Facult des sciences sociales | Faculty of Social Sciences

Theory of Economic Development ECO 6170 A Fernanda Estevan Fall, 2010

COURSE OUTLINE
Class schedule: Monday, 8:30am-11:30am Desmarais Hall, Room 10161 (10th floor)

Professors office hours: E-mail: On virtual campus:

Monday, 2:30pm-4:30pm Desmarais Hall, Room 10123 (10th floor) festevan@uottawa.ca Yes

OFFICIAL COURSE DESCRIPTION Review of theoretical approaches in the economic development literature in relation to the historical, economic, environmental, social and political dimensions of the development process. GENERAL COURSE OBJECTIVES This is an advanced course designed for Ph.D. and Master students interested in development economics. The treatment of the material is mathematically rigorous, and presumes knowledge of calculus. Topics include: the economics of growth; the relationship between growth, poverty and inequality; the interaction between agrarian institutions in land, labour, credit, and insurance markets; education, health, and nutrition; corruption. The course will integrate theoretical ideas and empirical analysis, with an emphasis on questions relevant for economic policy. ASSESSMENT METHODS The evaluation consists of two exams, a research assignment, and the presentation of an empirical paper. Research assignment The research paper is due in three stages:

1. Research Proposal: a proposal for a paper containing: (a) a statement of research questions (1 page), (b) a brief discussion of how the question will be treated (model or empirical analysis) (1 page), and (c) a bibliography of relevant literature (no suggested page limit). 2. Research Plan: (a) an expansion of part (a) in the proposal into a serious introduction and the complete review of the literature with appropriate references. (b) if an empirical component, then a discussion of what it is that you want to estimate or test, along with a description of the data you plan to use, or the setting-up of a model and a formal translation of the research questions into the language of the model. (d) Bibliography. The main parts (a-c) should be around 8 pages. 3. Final paper: a final paper of around 15 pages that builds on stage (2). The research paper will be presented in the last lecture. Presentation of an empirical paper Some of the empirical papers indicated in the program by a will be presented by the students. The presentation will take place at the end of the last lecture covering the topic. The presentation should last no more than 15 minutes and should answer the following questions: 1. What is the main question that the empirical paper is seeking to answer? How does it relate to the theory presented in the course? 2. What are the main challenges associated to answering this question? 3. How do the methods chosen by the authors address these challenges? 4. What is the main model estimated? 5. What are the main results? 6. What are the main advantages/weakness of the methods and data employed? What else do you think could be done to address this question? Components of Final Mark Evaluation format Midterm exam Research assignment and presentation Final exam Empirical paper presentation
Policy on language quality and late submissions Class attendance is necessary to successfully complete this course. You will also be judged on your writing abilities. It is recommended to take the appropriate measures to avoid mistakes. You will be penalized in 10% of the total grade. Late submissions are not tolerated. Exceptions are made only for illness or other serious situations deemed as such by the professor. There will be a penalty for late submissions. University regulations require all absences from exams and all late submissions due to illness to be supported by a medical certificate. The Faculty reserves the right to accept or reject the reason put forth if it is not medical. Reasons such as travel, work and errors made while reading the exam schedule are not usually accepted. If you miss an exam and have a valid reason for doing so, then I will simply base your final grade on an appropriate weighting of the remaining exams. If you miss an exam without providing a valid excuse, I will give you a zero for that exam. In the event of an illness or related complications, only the counseling service and the campus clinic (located

Weight 30 % 30 % 30 % 10%

Date November 01, 2010 December 06 2010 December 08, 2010

Several dates

at 100 Marie-Curie) may issue valid certificates to justify a delay or absence. Each day of late submission results in a penalty of 5% (weekends not excluded). This also applies to assignments sent by email, and in this case, the time of receipt of the email by the recipient is guarantor of the time of delivery. We advise you to notify your professor as soon as possible if a religious holiday or event forces your absence during an evaluation.

SCHEDULE
DATE Sep 13 Sep 20 Sep 27 Oct 4 Oct 18 Oct 25 Nov 01 Nov 08 Nov 15 Nov 22 Nov 29 Dec 6 Dec 8 Exam period Agrarian Relations Education and Child Labour Education and Child Labour Health and Nutrition Corruption Presentation EP Presentation EP Final research paper due/ Presentation EP Research paper presentation COURSE Introduction Economic Growth Inequality and Development Inequality and Development Credit and Insurance Markets Credit and Insurance Markets Presentation EP Midterm Exam Research Plan due/ Presentation EP Research Proposal due/ Presentation EP OTHERS

BIBLIOGRAPHY Most of the course will be based on the journal articles mentioned below. Two useful reference books are: Ray, D. (1998). Development Economics. Princeton University Press (available in the library reserve) and Bardhan, P.K. and Udry, C. (1999). Development Microeconomics, Oxford University Press (available online in UOttawa librarys website). All the articles mentioned below can be accessed via Web Link on Virtual Campus, if you are connected to the UOttawa domain. The starred (*) readings are required. Some of the papers indicated by will be presented by the students. Economic Growth

Banerjee, A. V. and Duflo, E. (2005). Growth theory through the lens of development economics. In Aghion, P. and Durlauf, S., editors, Handbook of Economic Growth, pages 473552. Elsevier. (pages 1-22) *Barro, R. J. and Sala-i-Martin, X. (2003). Economic Growth, chapter 1. The MIT Press, 2nd ed. (pages 23-56) *Lucas, R. (1990). Why doesnt capital flow from rich to poor countries? American Economic Review, 80(2): 92-96. *Mankiw, N. G., Romer, D., and Weil, D. N. (1992). A contribution to the empirics of economic growth. The Quaterly Journal of Economics,107(2):407437. *Pritchett, L. (1997). Divergence, big time. The Journal of Economic Perspectives, 11(3):317. Inequality and Development

Banerjee, A. V. and Duflo, E. (2003). Inequality and growth: What can the data say? Journal of Economic Growth, 8(3):267299. (pages 267-268; 276-281) *Banerjee, A. V. and Newman, A. F. (1993). Occupational choice and the process of development. Journal of Political Economy, 101(2):274298. *Galor, O. and Zeira, J. (1993). Income distribution and macroeconomics. The Review of Economic Studies, 60(1):3552. (pages 35-48) Credit and Insurance Markets

Banerjee, A. V. and Duflo, E. (2008). Do firms want to borrow more? Testing credit constraints using a directed lending program. Working Paper. *Ghosh, P., Mookherjee, D., and Ray, D. (2001). Credit rationing in developing countries: An overview of the theory. In Mookherjee, D. and Ray, D.,editors, Readings in the theory of economic development, pages 383401. Blackwell. (pages 1-12) Morduch, J. (1999). The microfinance promise. Journal of Economic Literature, 37(4):15691614. *Stiglitz, J. E. and Weiss, A. (1981). Credit rationing in markets with imperfect information. The American Economic Review, 71(3):393410. (pages 393-397) Karlan, D. and Zinman, J. (2009). Observing unobservables: Identifying information asymmetries with a consumer credit field experiment. Econometrica, 77(6): 1993-2008. Udry, C. (1994). Risk and insurance in a rural credit market: An empirical investigation in northern Nigeria. The Review of Economic Studies, 61(3):495526. Agrarian Relations

Eswaran, M. and Kotwal, A. (1985a). A theory of contractual structure in agriculture. The American Economic Review, 75(3):352367. Eswaran, M. and Kotwal, A. (1985b). A theory of two-tier labour markets in agrarian economies. The American Economic Review, 75(1):162177. Shaban, R. A. (1987). Testing between competing models of sharecropping. Journal of Political Economy, 95(5):893920. *Singh, N. (1991). Theories of sharecropping. In Bardhan, P., editor, The Economic Theory of Agrarian Institutions, pages 3372. Oxford University Press. Education and Child Labor

*Baland, J. M. and Robinson, J. A. (2000). Is child labor inefficient. Journal of Political Economy, 108(4):663679. *Basu, K. and Van, P. H. (1998). The economics of child labor. The American Economic Review, 88(3):412427. Duflo, E. (2001). Schooling and labor market consequences of school construction in indonesia: Evidence from an unusual policy experiment. The American Economic Review, 91(4):795813. Edmonds, E. V. (2006). Child labor and schooling responses to anticipated income in South Africa. Journal of Development Economics, 81(2):386414. Glewwe, P. (2002). Schools and skills in developing countries: Education policies and socioeconomic outcomes. Journal of Economic Literature, 40(2):436482. Orazem, P. and King, E. M. (2007). Schooling in development countries: The roles of supply, demand and government policy. In Schultz, T. and Strauss, J., editors, Handbook of Development Economics, 4, pages 34753559. Elsevier. Schultz, T. P. (2004). School subsidies for the poor: evaluating the Mexican Progresa poverty program. Journal of Development Economics, 74(1):199250.

Health and Nutrition

Acemoglu, D. and Johnson, S. (2007). Disease and development: The effect of life expectancy on economic growth. Journal of Political Economy,115(6):925985. *Dasgupta, P. and Ray, D. (1986). Inequality as a determinant of malnutrition and unemployment theory. The Economic Journal, 96(384):10111034. Field, E., Robles, O., and Torero, M. (2009). Iodine deficiency and schooling attainment in Tanzania. American Economic Journal Applied Economics, 1(4):140-169. Miguel, E. and Kremer, M. (2004). Worms: Identifying impacts on education and health in the presence of treatment externalities. Econometrica, 72(1):159217. Srinivasan, T. N. (1994). Destitution: A discourse. Journal of Economic Literature, 32(4):18421855. *Strauss, J. and Thomas, D. (1998). Health, nutrition, and economic development. Journal of Economic Literature, 36(2):766817. Subramanian, S. and Deaton, A. (1996). The demand for food and calories. Journal of Political Economy, 104(1):133162. Corruption

*Besley, T. Political agency and accountability. In Principled Agents? The Political Economy of Good Government, chapter 3. Oxford: Oxford University Press *Besley, T. and Burgess, R. (2002). The Political Economy of Government Responsiveness: Theory and Evidence from India. Quarterly Journal of Economics, 117(4):1415-1451. Ferraz, C. and Finan, F. (2007). Exposing Corrupt Politicians: The Effect of Brazils Publicly Released Audits on Electoral Outcomes. Quarterly Journal of Economics, 123(2):703-745. Fisman, Raymond. (2001). Estimating the Value of Political Connections. American Economic Review, 91(4), 1095-1102. Mauro, P. (1995). Corruption and Growth. Quarterly Journal of Economics, 110(3): 681-712. Olken, B. (2007). Monitoring Corruption: Evidence from a Field Experiment in Indonesia. Journal of Political Economy, 115(2): 200-249. Reinikka, R. and Svensson, J. (2004), Local Capture: Evidence from a Central Government Transfer Program in Uganda. Quarterly Journal of Economics, 119(2): 679-705. Svensson, J. (2005). Eight Questions about Corruption. Journal of Economic Perspectives,19(3): 1942.
Beware of Academic Fraud! Academic fraud is an act committed by a student to distort the marking of assignments, tests, examinations, and other forms of academic evaluation. Academic fraud is neither accepted nor tolerated by the University. Anyone found guilty of academic fraud is liable to severe academic sanctions. Here are a few examples of academic fraud: engaging in any form of plagiarism or cheating; presenting falsified research data; handing in an assignment that was not authored, in whole or in part, by the student; submitting the same assignment in more than one course, without the written consent of the professors concerned. In recent years, the development of the Internet has made it much easier to identify academic plagiarism. The tools available to your professors allow them to trace the exact origin of a text on the Web, using just a few words. In cases where students are unsure whether they are at fault, it is their responsibility to consult the Universitys Web site at the following address: http://www.socialsciences.uottawa.ca/eng/writing_tools.asp Tools for Writing Papers and Assignments .

Persons who have committed or attempted to commit (or have been accomplices to) academic fraud will be penalized. Here are some examples of the academic sanctions, which can be imposed: a grade of F for the assignment or course in question; an additional program requirement of between 3 and 30 credits; suspension or expulsion from the Faculty. Last session, most of the students found guilty of fraud were given an F for the course and had between three and twelve credits added to their program requirement. For more information, refer to: http://www.uottawa.ca/academic/info/newsletter/fraud_e.html

Resources for you Mentoring Centre - http://www.sciencessociales.uottawa.ca/mentor/fra/ The goal of the Mentoring Centre is to help students with their academic and social well being during their time at the University of Ottawa. Regardless of where a student stands academically, or how far along they are in completing their degree, the mentoring centre is there to help students continue on their path to success. A student may choose to visit the mentoring centre for very different reasons. Younger students may wish to talk to their older peers to gain insight into programs and services offered by the University, while older student may simply want to brush up on study and time management skills or learn about programs and services for students nearing the end of their degree. In all, the Mentoring Centre offers a place for students to talk about concerns and problems that they might have in any facet of their lives. While students are able to voice their concerns and problems without fear of judgment, mentors can garner further insight in issues unique to students and find a more practical solution to better improve the services that the Faculty of Social Sciences offers, as well as the services offered by the University of Ottawa. Academic Writing Help Centre - http://www.sass.uottawa.ca/writing/ At the AWHC you will learn how to identify, correct and ultimately avoid errors in your writing and become an autonomous writer. In working with our Writing Advisors, you will be able to acquire the abilities, strategies and writing tools that will enable you to: Master the written language of your choice Expand your critical thinking abilities Develop your argumentation skills Learn what the expectations are for academic writing Career Services - http://www.sass.uottawa.ca/careers/ Career Services offers various services and a career development program to enable you to recognize and enhance the employability skills you need in today's world of work. Counselling Service- http://www.sass.uottawa.ca/personal/ There are many reasons to take advantage of the Counselling Service. We offer: Personal counselling Career counselling Study skills counselling Access Service - http://www.sass.uottawa.ca/acces/ The Access Service contributes to the creation of an inclusive environment by developing strategies and implementing measures that aim to reduce the barriers to learning for students who have learning disabilities, health, psychiatric or physical conditions. Student Resources Centres - http://www.communitylife.uottawa.ca/en/resources.php The Student Resources Centres aim to fulfill all sorts of students needs.