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Economic Development in the 21st Century

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  • Carmel Chiswick

Abstract

The goal of economic development is to raise standards of living in LDCs, to be achieved by accumulating both human and non-human capital so as to maximize production net of the cost of these investments. An LDC economy is modelled with two sectors, modern and traditional, each of which uses its own type of human and non-human capital in production. Sector-specific human capital is specified as an attribute embodied in its workers, who have agency to choose their sector of employment and level of education. Earnings of labor are the sum of two components: recovery of human capital investment costs (e.g., student loan repayments) and an economic rent (i.e., profit) available for current consumption. The consumption-maximizing resource allocation equalizes rates of return to investments in all types of capital and allocates workers between the two sectors so that labor rents (i.e. consumption levels) are the same in both. Policy implications emphasize removing economic, social and cultural barriers to economic mobility for all resources.

Suggested Citation

  • Carmel Chiswick, 2025. "Economic Development in the 21st Century," Working Papers 2025-011, The George Washington University, The Center for Economic Research.
    • Handle: RePEc:gwc:wpaper:2025-011
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    References listed on IDEAS

    as
    1. Chiswick, Carmel U., 1986. "The efficiency-wage hypothesis : Applying a general model of the interaction between labor quantity and quality," Journal of Development Economics, Elsevier, vol. 20(2), pages 311-323, March.
    2. Amartya K. Sen, 1966. "Peasants and Dualism with or without Surplus Labor," Journal of Political Economy, University of Chicago Press, vol. 74(5), pages 425-425.
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    More about this item

    Keywords

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    JEL classification:

    • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
    • I26 - Health, Education, and Welfare - - Education - - - Returns to Education
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • O00 - Economic Development, Innovation, Technological Change, and Growth - - General - - - General
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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