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Ricardian theory of economic development
On the line of Prof
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Ricardo develop the theory of economic development
by taking into account of several area which may directly influence the attainment of economic
development
His idea on the depth process are being scatter in this book ‘the principle of political
economy& taxation’-1817
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He discussed the theory of distribution with the help of deductive reasoning & analytical
approach
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Technically the marginal &
surplus principles
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The share of rent in the national
output whereas the surplus principle explains the divisions of the remaining share of rent in the
national output whereas he surplus principle explains the divisions of the remaining share
between wages& profits
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The main content of Ricardian theory includes
1)
2)
3)
4)

Role of agriculture
Division of rent , profit , wages out of national output
Operational of law of diminishing return
Process of capital accumulation which includes the profit rates & level of rising in wages
&other source of capital accumulation
...
According to him
there are 3 major groups in the economy where they have called as production class
namely the landlords ,capitalists & laborers who can help for the expansion &
diversification of economic activities which prom0otes the economic development
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3) Operations of law of diminishing returns :Ricardo assumes that law of diminishing returns was applicable in agriculture
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4) Process of capital accumulation:According to him capital accumulation is a source of economic development because
capital acts as an engine of growth, therefore the role of capitalist are very important
from the point of economic development
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As a result capital
accumulation becomes the primary part, wages & rent becomes the secondary part in
the field of process of a capital accumulation
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e
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But basically profit depends on wages, depends on the price of corn, &
this way the price of the corn depends on the fertility of the land
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The wages rate depends upon the number of workers and the wage fund
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The wage rate falls with rising in the number of workers &
vice versa
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In such
condition laborers are unable to contribute towards capital accumulation i
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growth of
population, retard the process of capital accumulation which in turn lesser he process of
economic development
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A) Rise in the rate of production
B) Role of taxes
C) Amount of free international trade

A) rise in the rate of production:Ricardo is of the opinion that economic development depends on the difference
between production and consumption
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The productivity of labor can be increased
through technical changes & better organized thereby capital accumulation
becomes possible
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According to him taxes are imposed by the government to reduce conspicuous
consumption, which in turn used by the government community yielding assets the
economy
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The re –investment of the profit by the
capitalist will not only encourage the foreign trade & further leading towards
Economic development of an under developed countries (UDC’s) & there by
prosperity can be attainable from such economies, also represented as at point A,
rate of growth of capital [is equal to the rate of growth of labor [ 



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