Development Economics

Content and purpose

The purpose of this course is to study the theories of economic development and the related theme of economic growth which constitute a fundamental question for economists. More than a purely theoretical course, we will also try to assess the success and limits of different theories by looking at empirical evidences in order to identify the determinants of economic growth. Many questions will be raised: is it possible to consider that geography, capital, population growth are keys for understanding economic development? What are the effects of international trade on development? How is it possible to design good development policies?

More specifically, this course has two major objectives: 1) to present and assess the value of the theories of economic development; 2) to give the students the tools to understand development policies and issues.

Textbook(s)

Acemoglu, Daron, and James A Robinson, Why Nations Fail: The Origins of Power, Prosperity and Poverty, New York: Crown, 2012 (WNF)

Perkins, Dwight, Steven Radelet and David Lindauer, Economics of Development (Seventh Edition), New York: WW Norton and Company, 2012 (ED)

Tentative schedule:

1. What is development economics?

ED, Chap 1

Banerjee and Duflo (2007), The economic lives of the poor, Journal of Economic Perspectives 21 n°1, pages 141-168.

Dollar, David (2002), “ Growth is Good for the Poor ”, Journal of Economic Growth, 7 (3), 195-225.

Ravallion and Chen (2008)The developing world is poorer than we thought, but no less successful in the fight against poverty, World Bank Policy Research Working Paper 4703.

Ray, Debraj. 2007. “Introduction to Development Theory.” Journal of Economic Theory, 137 (2007): 1 – 10

2. Measuring development

ED, Chap 2 & 6

Deaton, Angus. (2005). “Measuring Poverty in a Growing World (or Measuring Growth in a Poor World),” Review of Economics and Statistics, 87(1), 1-19

Sen, A. (1988) The Concept of Development, Handbook of Development Economics Vol. 1

3. Harrod Domar and the financing gap

ED, Chap 3 & 4

Burnside C. and D. Dollar, 2000. Aid, Policies and Growth. American Economic Review 90, 847-868

4-5. Solow growth model and the impact of investment

ED, Chap 3 & 4

Barro, Robert, and Xavier Sala-i-Martin (2004), Economic Growth, Second Edition: Introduction.

6. Social capital and the impact of education

ED, Chap 8

Duflo, Esther. (2001). “Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment,” American Economic Review, 91(4), 795-813

Krueger, Alan and Mikael Lindahl. (2001). “Education for Growth: Why and For Whom?” Journal of Economic Literature, 39 (4), 1101-1136

7. Is there a population problem?

ED, Chap 7

Partha Dasgupta, 1995, “The population problem: Theory and evidence”, Journal of Economic Literature, 33 (1995), 1879-1902

Kelly, A.C. (1988), “Economic Consequences of Population Change in the Third World”, Journal of Economic Literature, 26 (2), pp. 1685 – 1728.

8. Aid financing reforms and its consequences

ED, Chap 14

Alesina, A., & Dollar, D. (2000). Who gives foreign aid to whom and why? Journal of economic growth, 5(1), 33-63.

Burnside C. and D. Dollar, 2000. Aid, Policies and Growth. American Economic Review 90, 847-868

Rajan R. and A. Subramanian, 2005. What Undermines Aid’s Impact on Growth? IMF Working Papers 05/126, International Monetary Fund, Washington D.C.

9. Debt forgiveness and its consequences

ED, Chap 15

Moss, Todd. 2006. “Will Debt Relief Make a Difference? Impact and Expectations of the Multilateral Debt Relief Initiative.” Center for Global Development Working Paper No. 88.

Buchheit, Lee C., G. Mitu Gulati, and Robert B. Thompson. 2007. “The Dilemma of Odious Debts.” Duke Law Journal, 56(5): 1201‐1262

10. International trade and development

ED, Chap 19

Daniel W. Drezner (2006), “The Race to the Bottom Hypothesis – An Empirical and Theoretical Review”

A. Krueger, “Why Trade is Good for Growth,” Economic Journal, September 1998

Singer, H. W. (1950). The distribution of gains between investing and borrowing countries. The American Economic Review, 473-485

11. Creative destruction, innovation and growth

Schumpeter, Joseph, The Theory of Economic Development (Cambridge: Harvard University Press, 1934), pp. 83-94.

Cantner U., J. Krüger, K. v. Rhein, “Knowledge and Creative Destruction over the Industry Life Cycle - The Case of the German Automobile Industry”, Economica 76(301) , 2009, 132-148

12. Developing through the state or through the markets?

ED, Chap 5

Acemoglu, D (2005). “Politics and Economics in Weak and Strong States”, Journal of Monetary Economics, 52, 1199-1226

Besley, T. and T. Persson (2009). "The Origins of State Capacity: Property Rights, Taxation, and Politics." American Economic Review, 99(4): 1218-44.

Stiglitz, Joseph E. 1989. “Markets, market failures, and development,” The American Economic Review, 79(2): 197-203.

13. The case of corruption and development

WNF, Chap 5

Bai, J., Jayachandran, S., Malesky, E. and Olken, B. (2014). “Does Economic Growth Reduce Corruption? Theory and Evidence from Vietnam.” NBER Working Paper #19483

Banerjee, A. V., Duflo, E., & Glennerster, R. (2008). Putting a Band‐Aid on a corpse: Incentives for nurses in the Indian public health care system. Journal of the European Economic Association, 6(2‐3), 487-500

Fisman, Raymond and Edward Miguel. (2007). “Corruption, Norms, and Legal Enforcement: Evidence from Diplomatic Parking Tickets”, Journal of Political Economy, 115(6), 1020-1048

Fisman, Ray and Wei, Shang-Jin (2004) "Tax Rates and Tax Evasion: Evidence from “Missing Imports” in China", Journal of Political Economy, 112(2): 471-500

14-15. The crucial function of institutions

WNF, Chap 3, 11 & 12

Acemoglu, D., Johnson, S., & Robinson, J. A. (2002). “Reversal of fortune: Geography and institutions in the making of the modern world income distribution.” Quarterly journal of economics, 1231-1294

La Porta R, Lopez-de-Silanes F, Shleifer A, Vishny R. (1998). Law and finance. Journal of Political Economy

Nunn N. The Long Term Effects of Africa's Slave Trades. Quarterly Journal of Economics. 2008;123(1):139-176

16. Sustainable development

ED, Chap 20

Howarth, Richard B. (2007) “Towards an operational sustainability criterion,” Ecological Economics, 63, pp. 656–663.

C. Wolfram, et al., “How Will Energy Demand Develop in the Developing World?” JEP Fall 2012