Economic Development

Michael Todaro / Stephen C. Smith
April 2011
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Economic Development
12 August 2014 83.00


Economic Development is the leading textbook in this field, providing a complete and balanced introduction to the requisite theory, the driving policy issues, and the latest research.

Todaro and Smith take a policy-oriented approach, presenting economic theory in the context of critical policy debates and country-specific case studies so students see how theory relates to the problems and prospects of developing countries.


Economic Development is the leading textbook in this field, providing a complete and balanced introduction to the requisite theory, the driving policy issues, and the latest research.

Todaro and Smith take a policy-oriented approach, presenting economic theory in the context of critical policy debates and country-specific case studies so students see how theory relates to the problems and prospects of developing countries.

  • The hallmark approach, shaped by the authors’ personal experience and extensive research:
    • Teaches economic development within the context of country-specific examples so that theory is demonstrated through real-world issues.
    • Adopts a problem- and policy-oriented presentation to foster students’ ability to understand contemporary economic problems and to reach independent and informed conclusions.
    • Uses the best and most recent available data and the appropriate theoretical tools to illuminate common problems of developing countries.
    • Focuses on a wide range of developing countries, not only as independent nation-states but also in relation to one another and in their interactions with rich nations.
    • Recognizes the necessity of treating the problems of development and underdevelopment from institutional, structural, and market perspectives.
    • Views development and underdevelopment in both domestic and international contexts, stressing the increasing interdependence of the world economy.
    • Considers the economic, social, and institutional problems of underdevelopment as closely interrelated and requiring coordinated solutions at local, national, and international levels.
  • Country-specific Case Studies at the end of each chapter reflect and illustrate specific problems discussed in the chapter.
  • Voices of the Poor boxes give students perspective on the issues faced by citizens in developing and underdeveloped nations.
  • The text is organized into three distinct parts:
    • Part One focuses on the nature and meaning of development and underdevelopment, and its various manifestations in developing nations. The growth experience of now-developed countries is examined, four classic theories of development are presented, and recent development models are introduced.
    • Parts Two and Three focus on major domestic and international development problems and policies, such as economic growth, poverty and income distribution, population, migration, and urbanization.
    • The book concludes with the authors’ look ahead at key emerging issues in economic development.
  • Coverage of topics is structured to allow instructors to adapt lecture topics based on their individual course.
  • Essential principles of economics relevant to understanding development problems are highlighted in boldface and are explained in detail where appropriate.
  • The material is sufficiently broad in scope and rigorous in coverage to be used in any undergraduate and some graduate development economics courses.

New to this Edition

Global crisis.  Amajor new section of the text addresses potential long-term impacts of the recent global financial crisis on economic development, examining conditions that caused the crisis, its aftermath, and  possible broader implications and potential differences for developing nations and regions.


Violent conflict.  The Eleventh Edition provides an entirely new major section on the causes and consequences of violent conflict, postconflict recovery and development, and prevention of conflict through an  improved understanding of its major causes.


New and updated case studies. Two new full-length end-of-chapter comparative case studies are introduced to address current topics and findings and to broaden geographic coverage.   All the other case studies have been revised to reflect current conditions and status, including an update on the experience of the Grameen Bank, now appearing in Chapter 15.


Findings boxes. A new feature reports empirical findings in boxes that address both specific policy concerns–such as improving child health, education, and microfinance design–and a broader understanding of the sources of disparities in the world’s economies that can inform the strategy of economic development.


New measures. Measurement is an ever-present issue in the field of economic development. The United Nations Development Program released its Multidimensional Poverty Index in August 2010 and its New Human Development Index in November 2010. The text examines the index formulas, explains how they differ from earlier indexes, reports on findings, and reviews issues surrounding the active debate on these measures.   As with all the theories, measures, evidence, and policy prescriptions examined throughout the text, the value of each contribution and critiques by other analysts are presented.


Applications of contemporary models to new topics. Insights from multiple equilibrium economic development models help explain the persistence of violent ethnic conflict and of harmful cultural practices such as female genital mutilation while at the same time indicating how the use of these frameworks has helped inspire strategies for ending these practices.


Marginal glossaries. Each term of significance to the topic of economic development is highlighted in the text and defined in the margin at the spot where it is first used. All these terms are also presented alphabetically in the Glossary at the back of the book.


Updated statistics. Change continues to occur very rapidly in the developing world. Throughout the text, data and statistics have been updated to reflect the most current available information.


Additional updates. Other updates include an expanded section on alternative designs for microfinance, focusing on their potential benefits, successes to date, and some limitations; trends in central banking in developing economies; Amartya Sen’s latest thinking on capability; new evidence on the extent and limits of convergence; expanded coverage of China and the stubborn chronic poverty among hundreds of millions of people despite otherwise impressive global progress; presentation of a streamlined Malthus trap model; development implications of new and proposed environmental agreements for developing countries; and growing challenges of adaptation to climate change with examples of efforts that are already under way.


Numbered subsections. The introduction of numbered subsections facilitates a tailored course design and extended class focus on selected topics.

Table of Contents

I. Principles and Concepts

1. Economics, Institutions, and Development: A Global Perspective
How the Other Half Live
Economics and Development Studies
Economies as Social Systems: The Need to Go Beyond Simple Economics
What Do We Mean by Development?

2. Comparative Economic Development
Defining the Developing World
Measuring Development for Quantitative Comparison across Countries
Some Basic Indicators of Development
Characteristics of the Developing World: Diversity within Commonality
How Low-Income Countries Today Differ from Developed Countries in Their Earlier Stages
Are Living Standards of Developing and Developed Nations Converging?
Long-Run Causes of Comparative Development

3. Classic Theories of Economic Growth and Development
Classic Theories of Economic Development: Four Approaches
Development as Growth and the Linear-Stages Theories
Structural-Change Models
The International-Dependence Revolution
The Neoclassical Counterrevolution: Market Fundamentalism
Classic Theories of Development: Reconciling Differences

4. Contemporary Models of Development and Underdevelopment
Underdevelopment as a Coordination Failure
Multiple Equilibria: A Diagrammatic Approach
Starting Economic Development: The Big Push
Further Problems of Multiple Equilibria
Kremer’s O-Ring Theory of Economic Development
The Hausmann-Rodrik-Velasco Growth Diagnostics Framework

II. Problems and Policies: Domestic

5. Poverty, Inequality, and Development
Measuring Inequality and Poverty
Poverty, Inequality, and Social Welfare
Absolute Poverty: Extent and Magnitude
Economic Characteristics of Poverty Groups
The Range of Policy Options: Some Basic Considerations
Summary and Conclusions: The Need for a Package of Policies

6. Population Growth and Economic Development: Causes, Consequences, and Controversies
The Basic Issue: Population Growth and the Quality of Life
A Review of Numbers: Population Growth—Past, Present, and Future
The Demographic Transition
The Causes of High Fertility in Developing Countries: The Malthusian and Household Models
The Consequences of High Fertility: Some Conflicting Opinions
Goals and Objectives: Toward a Consensus
Some Policy Approaches

7.  Urbanization and Rural-Urban Migration: Theory and Policy
The Migration and Urbanization Dilemma
The Role of Cities
The Urban Giantism Problem
The Urban Informal Sector
Urban Unemployment
Migration and Development
Toward an Economic Theory of Rural-Urban Migration
Summary and Conclusions: The Shape of a Comprehensive Migration and Employment Strategy

8. Human Capital: Education and Health in Economic Development
The Central Roles of Education and Health
Education and Health as Joint Investments for Development
Improving Health and Education: Why Increasing Income Is Not Sufficient
Investing in Education and Health: The Human Capital Approach
Child Labor
The Gender Gap: Women and Education
Educational Systems and Development
Health Systems and Development

9. Agricultural Transformation and Rural Development
The Imperative of Agricultural Progress and Rural Development
Agricultural Growth: Past Progress and Current Challenges
The Structure of Agrarian Systems in the Developing World
The Important Role of Women
The Economics of Agricultural Development: Transition from Peasant Subsistence to Specialized Commercial Farming
Toward a Strategy of Agricultural and Rural Development: Some Main Requirements

10. The Environment and Development
Economics and the Environment
Environment and Development: The Basic Issues
The Scope of Environmental Degradation: An Overview
Rural Development and the Environment: A Tale of Two Villages
Global Warming and Climate Change
Traditional Economic Models of the Environment
Urban Development and the Environment
The Need for Policy Reform
The Local and Global Costs of Rain Forest Destruction and Greenhouse Gases
Policy Options in Developing and Developed Countries

11. Development Policymaking and the Roles of Market, State, and Civil Society
The Planning Mystique
The Nature of Development Planning
The Rationale for Development Planning
The Planning Process: Some Basic Models
Aggregate Growth Models: Projecting Macro Variables
Multisector and Sectoral Projections
Project Appraisal and Social Cost-Benefit Analysis
Problems of Plan Implementation and Plan Failure
Government Failure and the Resurgent Preference for Markets over Planning
The Market Economy
The “Washington Consensus” on the State in Development and Its Limitations
Development Political Economy: Theories of Policy Formulation and Reform
Trends in Governance and Reform
Development Policy and the State: Concluding Observations

III. Problems and Policies: International and Macro

12. International Trade Theory and Development Strategy
Globalization: An Introduction
International Trade and Finance: Some Key Issues
Five Basic Questions about Trade and Development
The Terms of Trade and the Prebisch-Singer Thesis
The Traditional Theory of International Trade
The Critique of Traditional Free-Trade Theory in the Context of Developing-Country Experience
Some Conclusions on Trade Theory and Economic Development Strategy
Traditional Trade Strategies for Development: Export Promotion versus Import Substitution
Trade Optimists and Trade Pessimists: Summarizing the Traditional Debate
The Industrialization Strategy Approach to Export Policy
Reconciling the Arguments: The Data and the Consensus
South-South Trade and Economic Integration: Looking Outward and Inward
Trade Policies of Developed Countries: The Need for Reform

13. Balance of Payments, Developing-Country Debt, and the Macroeconomic Stabilization Controversy
The Balance of Payments Account
Financing and Reducing Payments Deficits
The Debt Crisis of the 1980s
Attempts at Alleviation: Macroeconomic Instability, IMF Stabilization Policies, and Their Critics
 “Odius Debt” and its Prevention
Resolution and Continued Vulnerabilities

14.  Foreign Finance, Investment, and Aid: Controversies and Opportunities
The International Flow of Financial Resources
Private Foreign Direct Investment and the Multinational Corporation
Private Portfolio Investment: Boon or Bane for LDCs?
The Role and Growth of Remittances
Foreign Aid: The Development Assistance Debate

15. Finance and Fiscal Policy for Development
The Role of the Financial System
The Road to Macroeconomic Stability
Microfinance Institutions
Reforming Financial Systems
Fiscal Policy for Development
Public Administration: The Scarcest Resource
State-Owned Enterprises
Military Expenditures and Economic Development

16.  Some Critical Issues for the Twenty-First Century
Global Interdependence and the Growth of Developing-World Markets
The Global Environment and the Developing World
The Crisis in Sub-Saharan Africa
Globalization and International Financial Reform
Concluding Remarks

Back Cover

Todaro and Smith, Economic Development 11/e


Accessible theory, relevant policy issues, and the latest data and research

Economic Development, presents the latest thinking in economic development with the clear and comprehensive approach that has been so well received in previous editions.


‘The pace and scope of economic development continues its rapid, uneven, and sometimes-unexpected evolution. This text explains the unprecedented progress that has been made in the developing world – but fully confronts the enormous problems and challenges that remain to be addressed in the years ahead. The text shows the wide diversity across the developing world, and the differing positions in the global economy held by developing countries. The principles of development economics are key to understanding how we got to where we are, why many development problems are so difficult to solve, and the design of economic development policy and programs as we look ahead’.  [From the preface]





·        Global crises. A major new section of the text addresses the potential longer-term impacts of the global financial crisis on economic development, examining conditions that caused the crisis, its aftermath, and possible broader implications and potential differences across developing nations and regions.

·        Violent conflict. The new edition provides an entirely new major section on the causes and consequences of violent conflict, post-conflict recovery and development, and prevention of conflict through an improved understanding of its major causes.

·        New case studies. Two new full-length end-of-chapter comparative case studiesare introduced to address current topics and findings, and to broaden geographic coverage.


“'In attempting the impossible task of covering the empirical diversity of Third World experiences and institutions, trying to keep up with the policy debate, and very important and very difficult, not pushing an ideological line but allowing students to make up their own minds it is streets ahead of all the direct competition I have seen, '

-Paul Mosley University of Sheffield.

'The strengths of the book are that it is comprehensive, well written and accessible to students who don’t have an in-depth understanding of formal economics.'

-Matthew Cole Birmingham University. 

“This Book has been and still is a classic.”

-Arild Angelsen, Agricultural University of  Norway. 



Michael P. Todaro was Professor of Economics at New York University for eighteen years and Senior Associate at the Population Council for thirty years. He lived and taught in Africa for six years. He appears in Who's Who in Economics and Economists of the Twentieth Century. He is also the author of eight books and more than fifty professional articles. 

In a special February 2011 centenary edition, the American Economic Review selected Todaro’s article “Migration, Unemployment and Development: A 2-Sector Analysis” (with J. Harriss) as one of the twenty most important articles published by that journal during the first hundred years of its existence.

Stephen C. Smith is Professor of Economics and International Affairs at George Washington University. He received his PhD in economics from Cornell University. Smith is author of Ending Global Poverty: A Guide to What Works, co-editor of NGOs and the Millennium Development Goals: Citizen Action to Reduce Poverty, and author or coauthor of some three dozen journal articles

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