ABSTRACT
This chapter discusses traditional theories of growth. It examines the dependency theory and neoclassical growth theory, two important possibilities for explaining economic performance. In its simplest form, dependency theory argues that poor countries are poor because rich countries are rich. A dependency theorist views the world economies as composed of two distinct groups, the core and the periphery. A sophisticated version of dependency theory was first drafted in 1948 by Raul Prebisch, head of the Economic Commission for Latin America (ECLA). Neoclassical growth theory grew out of work done by Robert Solow in the late 1950s. Neoclassical growth theory assumes that the production function exhibits constant returns to scale. This means that a doubling of capital and labor inputs results in a doubling of output. The per-worker production function determines the relationship between the capital stock per worker and output per worker, but it does not determine the equilibrium level of capital per worker that the economy will achieve.
