PovertyTrapsIncentivesandDevelopment PKrishnan

PartIIBPaper8LectureCourse Michaelmas,Weeks18 Thiscourseconsistsof8lecturesdesignedtoprovideabroadunderstandingofthe economicperformanceofdevelopingcountriesandtheconstraintsthatindividuals, householdsandfirmswithinthemfaceinattemptingtogetbetteroff.Itwill introducestudentstotheexcitingandevolvingfieldthatisdevelopmenteconomics. Thefocusisontheapplicationofstandardmicroeconomictheoryandtheoriesof growthtounderstandtheprocessofdevelopment. Recommendedtexts Ray,Debraj.DevelopmentEconomics.PrincetonUniversityPress,1998. (recommended) Deaton,Angus.TheAnalysisofHouseholdSurveys.JohnHopkins,1997. Bardhan,PranabandChristopherUdry.DevelopmentMicroeconomics.Oxford: OxfordUniversityPress,1999.(moredifficult,graduatelevelbutuseful nevertheless) Dasgupta,P.,1993,AnInquiryintoWellBeingandDestitution,ClarendonPress (Oxford),1993,pp.1661.(Highlyrecommended,forboththisyearandbeyond) (AllarticlesonreserveatMarshalllibrary) Otherreading: Bates,R,2001,ProsperityandViolence:ThePoliticalEconomyofDevelopment, Cohen,D,1998,TheWealthoftheWorldandthePovertyofNations,MITPress. Collier,P.,2007,TheBottomBillion,OxfordUniversityPress. Diamond,J.,Guns,Germs,andSteel:theFatesofHumanSocieties,RandomHouse, NewYork. Seabright,Paul,TheCompanyofStrangers:ANaturalHistoryofEconomicLife, PrincetonUniversityPress,USA

Week1:Overview:Themacrohistoryofdevelopment: Question: The(augmented)Solowmodelofgrowthprovidesausefulwaytounderstandthe divergenceinincomesacrossdevelopingcountries.Discuss Ray,Debraj,DevelopmentEconomics,Chaps24.(Background) Overview Sen,Amartya,TheConceptofDevelopment,chapter2inHollisCheneryandT.N. Dasgupta,Partha,AnInquiryintoWellbeingandDestitution,Oxford:Oxford UniversityPress,1994.Chapters4and5. S.AnandandM.Ravallion,1993,Humandevelopmentinpoorcountries:ontherole ofprivateincomesandpublicservices,JournalofEconomicPerspectives,1(1). GrowthandInstitutions Acemoglu,D,Johnson,SandRobinsonJ,2001,InstitutionsandEconomicGrowth, Mimeo,MarshallLibrary Acemoglu,D,Johnson,SandRobinsonJ,2002,.ReversalofFortune:Geographyand InstitutionsintheMakingoftheModernWorldIncomeDistribution,.Quarterly JournalofEconomics,November. MartinRavallion,Goodandbadgrowth:Thehumandevelopmentreports, WorldDevelopment,Volume25,Issue5,May1997,Pages631638 Week2:PovertyMeasurement&ThePsychologyofPoverty Sen,A.(1983),PoorRelativelySpeaking,OxfordEconomicPapers,vol.35,pp.153 69,reprintedinResources,ValuesandDevelopment,OxfordUniversityPress (reprinted1999),pp.325345.. Deaton,A:http://www.wws.princeton.edu/~deaton/poverty.html Seecollectionofpapersonpoverty,particularly"MeasuringPoverty"July2004 (Agenerallyaccessiblenontechnicalaccountofhowpovertyismeasured) AlsobyDeaton:"CountingtheWorld'sPoor:ProblemsandPossibleSolutions"World BankResearchObserver,Fall2001,v.16,iss.2,pp.125147 Deaton,A,1997,chap3.1inTheAnalysisofHouseholdSurveys,TheWorldBankand JohnsHopkinsUniversityPress. BanerjeeandMullainathan,2009,TheShapeofTemptation:Implicationsforthe EconomicLivesofthePoor,,Mimeo(willmakeavailableatMarshall) Mullainathan,s.,2008,Developmenteconomicsthroughthelensofpsychology (availableatMarshall) Week3:PovertyTraps. Question:Inequalityisthemainreasonforthepersistenceofpoverty.Discuss.

*Ray,Chaps68. *Ray:Chap8:272279,Chap13:489504. Ray,D,WhatsNewinDevelopmentEconomics?,TheAmericanProspect Dercon,S.,2003,PovertyTrapsandDevelopment:TheEquityEfficiencyTradeOff Revisited,presentedatEUDN/AFDCconference,Paris http://www.economics.ox.ac.uk/members/stefan.dercon/poverty%20traps.pdf Dasgupta,P.andD.Ray,1986,Inequalityasadeterminantofmalnutritionand unemployment,TheEconomicJournal,96(384),10111034. Behrman,J.R.,1993,Theeconomicrationaleforinvestinginnutritionindeveloping countries,WorldDevelopment,21(11),17491771 Ravallion,M,andWodon,Q"PoorAreas,orJustPoorPeople?",JournalofRegional Science,Vol.39(4),1999,pp.689711 Week4:RiskandInsurance Question:Ruralcommunitieshavenoneedforformalinsurancemarkets;theyshare riskveryeffectivelywithoutthem.Discuss . *Ray,D,Chaps14and15 *Dasgupta,P,1994,AnInquiryintoWellBeingandDestitution,Chap. SymposiuminJournalofEconomicPerspectives,Summer1995,PapersbyTim Besley,JonathanMorduchandRobertTownsend. *Dercon,S.,2002,IncomeRisk,CopingStrategiesandSafetyNets,WorldBank ResearchObserver,December,Vol.17(2),pp.14166. Week5:Investment Question: People in poor countries invest too little because they have little informationaboutthepotentialreturnsfromsuchinvestment.Discuss. Udry,Christopher,2010,TheEconomicsofAgricultureinAfrica:NotesonaResearch Program.Forthcoming,AfricanJournalofAgriculturalandResourceEconomics

Duflo,E.,Kremer,M.&Robinson,J.,2009,NudgingFarmerstoUtilizeFertilizer: TheoryandExperimentalEvidencefromKenya,at: http://econwww.mit.edu/files/4281

Suri, T, 2008, SelectionandComparativeAdvantageinTechnologyAdoption,at: http://www.mit.edu/~tavneet/suri.pdf

ODonoghue,TedandMatthewRabin(1999).DoingitNoworDoingitLater. AmericanEconomicReview:89(1),103124.

Week6:PoliticalEconomy Collier,P.andHoeffler,A.,2007,TestingtheNeoConAgenda:Democracyin ResourceRichSocieties,availableat: http://users.ox.ac.uk/~econpco/research/politicaleconomy.htm Cabrales,A.&E.Hauk,2007."Democracyandthecurseofnaturalresources," EconomicsWorkingPaperswe075429,UniversidadCarlosIII,Departamentode Economa

Week7:Governance Besley,TimothyandAndreaPrat"HandcuffsfortheGrabbingHand?:Media CaptureandGovernmentAccountability"AndreaPrat http://econ.lse.ac.uk/staff/tbesley/papers/mediacap.pdf Besley,TimothyandRobinBurgess,(2002),"ThePoliticalEconomyofGovernment Responsiveness:TheoryandEvidence,"QuarterlyJournalofEconomics,117(4), 14151451. Brunetti,Aymo,andBeatriceWeder,[2003],"Afreepressisbadnewsfor corruption,"JournalofPublicEconomics,87(78),18011824. Week8:Migration Pritchett,L.,2006,Lettheirpeoplecome:breakingthegridlockoninternationallabor mobility,CenterforGlobalDevelopment. HarrisJ.andM.Todaro(1970).Migration,Unemployment&Development:ATwo SectorAnalysisAmericanEconomicReview,March1970;60(1):12642.