Endogenous rural development refers the development initiated by local people with their own resources, values, aspirations, knowledge, skill and organizations.

1. Rural Development: Approaches,
Discourses and Theories
Unit Three: Endogenous Theory of
Rural Development
By:
Khemraj Subedi
Assistant Professor
M. Phil
PhD Scholar

2. Concept of Endogenous Development
• Endogenous means ‘growing from within’.
• Endogenous development is, therefore, development
based on people’s own, knowledge, skill, resources,
strategies and initiatives.
• In the context of rural development, endogenous rural
development refers the development initiated by local
people with their own resources, values, aspirations,
knowledge, skill and organizations.
• Therefore, Endogenous development aims at
strengthening the resource base of the local
population, enhancing their ability to integrate
selected external elements into local practices and to
broaden the options available to the people, without
romanticizing their local views and practices

3. Definition
According to Oxford University’s Centre on
Migration, Policy and Society (COMPAS)
“Endogenous development refers to the
development based mainly, though not exclusively,
on locally available resources, local knowledge,
culture and leadership, with openness to
integrating traditional as well as outside knowledge
and practices. It has mechanisms for local learning
and experimenting, building local economies and
retention of benefits in the local area.”

4. Endogenous development distinguish six different
resources:
• Natural resources (land, ecosystem, water, climate, waters, plants,
animals)
• Human resources (knowledge and skills, local concepts and ways
of knowing, learning and
experimenting)
• Produced resources (human-made things such as roads, canals,
irrigation systems, schools,
infrastructure)
• Economic resources (markets of goods, food, labour; ownership,
price relations, credit systems,
reciprocity)
• Social resources (family systems, ethnic organisations, social
institutions, leadership, ways of solving conflicts and taking
decisions)
• Cultural or spiritual resources (beliefs, norms, values, festivals,
rituals, art, language, lifestyle, ancestors and spiritual beings)

5. Endogenous Growth Theory: A Brief
History
• The determinants of the wealth of nations and its
evaluation over time have mystified
economists ever since the beginning of our discipline.
Why do some countries grow faster
than others?
• Complete answer to this question cannot possibly be
provided within the narrow
limits of a single branch of economics.
• Nevertheless, macroeconomic theories of economic
growth have much to offer, as exemplified by the
seminal contributions of Ramsey (1928),
Harrod (1939), Domar (1946), and Solow (1956).

6. Endogenous Growth Theory
continued…
 Nobel laureate Kenneth Arrow (1962) gave a dynamic
interpretation to increasing returns by emphasizing 'Learning by
Doing'.
 This was an early attempt to render technological progress
endogenous in growth models by making the productivity of a given
firm an increasing function of cumulative aggregate investment for
the industry.
 But that theory suffers from the limitation that it assumes that
productivity improvements occur serendipitously as a by-product of
capital accumulation, although deliberate efforts to develop new
products and technologies have been very prominent.
 One can recall the dramatic developments in consumer electronics,
computers, and pharmaceuticals in order to see the important role of
deliberate research and development (R&D) in raising our standards
of living. R&D has grown in importance in all industrial nations.

7. Endogenous Growth Theory
continued…
• The new wave of research on economic growth was
stimulated by Romer (1986) and Lucas (1988).
• Their work relies on Arrow's mechanism of learning-
by-doing, but following Uzawa (1965), they have
redirected its application to the accumulation of
knowledge and
human capital rather than the accumulation of plant
and equipment.
• Moreover, they have changed the focus toward
explanations of sustained long-run growth and cross
country variations in growth rates.

8. Endogenous Growth Theory
continued…
In Conclusion:
• Endogenous growth theory holds that economic
growth is primarily the result of endogenous and
not external forces.
• Endogenous growth theory holds that investment
in human capital, innovation, and knowledge
are significant contributors to economic growth.
• The theory also focuses on positive
externalities and spillover effect of a knowledge-
based economy which will lead to economic
development.

9. What is Endogenous Growth Theory?
• Endogenous growth theory is an economic
theory which argues that economic growth is
generated from within a system as a direct
result of internal processes.
• More specifically, the theory notes that the
enhancement of a nation's human capital will
lead to economic growth by means of the
development of new forms of technology and
efficient and effective means of production.

10. • Endogenous growth theory maintains that
economic growth is primarily the result of
internal forces, rather than external ones.
• It argues that improvements in productivity
can be tied directly to faster innovation and
more investments in human capital from
governments and private sector institutions.

11. • Endogenous growth economists believe that
improvements in productivity can be tied
directly to faster innovation and more
investments in human capital.
• As such, they advocate for government and
private sector institutions to nurture
innovation initiatives and offer incentives for
individuals and businesses to be more
creative, such as research and
development (R&D) funding and intellectual
property rights.

12. Role of Endogenous Growth Theory
Investment in human capital.
Research & Development.
Emphasis to learning-by-doing hypothesis.
Emphasis to the externalities and spill over
effect.
Emphasis on local resource utilization.

13. Fundamentals of Endogenous Development
 Martin and Sunley (1996) there is possible to contrast the
ideas of endogenous development with those of the
endogenous growth theory.
 Martin and Sunley warn against the confusion of these
concepts, which they call the indigenous respectively the
endogenous approach).
 In endogenous growth, economic activity facilitates
innovation and thereby induces more economic activities.
 Martin and Sunley (1996) The concept makes key-factors of
growth endogenous to the production-function– not
endogenous in a spatial sense.
 Garofoli (2002) endogenous development, indigenous
development, and new industrial districts (Harrison 1992) in
contrast interpret “endogenous” as “locallybased” (Martin
and Sunley 1996).

14. Fundamentals of Endogenous Development
• Stimson, Stough, and Salazar (2009) argued
that the concept of endogenous development
ascribe an important role in the development
of human resources not only to “innovative
firms and entrepreneurs” but also to
“governmental agencies” and “education
institutions.”

15. Fundamentals of Endogenous Development….
 Key principle - the specific resources of an area
(natural, human and cultural) hold the key to its
sustainable development;
 Dynamic force - local initiative and enterprise;
 Function of rural areas - diverse service economies;
 Major development problems - the limited
capacity of areas and social groups to participate in
economic and development activity;
 Focus of development - capacity building (skills,
institutions and infrastructure) and overcoming
social exclusion.

16. Rural Endogenous Development
 The idea of endogenous growth has been favoured by
many working on rural development because a model of
endogenous development guarantees autonomy to the
process of transformation of the local economic system.
 It does so by underlining the centrality of the decision-
making processes of local social actors and their capacity
to control and internalize external knowledge and
information, and by generally assuming the traits of a
self-sustaining process of development.
 The process of transformation is based, therefore, on local
specificities and on the capacity to govern fundamental
variables.
 A model of endogenous development is, in fact, based on
the production of ‘social capability’ at the level of the
community of firms and institutions that operate in the
local sphere

17. Rural Endogenous Development cont..
• 1.Changes in the local management of natural
resources
• 2.Changes in the diversity of livelihoods
strategies of different groups in the community
• 3.Changes in the local leadership and governance
systems
• 4.Changes in the scope and effectiveness of
community processes to undertake local
initiatives
• 5.Changes in intra‐community dialogue and
collaboration processes

18. Rural Endogenous Development
cont..
• 8.Changes in cultural practices that foster
internal changes in people’s attitudes, sense
of dignity, self‐confidence ,and value given to
the culture and knowledge).
• 10.Changes in roles of women in community
development based on revisited and
revitalized traditional mechanisms for gender
equity and in their relationships with men
toward greater equity

19. Best example of endogenous rural
development in Nepal
• Community Managed Natural Resource
Modality (Community Forestry, Farmer
Managed irrigation system,User’s community)
• Tourism development
model(rural,nature,village,eco-tourism,home
stay)
• Agriculture devt.
• Food for work.
• Small cottage industries.

20. Indian model of endogenous rural
development (Gandhi’s model)
• Indian lives in seven and half lakh village during
the independent time
• Gandhi’s vision of rural development is HOLISTIC
and People Centered.
• Respect on moral and spiritual value
• Village Swaraj 1042
• Industrialization would destroy the Indian
society by eliminating our decentralized rural
industries further lead to impoversihment.

21. Critique of rural endogenous development
The weak theoretical foundation of the
non-sectoral Rural Deveopment Programs has
frequently been criticized by Sotte (2003) who
deplores “the lack of a theoretical foundation for
rural development and […] the still insufficient
analysis of the relationship between rural
development and general development.”

22. Critique of rural endogenous
development cont…
• Dax, Kahila, and Hörnström (2011)“the gap
between academic discourse and policy
practice as experienced through
implementation in EU countries and regions
hardly decreased through the respective policy
reforms”

23. • Dwyer et al. (2007) identify a “deep-seated
conservatism in the design and implementation of
programmes”.
• Especially they found that the existing variety in
national and sub-national Rural Development Plans does
not correspond consistently to existing structural and
socio-economic differences among the corresponding
regions.
• Instead, the existing differences may rather be explained
by institutional path-dependence and inflexibility.
• Therefore, one may conclude that the “integrated
approach” that was aimed at by the introduction of
distinctive development plans remained largely
unfulfilled.

24. Shucksmith, Thomson, and Roberts (2005)
states that the results have been derived,
though, on a rather superficial analysis of
funds allocation and on case studies’ results
rather than on theoretically based reasoning or
well founded impact analyses.