ABSTRACT
This chapter provides the formal economic growth models and the theories of economic and social change which constitute the foundations for foreign-aid theories and policies. Various growth models emphasize different strategic or limiting factors in the growth process, and these factors in turn suggest the relative importance of external inputs such as capital and technology in an open economy. Theories of investment criteria and of the allocation of resources for achieving development goals constitute the foundation for development policy and strategy. The emphasis on capital as the strategic factor in growth which is associated with development theories based on the Harrod-Domar model is reflected in certain theories of resource allocation. The chapter discusses the partial or specialized development theories: the critical rate of growth or minimum effort thesis; the balanced growth or "big push" thesis; the absorption of surplus labor approach; theories emphasizing external trade and capital imports; and theories of investment criteria.
