The Structure of Incentives

  • Keith Griffin
  • Terry McKinley


The structure of incentives in an economy has a pervasive influence on the pace and pattern of development. Public expenditure is, of course, important, and in some cases decisive, but in the great majority of developing countries the public sector employs directly only a small fraction of the labour force and produces substantially less than half of all goods and services in the economy. Most people obtain their livelihood in the private sector, and most goods and services originate there. What is produced, how much is produced and what methods of production are used are questions decided largely in the private sector and primarily in response to the set of incentives which the private sector faces. The set of incentives, in turn, is strongly influenced by public policy, both directly and indirectly, and hence in formulating a human development strategy a good place to begin is by examining the structure of incentives.


Labour Market Human Capital Comparative Advantage Physical Capital Informal Sector 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. 4.
    See Michael D. Levin, ‘Accountability and Legitimacy in Traditional Cooperation in Nigeria’, in D. W. Attwood and B. S. Baviskar (eds), Who Shares? Co-operatives and Rural Development (Delhi: Oxford University Press, 1988).Google Scholar
  2. 5.
    See Mahabub Hossain, Credit for the Rural Poor: The Grameen Bank in Bangladesh, Bangladesh Institute of Development Studies Research Monograph No. 4, Dhaka, 1984.Google Scholar
  3. Also see Rushidon Islam Rahman, ‘Poor Women’s Access to Economic Gain from Grameen Bank Loans’, Australian National University Research School of Pacific Studies, National Centre for Development Studies, Working Paper No. 91/2, 1991.Google Scholar
  4. 7.
    Hernando de Soto, The Other Path (New York: Harper and Row, 1989).Google Scholar
  5. 8.
    Ibid. Legal restraints on the development of the informal sector were first called to the attention of a wide audience in ILO, Employment, Incomes and Equality: A Strategy for Increasing Productive Employment in Kenya, 1972.Google Scholar
  6. 9.
    See, for example, R. Repetto and M. Gillis (eds), Public Policies and the Misuse of Forest Resources (Cambridge: Cambridge University Press, 1988).Google Scholar
  7. 10.
    D. Mahar, Government Policies and Deforestation in Brazil’s Amazon Region (Washington, DC: World Bank, 1989).Google Scholar
  8. 11.
    See Keith Griffin and Azizur Rahman Khan, Globalization and the Developing World: an Essay on the International Dimensions of Development in the Post-Cold War Era (Geneva: UNRISD, 1992), p. 20.Google Scholar
  9. 13.
    Keith Griffin, Alternative Strategies for Economic Development (London: Macmillan, 1989), Chapter 6.Google Scholar
  10. 14.
    UNDP, Balanced Development: An Approach to Social Action in Pakistan (Islamabad, Pakistan, 1992).Google Scholar
  11. 15.
    Nathan Rosenberg, Perspectives on Technology (London: Cambridge University Press, 1987), pp. 192–3.Google Scholar
  12. 16.
    Aaron Segal, ‘From Technology Transfer to Science and Technology Institutionalization’, in John R. McIntyre and Daniel S. Papp (eds), The Political Economy of International Technology Transfer (Westport, Connecticut: Quorum Books, 1986).Google Scholar
  13. 18.
    Nathan Rosenberg, Inside the Black Box: Technology and Economics (Cambridge, Mass.: Cambridge University Press, 1982).Google Scholar
  14. 19.
    This whole section draws on the discussion in Edward J. Malecki, Technology and Economic Development: The Dynamics of Local, Regional and National Change (New York: Longman, 1991), Chapter 4.Google Scholar
  15. 20.
    Aaron Segal, ‘Africa: Frustration and Failure’, in Aaron Segal (ed.), Learning By Doing: Science and Technology in the Developing World (Boulder, Colorado: Westview Press, 1987).Google Scholar

Copyright information

© Keith Griffin and Terry McKinley 1994

Authors and Affiliations

  • Keith Griffin
    • 1
  • Terry McKinley
    • 2
  1. 1.The Department of EconomicsUniversity of CaliforniaRiversideUSA
  2. 2.International Development Program of the School of International ServiceAmerican UniversityUSA

Personalised recommendations