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The Economic Progress Models Economics Essay

In this section is define the concept of local development, according to the books, are enumerate the financial development models and is made a comparative analysis of economic models of local and local development. The section will present the newest methods of local development carried out in europe and in our country Romania.


Our world today is more interconnected, smart and the info is positioned in the middle of it. Inside our age the invention will depend on the access to increasingly more knowledge and information. For smart and lasting progress of a city is important to promoting a more learning resource efficient, a competitive market and an current economic climate base on knowledge and invention. The purpose of this chapter is to present the concept of local economic development inside our years and highlighting the importance of intelligent solutions in sustainable development.

European Commission, Europe 2020 program - a strategy for smart development, ecological and inclusive expansion has determined three key factors for the turmoil and finding your way through the next ten years the EU market: smart expansion (promoting knowledge, technology, education and population digital), sustainable (competitive creation with reliable use of resources) and inclusive expansion (increased labor market participation, skills and poverty lowering). Given, on the one hand, the key elements recognized by the European Commission and on the other hands first goal axis of Regional Operational Programmer 2007-2013 involves supporting the ecological development of metropolitan development poles- think we can say that it is necessary to consider the introduction of cities by adopting impressive, creative and clever solution in every economic domains.

In our get older sustainability is a significant global concern today that requires urgent attention with the intensification of real human activities that wantonly use natural resources and degrade the environment. The introduction of a ecological community is one of the effective alternatives. In specialty reserve (Levent and Nukamp, 2006) classification of sustainability is related to the quality of life in a community whether the economic, interpersonal and environmental systems that make up the community are providing a wholesome, productive, meaningful life for any community residents, present and future.

The term ecological development by REC (Regional Environmental Centre) should go beyond the limitations of research and business development and trade to add human development, principles, and variations in cultures. In fact, many organizations are discussing sustainable human development as opposed to sustainable development to be able to emphasize issues like the importance of gender equality, involvement in decision-making functions, and access to education and health.

In the MACED (Pile Association for Community Economic Development) perspective sustainable community development is the capability to make development options which respect the partnership between the three "E's"-economy, ecology, and collateral:

Economy - Economical activity should provide the normal good, be self-renewing, and build local belongings and self-reliance.

Ecology - Individual are part of characteristics, nature has restrictions, and neighborhoods are in charge of guarding and building natural possessions.

Equity - The chance for full participation in all activities, benefits, and decision-making of a society.

So we can say that the location sustainability is a multi-dimensional strategy that includes financial, social and politics sizes (Huang et al. , 2009; Olewiler, 2006).

The term ecological development by REC (Regional Environmental Centre) will go beyond the restrictions of science and business development and trade to include human development, worth, and variations in cultures. In fact, many organizations are referring to sustainable individual development instead of sustainable development to be able to highlight issues like the importance of gender equality, contribution in decision-making operations, and access to education and health.

Actual population is seen as a the rapidity of change information and knowledge in services and products areas. In this economy is important to remark that the obstacles of communication and the physical distance are lowest, the value of knowledge and information depends upon the situation they are being used but the mode in which these are understand by the resident is important too.

As an outcome, investment in innovation, research, education and technical changes contain the most central indicate monetary performance (Figure 5).

The progress of current economic climate can be analyzed by the purchases in advanced schooling, development and research, and software. Way of measuring the performance of overall economy is based on the Gross Household Product (GDP) signal.

In generally GDP is the value of total production of goods and services in an economy throughout a particular period (normally a year). These traditional indicators guide the insurance policy decisions of government authorities. But to the level that the data economy works diversely from traditional monetary theory, current signals may fail to capture fundamental aspects of economical performance and lead to misinformed financial guidelines (Arundel, 2005). The traditional indicators can't measure the performance of knowledge market because the data is not a quantitative product.

Figure The factors that impact the Society Growth

In (Arundel, 2005) GDP for measuring knowledge economy are needed for the following duties:

measuring knowledge inputs;

measuring knowledge companies and flows;

measuring knowledge outputs;

measuring knowledge and learning (human capital).

To measure knowledge inputs is similar to gauge the investment in the creation of methodical and specialized knowledge, including research and development (R&D).

Development of knowledge movement indicators would produce better actions of the R&D and knowledge strength of sectors and economies.

Statistical techniques could be developed to estimate knowledge stocks based on current R&D type and flow options.

To measure knowledge outputs and evaluate the performance of knowledge-based economies, main concern should be put on developing improved indications of the private and sociable rates of return to R&D and other knowledge inputs. This consists of measuring results to individuals, businesses and societies in conditions of employment, output, efficiency and competitiveness, and may be predicated on both macro-level econometric analyses and firm-level studies. One of the great challenges is to develop signals and methodologies for analyze the impact of technology on efficiency and economic progress.

Human capital indications, particularly those relating to education and occupation, are central procedures for the knowledge-based current economic climate.

To study the evolutions of knowledge overall economy we can use Harrold-Domar [20] model. The model means that economic growth will depend on policies to increase investment, by increasing cutting down, and using that investment more successfully through use sensible solution and scientific advances.

Let Y represent productivity, which equals income, and let K equal the administrative centre stock. S is total saving, s is the savings rate, and I is investment. stands for the pace of depreciation of the administrative centre stock. The Harrod-Domar [20] model makes the next a priori assumptions:

1: End result is a function of capital stock

2: The marginal product of capital is constant, the development function exhibits continuous dividends to scale

3: Since the marginal product of capital is constant, it equals the constant ratio Y/K

4: The merchandise of the cost savings rate and output equals keeping, which equals investment

5: The change in the administrative centre stock equals investment less the depreciation of the capital stock

Derivation of end result growth rate:

If the marginal product is constant:

The marginal product of capital is constant:

In summation, the savings rate times the marginal product of capital without the depreciation rate equals the result growth rate. So, increasing the savings rate, increasing the marginal product of capital, or reducing the depreciation rate will raise the development rate of output, they are the methods to achieve development in the Harrod-Domar model. We are able to say that the economic growth is determined by guidelines to increase investment, by increasing cutting down, and using that investment more successfully through use brilliant solution and scientific advances.

The economy progress depends upon investment and using that investment more successfully through use clever systems.

Cities have become the things of these components as major consumers and marketers of goods and services. However, many cities tend to be large consumers of goods and services, while draining resources out of external locations that they count on. Due to increasing ingestion of resources, and growing dependencies on trade, the ecological impact of places expands beyond their geographic locations.

On the commence we must to firelight that practically 15 petabytes of data are created every day - eight times more than the info within all libraries in the U. S. blended. Therefore it can be viewed as for any area can be considered a daunting task to work with massive amounts of data, information retrieval and transformation. To accomplish real progress in virtually any economic field of your city, we need useful use of existing infrastructure and experience and good knowledge of economic issues.

In the twenty-first hundred years, growth, economical value and competitive differentiation of cities will ever more be produced from people and their skills, imagination and knowledge, as well as the capacity of the market to generate and absorb creativity. To remain competitive in this new economical environment, cities should better apply advanced it, analytics and systems pondering to develop a more citizen-centric method of services. By doing so, they can better draw in, create, enable and sustain their people' skills, knowledge and creativeness.

The use of new technology/brilliant solutions efficiently in our society is an important part of innovation, evolution and ecological development. Our world today is more interconnected, brilliant and the info is positioned in the middle of it. In our age the sustainable development depends on the use of increasingly more new intelligent solution. For smart and lasting growth of towns are important to work with useful the new technology and resources.


Analyzing the economic models we can discover that most of them suggest that the economical development is determined by investment in increasing the quality life which is the support of sustainable development.

The Harrod-Domar model is utilized in development economics to describe an economy's development rate in conditions of the level of saving and productivity of capital. It shows that there is absolutely no natural reason behind an economy to possess balanced expansion. The model originated individually by Sir Roy F. Harrod in 1939 and Evsey Domar in 1946. The Harrod-Domar model was the precursor to the exogenous growth model.

Figure The Harrod-Domar Growth Model (Welker, 2008)

The model means that economic growth depends on regulations to increase investment, by increasing keeping, and using that investment more efficiently through technological developments (number 6).

Many of developed countries - suggested Lewis Structural Change Model- have dual economies. In this market:

The traditional agricultural sector was assumed to be of a subsistence nature characterized by low output, low earnings, low savings and substantial underemployment.

The professional sector was assumed to be technologically advanced with high degrees of investment operating within an metropolitan environment.

Lewis recommended that the modern industrial sector would draw in employees from the rural areas.

Industrial organizations, whether private or publicly possessed could offer salary that would guarantee a higher standard of living than staying in the rural areas could provide.

Furthermore, as the amount of labor efficiency was so lower in traditional agricultural areas people departing the rural areas would have virtually no impact on output.

Indeed, the quantity of food open to the rest of the villagers would increase as the same amount of food could be shared amidst fewer people. This might generate a surplus that could them be sold producing income.

Those people that moved from the villages to the cities would earn increased earnings:

Higher incomes make more personal savings.

Increased savings recommended more fund designed for investment.

Increased investment designed more capital and increased efficiency in the professional sector, higher pay, more incentive to go from low efficiency agriculture to high output industry, the circle continues.

Figure Lewis Structural Change (dual-sector) Model

The model shows that economic growth depends on investment in technologically advanced which will increase efficiency.

Rostow's Model - the 5 Levels of Economic Development presents his strategy in The stage of economic expansion". He argues that in a society sequential financial steps of modernization can be identified. These steps are linear and towards an evolutional higher development. In 1960, the North american Economic Historian, W. W. Rostow identifies five growth levels (amount 8).

Figure Physique Rostow's Model -The Phases of Economic Development

He suggested that countries exceeded through five phases of economic development:

Stage 1 Traditional World - Agriculture is the most important industry and development is intensive, using only limited quantities of capital.

Stage 2 Transitional Stage - Surpluses for trading emerge backed by an appearing transport infrastructure. Cost savings and investment grow.

Stage 3 REMOVE - Industrialization raises, with workers turning from the land to making. Growth is targeted in a few regions of the united states and in one or two establishments. New politics and social corporations are evolving to support industrialization.

Stage 4 Drive to Maturity - Expansion is now diverse reinforced by technological innovation.

Stage 5 High Mass Consumption - Rostow advised that the model is specific of the united states economy.

Rostow's Model - the 5 Phases of Economic Development recommended that financial development is recognized by know-how, so is vital to investment in technologically advanced.

Solow Model long the Harrod-Domar model by:

Adding labor as one factor of development;

Requiring diminishing comes back to labor and capital independently, and constant results to level for both factors mixed;

Introducing a time-varying technology changing different from capital and labor.

The capital-output and capital-labor ratios are not fixed because they are in the Harrod-Domar model. These refinements allow increasing capital power to be recognized from technological progress.

The Exogenous development model, also called the Neo-classical expansion model or Solow progress model is a term used last but not least the contributions of varied creators to a model of long-run economic progress within the framework of neoclassical economics [3].

In the R. M. Solow model, the monetary growth on long-term is based only on the technical progress, while on short-term depends on the capital accumulation, too (Rosca, 2007).

The Solow model clarifies growth as result made of use of technology in all cost-effective domains.

Romer Model is the style of endogenous growth, scheduled to Paul Romer ("Endogenous Technological Change, " Journal of Political Market, 1990) which starts off by accepting the Solow model's result that technological progress is what can determine long-run growth in result per worker. But, unlike the Solow model, Romer makes an attempt to clarify what determines technical progress.

Paul Romer said in (Romer, 90) that "development in this model is influenced by technical change than from intentional investment decisions made by profit-maximizing agents. The primary conclusions are that the stock of individual capital is devoted to research in equilibrium, that integration into world marketplaces will increase development rates, and this having a large society is not sufficient to create growth. "

Over some articles from 1986 through 1990, Paul Romer developed a model of economic growth where the fundamentally different nature of technologies compared to that of the most economical goods play a central role. Technological change is the main engine of growth. (Gordon, 2005)

We can emphasize that in all the cost-effective models the investment in new technology are a solutions for development and this will make a significant change in economic performance, job, education, healthcare, government, the surroundings and in the delivery services for everyone.


The first procedure on regionalization and metropolitan issue was specialized in economic activities and geographic location of towns and is well known in economics sciences - the idea of localization.

We identified the following models of regional and local/urban theory predicated on location:

a) Von Thunen model is well known by the name of Heinrich Von Thunen theory which is considered the creator of location. In 1826 he developed a style of rational spatial organization for farmers. He examined the allocation of agricultural land among several rivalling locations, understanding that the agricultural product needs to be transported from place of production to the utilization.

b) Weber model is known by its creator Alfred Weber theory underlying the location publicized in 1909 his "Theory of branch location. " The Thune's model was predicated on creating a new model for industry location choice. Main interest was to find the location of commercial centers.

Weber's model can be an important milestone in the idea of localization, because it attempts to optimize the location of businesses no matter the mathematical basis of their activity profile.

c) Christaller's model is well known by its writer W. Christaller. The goal of this theory was to explain the size and quantity of cities and the distance to which they are located in a particular place.

W. Cristallerie by his "central places of southern Germany" (Hurjui, 2006) founded the entire evaluation of the place organization, identifying how the centralization of urban structures and relations.

d) Losh's model is well known by its writer August Losh.

Cristallerie's theory was long with a. Losch that the book "Spatial group of the economic system", attempting first to introduce elements of nature space in general equilibrium theory of marketplaces (Hurjui, 2006).

Unlike Weber, Losh assumes a homogeneous surface which individuals are uniformly sent out. Manufacturers are focused, while individuals are assumed to be pass on regularly in space. The fundamental point emphasized by the model is the fact, as a result of overlap of hexagonal systems, prosperous areas go up and others poor. In other words, the hierarchy of industrial concentration, which he called "central places", emerged (Levent, 2006).

e) Zipf's model, known as regulations "Position - Size". This model correlates how big is a city (geographical size) using its rank (the position they take up in the hierarchy of metropolitan system).

Currently it includes a special put in place the study of the positioning of professional activity, which revealed their tendency to group in space in cluster like professional parks, small or big cities, etc.

Franois Perroux unbalanced progress theory and developed regional or local theory called the idea of polarized development of progress poles. The idea stems from the actual fact that development is unbalanced and hierarchical process and that while only certain financial units become motors of development. These models are designed poles of economical growth. Become expansion poles and certain specific areas of land or infrastructure.

John Friedmann, Stuart Holland and Gunar Myrdal exhibited uneven development ideas such as center-periphery relationship. It really is considered that regional imbalances derive from time variations in the procedures of integration, leading to the mobility gaps imperfect work - focused in the guts.

J. Fridmann and W. Stohr founded the idea of endogenous development in response to traditional theories.

According to Friedmann's theory, endogenous development has three basic features:

Territorial - space is an important value that facilitates specific businesses, synergy with an enterprise can use;

Community - development cannot be created beyond your neighborhood;

Cultural - Campaign of local resources, endogenous development is based generally on local resources or local industrial traditions.

P. Nijkamp and J. Paelinick emphasized the long cycles of local development theory in the '80s. They proposed a model of interregional fluctuations (Hurjui, 2006), in which space is allocated to progress poles, poles of appeal and intermediate parts. Attractiveness of an area will depend on its capital, infrastructure, and the stock of information.

According to the evaluation done on local and regional development models can be categorised into two categories: on one hand the theory targeted at localization (Von Thunen, Weber, Christaller, Losh, Zipf), and on the other hands there are models that how make an effort to determining the determinants factors of local development (Perroux, Myrdal, Holland, Nijkamp).

Location theory models directed to characterize a region from where it is located, while other models are focused on the idea of expansion poles and local resources utilization.

These metropolitan models, which were developed in the twentieth century, progressed from structural models to static models and also to strong models. Traditional metropolitan models usually simulate the metropolitan system at a macro level, so they cannot accurately represent the strong, self-organizing, or appearing characteristics of metropolitan systems.

The new metropolitan models are based on the use of the new technologies in every activities in order to enhance the quality of work and life, to lessen cost and to improve the efficiencies without troubling the surroundings.

Analyzing the new metropolitan development models that exist among the world we determined two ideas:

One theory is based on analyzing the actual stage of the town and use mobile automata models which show how simple local move rules can be used to emulate a intricate urban development. This will help us identify the goal areas starting from one cell to the introduction of a city;

The second theory is the Korean model of an metropolitan development. They consider that is more efficient to discover a good place and build a new city there.

The development of GIS (Geographic Information System) and other complex adaptive models led to urban models based on artificial life or discrete dynamics. In recent years (Long, 2009), urban progress models have used the cellular automata (CA) way which is dependant on self-organizing theory. The CA models are comprised of a series of basic rules rather than strictly identified physics equations or functions. The discrete personality is a key characteristic of the time and space and position in CA.

Couclelis in 1985 was the first how provided the CA model within an urban context. In this case CA has been adapted to simulate the emergence, self-organizing, and chaos phenomena in urban systems.





Figure Cellular automata one-dimensional

In this theory each sector of urban development has some properties which could change over the time and their state of one area at time t +1 depends on its position and condition of other areas at time t. In cases like this it is essential to recognize the priority portion of the city and, after producing this using smart solution, we can stretch it to the areas. Like Barredo (2003) said in CA is shocking their potential for modeling sophisticated spatial-temporal processes, despite their very easy framework. In his newspaper Barredo accentuate the idea that towns, as vibrant systems, show some complexity characteristics that may be modeled using CA.

For a sustainable growth of a city is important to market a more resource efficient, a competitive market and an market based on knowledge and advancement. Analyzing urban growing models helps us to find the best solutions for a ecological growth of the locations where the majority of the citizens of the world reside in and to choose the perfect model which is essential in our age.

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