Dependency Theory

Dependency theory is the body of social science theories predicated on the notion that resources flow from a “periphery” of poor and underdeveloped states to a “core” of wealthy states, enriching the latter at the expense of the former.

Central to the theory is the argument that the poverty of peripheral countries is not because they are not integrated into the world system, but because of how they are integrated.

Key concepts

• Center-periphery model: The global economy is structured with industrialized nations at the center and raw-material-exporting nations at the periphery
• Unequal exchange: Trade between center and periphery systematically disadvantages the periphery
• Import substitution industrialization (ISI): Policy response advocating domestic production of previously imported goods
• Structural heterogeneity: The coexistence of modern and pre-modern sectors within peripheral economies