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Economic De c
velopment
T W E L F cTcH EcD I cTcI O N c
Michael P. Todaro
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New York University
c c
Stephen C. Smith c c
The George Washington University
c c c
Bostonc Columbusc Indianapolisc NewcYorkc SancFranciscoc UppercSaddlecRivercAmster
damc CapecTownc Dubaic Londonc Madridc Milanc Munichc Parisc MontréalcTorontocDelhic
MexicocCityc SãocPauloc Sydneyc HongcKongc Seoulc Singaporec Taipeic Tokyo
, Findcmorecatchttp://www.downloadslide.com
For Donna Renée an
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d
For Renee, Martin, and Helena
c c c c
VicecPresident,cEditorcincChief:c DonnacBattista CovercDesigner:c JonathancBoylan
ExecutivecEditor:c DavidcAlexander CovercArt:c motif:cElenasz/Shutterstock;ctopcle
ProgramcManager:c LindseycSloan ft:cRanplett/Vetta/GettycImages;ctopcright:cCh
DirectorcofcMarketing:c MaggiecMoylancLeen arlescHarker/Shutterstock;cbottomcright:cDmi
MarketingcManager:c LoricDeShazo tryhcKalinovsky/Shutterstock;cbottomcleft:cSt
TeamcLead,cProjectcManagement:c JeffcHolcomb evecEstvanik/Shutterstock.
SeniorcProductioncProjectcManager: ProjectcCoordination,cTextcDesign,cand
LizcNapolitano cElectroniccPagecMakeup:c Cenveo®
SupplementscEditor:c AndracSkaalrud cPublisherc Services
Manager,cRightsc&cPermissions:c Michaelc Printer/Binder:c EdwardscBrotherscMalloy
Joyce CovercPrinter:c Lehigh-
Rightsc&cPermissionscCoordinator:c Samanthac PhoenixcColor/cHagerstown
Graham Typeface:c 10/12c Palatino
SeniorcProcurementcSpecialist:c CarolcMelville
Creditscandcacknowledgmentscborrowedcfromcothercsourcescandcreproduced,cwithcpermis-
c sion,cinc thisctextbookc appearconc thecappropriatecpagec withinc text.
Copyrightc©c2015,c2012,c2009cbycMichaelcP.cTodarocandcStephencC.cSmith.cAllcrightscreserved.
c ManufacturedcincthecUnitedcStatescofcAmerica.cThiscpublicationciscprotectedcbycCopyright,can
dcpermissioncshouldcbecobtainedcfromcthecpublishercpriorctocanycprohibitedcreproduction,cst
or-
cagecincacretrievalcsystem,corctransmissioncincanycformcorcbycanycmeans,celectronic,cmechanical
,cphotocopying,crecording,corclikewise.cTocobtaincpermission(s)ctocusecmaterialcfromcthiscwor
k,cpleasecsubmitcacwrittencrequestctocPearsoncEducation,cInc.,cPermissionscDepartment,cOnecLa
kecStreet,cUppercSaddlecRiver,cNewcJerseyc07458,corcyoucmaycfaxcyourcrequestctoc201-236-
3290.
Manycofcthecdesignationscbycmanufacturerscandcsellersctocdistinguishctheircproductscarecclai
medcasctrademarks.cWherecthosecdesignationscappearcincthiscbook,candcthecpublishercwascaw
arecofcactrademarkcclaim,cthecdesignationschavecbeencprintedcincinitialccapscorcallccaps.
LibrarycofcCongresscCataloging-in-PublicationcData
Todaro,cMichaelcP.
Economiccdevelopmentc/cMichaelcP.cTodaro,cNewcYorkcUniversity,cStephencC.cSmith,cT
hecGeorgecWashingtoncUniversity.c--cTwelfthcEdition.
pagesccm
Includescbibliographicalcreferencescandcindex.cISB
Nc978-0-13-340678-8c--cISBNc0-13-340678-4
1.c Economiccdevelopment.c2.c Developingccountries--
Economiccpolicy.c I.cSmith,cStephencC.,cDate-cII.cTitle.
HD82.T552c2014c33
8.9009172’4--dc23
2014011530
10c9c8c7c6c5c4c3c2c1
ISBNc10:c0-13-340678-4
www.pearsonhighered.com ISBNc 13:c 978-0-13-340678-8
, Findcmorecatchttp://www.downloadslide.com
The Pearson Series in Economics
c c c c
Abel/Bernanke/c Croush Fort Klein Phelps
ore SportscEconomics MathematicalcMethodscforcEco HealthcEconomics
Macroeconomics* nomics
Froyen Pindyck/Rubinfeld
Bade/Parkin Macroeconomics Krugman/Obstfeld/Melitzc In Microeconomics*
Foundationsc ofc Economics* ternationalcEconomics:cThe
Fusfeld Riddell/Shackelford/c Stamo
oryc&cPolicy*
Berck/Helfandc c c T ThecAgecofcthecEconomist s/Schneiderc Economics:cAcTo
hecEconomicscofcthecE Laidler olcforcCriticallycUnderstandin
Gerber
nvironment ThecDemandcforcMoney gcSociety
InternationalcEconomics*
Bierman/Fernandezc c Ga Leeds/vonc Allmen Roberts
González-
mecTheorycwithcEconomiccA ThecEconomicscofc Sports ThecChoice:cAcFablecofcFreecTra
Riverac c ForecastingcforcEc
pplications decandcProtection
onomicscandcBusiness Leeds/voncAllmen/
Blanchard cSchiming Rohlf
Gordon
Macroeconomics* Economics* IntroductionctocEconomic
Macroeconomics*
cReasoning
Blau/Ferber/Winklerc Th Lynn
Greene
ecEconomicscofcWomen,cM EconomiccDevelopment: Roland
EconometriccAnalysis
en,candcWork cTheorycandcPracticecforca Development c Economics
Gregory cDividedcWorld
Boardman/Greenberg/c V Scherer
EssentialscofcEconomics Miller
ining/Weimer IndustrycStructure, cStrategy, ca
Cost-Benefitc Analysis Gregory/Stuart EconomicscToday* ndcPubliccPolicy
Boyer RussiancandcSovietcEconomiccP Schiller
UnderstandingcModerncEcono
erformancecandcStructure
PrinciplescofcTransportationcEc mics ThecEconomicscofcPovertycandcDiscri
onomics Hartwick/Olewilerc c c T mination
Miller/Benjamin
Branson hecEconomicscofcNaturalc Sherman
ThecEconomicscofcMacrocIssues
ResourcecUse
MacroeconomiccTheorycandcP MarketcRegulation
Miller/Benjamin/North
olicy Heilbroner/Milberg
ThecEconomicscofcPubliccIssues Stock/Watson
Bruce ThecMakingcofcthecEconomiccS
IntroductionctocEconometrics
ociety Mills/Hamilton
PubliccFinancecandcthe
UrbancEconomics Studenmund
cAmericancEconomy Heyne/Boettke/c Pryc
UsingcEconometrics:cAcPracti-
hitko Mishkin
Carlton/Perloffc M ccalcGuide
ThecEconomiccWaycofcThi ThecEconomicscofcMoney,cBank-
oderncIndustrialc
nking cing,candcFinancialcMarkets* Tietenberg/Lewisc Environmen
Organization
talcandcNaturalcResourcecEco
Holt ThecEconomicscofcMoney,cBa
Case/Fair/Oster nomics
Markets,cGames,cand nking,candcFinancialcMar-
Principlescofc Economics*
cStrategiccBehavior ckets, c Business c Schoolc Edition* EnvironmentalcEconomicscandc
Chapman Policy
Hubbard/O’Brien Macroeconomics:cPolicycandc
EnvironmentalcEconomics:cT
Economics* Practice* Todaro/Smith
heory,cApplication,candcPolicy
Economicc Development
Money,cBanking,candcthe Murray
Cooter/Ulen
cFinancialcSystem* Econometrics:cAcModern Waldman/Jensenc Indust
Lawc&cEconomics
cIntroduction rialcOrganization:cTheor
Hubbard/O’Brien/cRaffer
Daniels/VanHoosec Internatio ycandcPractice
ty O’Sullivan/Sheffrin/c
nalcMonetaryc&cFinancialcEco
Macroeconomics* Perez Walters/Walters/Appel/cCalla
nomics
Economics:cPrinciples,cApplica- han/Centanni/cMaex/O’Neill
Hughes/Cain
Downs ctionscandcTools* Econversations:cToday’sc
Americanc Economicc History
AncEconomiccTheorycof StudentscDiscusscToday’sc
Parkin
cDemocracy Husted/Melvin Issues
Economics*
Ehrenberg/Smith InternationalcEconomics Weil
Perloff
ModerncLaborcEconomics Jehle/Reny Economicc Growth
Microeconomics*
Farnham AdvancedcMicroeconomiccThe Williamson
ory Microeconomics:cTheorycandcA
EconomicscforcManagers Macroeconomics
pplicationscwithcCalculus*
Johnson-Lans
Folland/Goodman/cStan
AcHealthcEconomicscPrimer Perloff/Branderc Manageri
o
alcEconomicscandcStrategy
ThecEconomicscofcHealthcandc Keat/Young/Erfle
*
HealthcCare ManagerialcEconomics
*denotesc MyEconLab titles. Visit www.myeconlab.com to learn more.
c c c c c c
, Findcmorecatchttp://www.downloadslide.com
Economic De c
velopment
T W E L F cTcH EcD I cTcI O N c
Michael P. Todaro
c c
New York University
c c
Stephen C. Smith c c
The George Washington University
c c c
Bostonc Columbusc Indianapolisc NewcYorkc SancFranciscoc UppercSaddlecRivercAmster
damc CapecTownc Dubaic Londonc Madridc Milanc Munichc Parisc MontréalcTorontocDelhic
MexicocCityc SãocPauloc Sydneyc HongcKongc Seoulc Singaporec Taipeic Tokyo
, Findcmorecatchttp://www.downloadslide.com
For Donna Renée an
c c c
d
For Renee, Martin, and Helena
c c c c
VicecPresident,cEditorcincChief:c DonnacBattista CovercDesigner:c JonathancBoylan
ExecutivecEditor:c DavidcAlexander CovercArt:c motif:cElenasz/Shutterstock;ctopcle
ProgramcManager:c LindseycSloan ft:cRanplett/Vetta/GettycImages;ctopcright:cCh
DirectorcofcMarketing:c MaggiecMoylancLeen arlescHarker/Shutterstock;cbottomcright:cDmi
MarketingcManager:c LoricDeShazo tryhcKalinovsky/Shutterstock;cbottomcleft:cSt
TeamcLead,cProjectcManagement:c JeffcHolcomb evecEstvanik/Shutterstock.
SeniorcProductioncProjectcManager: ProjectcCoordination,cTextcDesign,cand
LizcNapolitano cElectroniccPagecMakeup:c Cenveo®
SupplementscEditor:c AndracSkaalrud cPublisherc Services
Manager,cRightsc&cPermissions:c Michaelc Printer/Binder:c EdwardscBrotherscMalloy
Joyce CovercPrinter:c Lehigh-
Rightsc&cPermissionscCoordinator:c Samanthac PhoenixcColor/cHagerstown
Graham Typeface:c 10/12c Palatino
SeniorcProcurementcSpecialist:c CarolcMelville
Creditscandcacknowledgmentscborrowedcfromcothercsourcescandcreproduced,cwithcpermis-
c sion,cinc thisctextbookc appearconc thecappropriatecpagec withinc text.
Copyrightc©c2015,c2012,c2009cbycMichaelcP.cTodarocandcStephencC.cSmith.cAllcrightscreserved.
c ManufacturedcincthecUnitedcStatescofcAmerica.cThiscpublicationciscprotectedcbycCopyright,can
dcpermissioncshouldcbecobtainedcfromcthecpublishercpriorctocanycprohibitedcreproduction,cst
or-
cagecincacretrievalcsystem,corctransmissioncincanycformcorcbycanycmeans,celectronic,cmechanical
,cphotocopying,crecording,corclikewise.cTocobtaincpermission(s)ctocusecmaterialcfromcthiscwor
k,cpleasecsubmitcacwrittencrequestctocPearsoncEducation,cInc.,cPermissionscDepartment,cOnecLa
kecStreet,cUppercSaddlecRiver,cNewcJerseyc07458,corcyoucmaycfaxcyourcrequestctoc201-236-
3290.
Manycofcthecdesignationscbycmanufacturerscandcsellersctocdistinguishctheircproductscarecclai
medcasctrademarks.cWherecthosecdesignationscappearcincthiscbook,candcthecpublishercwascaw
arecofcactrademarkcclaim,cthecdesignationschavecbeencprintedcincinitialccapscorcallccaps.
LibrarycofcCongresscCataloging-in-PublicationcData
Todaro,cMichaelcP.
Economiccdevelopmentc/cMichaelcP.cTodaro,cNewcYorkcUniversity,cStephencC.cSmith,cT
hecGeorgecWashingtoncUniversity.c--cTwelfthcEdition.
pagesccm
Includescbibliographicalcreferencescandcindex.cISB
Nc978-0-13-340678-8c--cISBNc0-13-340678-4
1.c Economiccdevelopment.c2.c Developingccountries--
Economiccpolicy.c I.cSmith,cStephencC.,cDate-cII.cTitle.
HD82.T552c2014c33
8.9009172’4--dc23
2014011530
10c9c8c7c6c5c4c3c2c1
ISBNc10:c0-13-340678-4
www.pearsonhighered.com ISBNc 13:c 978-0-13-340678-8
, Findcmorecatchttp://www.downloadslide.com
The Pearson Series in Economics
c c c c
Abel/Bernanke/c Croush Fort Klein Phelps
ore SportscEconomics MathematicalcMethodscforcEco HealthcEconomics
Macroeconomics* nomics
Froyen Pindyck/Rubinfeld
Bade/Parkin Macroeconomics Krugman/Obstfeld/Melitzc In Microeconomics*
Foundationsc ofc Economics* ternationalcEconomics:cThe
Fusfeld Riddell/Shackelford/c Stamo
oryc&cPolicy*
Berck/Helfandc c c T ThecAgecofcthecEconomist s/Schneiderc Economics:cAcTo
hecEconomicscofcthecE Laidler olcforcCriticallycUnderstandin
Gerber
nvironment ThecDemandcforcMoney gcSociety
InternationalcEconomics*
Bierman/Fernandezc c Ga Leeds/vonc Allmen Roberts
González-
mecTheorycwithcEconomiccA ThecEconomicscofc Sports ThecChoice:cAcFablecofcFreecTra
Riverac c ForecastingcforcEc
pplications decandcProtection
onomicscandcBusiness Leeds/voncAllmen/
Blanchard cSchiming Rohlf
Gordon
Macroeconomics* Economics* IntroductionctocEconomic
Macroeconomics*
cReasoning
Blau/Ferber/Winklerc Th Lynn
Greene
ecEconomicscofcWomen,cM EconomiccDevelopment: Roland
EconometriccAnalysis
en,candcWork cTheorycandcPracticecforca Development c Economics
Gregory cDividedcWorld
Boardman/Greenberg/c V Scherer
EssentialscofcEconomics Miller
ining/Weimer IndustrycStructure, cStrategy, ca
Cost-Benefitc Analysis Gregory/Stuart EconomicscToday* ndcPubliccPolicy
Boyer RussiancandcSovietcEconomiccP Schiller
UnderstandingcModerncEcono
erformancecandcStructure
PrinciplescofcTransportationcEc mics ThecEconomicscofcPovertycandcDiscri
onomics Hartwick/Olewilerc c c T mination
Miller/Benjamin
Branson hecEconomicscofcNaturalc Sherman
ThecEconomicscofcMacrocIssues
ResourcecUse
MacroeconomiccTheorycandcP MarketcRegulation
Miller/Benjamin/North
olicy Heilbroner/Milberg
ThecEconomicscofcPubliccIssues Stock/Watson
Bruce ThecMakingcofcthecEconomiccS
IntroductionctocEconometrics
ociety Mills/Hamilton
PubliccFinancecandcthe
UrbancEconomics Studenmund
cAmericancEconomy Heyne/Boettke/c Pryc
UsingcEconometrics:cAcPracti-
hitko Mishkin
Carlton/Perloffc M ccalcGuide
ThecEconomiccWaycofcThi ThecEconomicscofcMoney,cBank-
oderncIndustrialc
nking cing,candcFinancialcMarkets* Tietenberg/Lewisc Environmen
Organization
talcandcNaturalcResourcecEco
Holt ThecEconomicscofcMoney,cBa
Case/Fair/Oster nomics
Markets,cGames,cand nking,candcFinancialcMar-
Principlescofc Economics*
cStrategiccBehavior ckets, c Business c Schoolc Edition* EnvironmentalcEconomicscandc
Chapman Policy
Hubbard/O’Brien Macroeconomics:cPolicycandc
EnvironmentalcEconomics:cT
Economics* Practice* Todaro/Smith
heory,cApplication,candcPolicy
Economicc Development
Money,cBanking,candcthe Murray
Cooter/Ulen
cFinancialcSystem* Econometrics:cAcModern Waldman/Jensenc Indust
Lawc&cEconomics
cIntroduction rialcOrganization:cTheor
Hubbard/O’Brien/cRaffer
Daniels/VanHoosec Internatio ycandcPractice
ty O’Sullivan/Sheffrin/c
nalcMonetaryc&cFinancialcEco
Macroeconomics* Perez Walters/Walters/Appel/cCalla
nomics
Economics:cPrinciples,cApplica- han/Centanni/cMaex/O’Neill
Hughes/Cain
Downs ctionscandcTools* Econversations:cToday’sc
Americanc Economicc History
AncEconomiccTheorycof StudentscDiscusscToday’sc
Parkin
cDemocracy Husted/Melvin Issues
Economics*
Ehrenberg/Smith InternationalcEconomics Weil
Perloff
ModerncLaborcEconomics Jehle/Reny Economicc Growth
Microeconomics*
Farnham AdvancedcMicroeconomiccThe Williamson
ory Microeconomics:cTheorycandcA
EconomicscforcManagers Macroeconomics
pplicationscwithcCalculus*
Johnson-Lans
Folland/Goodman/cStan
AcHealthcEconomicscPrimer Perloff/Branderc Manageri
o
alcEconomicscandcStrategy
ThecEconomicscofcHealthcandc Keat/Young/Erfle
*
HealthcCare ManagerialcEconomics
*denotesc MyEconLab titles. Visit www.myeconlab.com to learn more.
c c c c c c
