacy. 3. Creative Destruction: One of the most famous elements of Schumpeter's theory is the concept of "creative destruction." This process involves the dismantling of long-standing practices and structures to make way for innovation. While this leads to the demise of outdated industries and jobs, it is essential for long-term economic growth and development. 4. Economic Cycles: Schumpeter also identifies cycles of economic activity driven by waves of innovation. These cycles, often referred to as Kondratieff waves or long cycles, consist of periods of rapid economic growth followed by periods of recession. Each cycle is characterized by the emergence of new leading sectors that drive the economy forward. 5. Finance and Credit: Schumpeter highlights the importance of financial institutions and credit in facilitating innovation. Entrepreneurs often rely on external funding to bring their innovations to market. Thus, a robust financial system is crucial for sustaining economic development. Critique: However, Schumpeter's theory also faces critiques. Critics argue that it overlooks the role of factors like stable institutions, infrastructure development, and income inequality in economic growth (Rodrik, 2003). Additionally, Schumpeter's focus on the lone entrepreneur may not fully capture the collaborative nature of innovation in today's world. Conclusion Schumpeter's Theory of Economic Development provides a dynamic and innovation-centric view of economic progress. By focusing on the roles of innovation, entrepreneurship, and creative destruction, Schumpeter offers a framework that explains not just how economies grow, but how they evolve and adapt over time. His insights into the cyclical nature of economic development and the importance of a supportive financial system remain highly relevant for modern economic policy. In summary, Schumpeter’s theory shifts the focus from traditional factors of production to the pivotal roles of innovation and entrepreneurial spirit in driving economic growth and transformation. This perspective underscores the importance of fostering an environment that encourages continuous innovation and supports the dynamic process of economic change.
