DEVELOPMENT ECONOMICS: MACROECONOMIC AND POLITICAL ECONOMIC ISSUES

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1 DEVELOPMENT ECONOMICS: MACROECONOMIC AND POLITICAL ECONOMIC ISSUES Professor: Julia Cagé Academic Year 2017/2018: Fall semester READINGS The reading list for the class is long BUT you are only required to read ONE of the required readings before each class. No more. (Even if obviously you should feel free to read more if you want to!) I selected and included many readings on this list because I want you to be free to select the topics you find the most interesting. Also because I think this may be of help for some of you in the future in case you decide to write a Master Thesis. But the requirement is: one reading before each class. COURSE OUTLINE Session 1: Introduction to Economic Development and Overview What is national income? What is GDP? Who are the developing countries? How much richer are we today than 100 years ago, and how large are the income gaps between countries? Is GDP a good measure of economic welfare? Easterly, William R. (2002): The Elusive Quest for Growth, Chapters 1 & 2. Piketty, Thomas (2014): Capital in the Twenty-First Century, Chapters 1 & 2. Jones, Charles (2015): The Facts of Economic Growth. NBER Working Paper Jones, Charles and Pete Klenow (2010): Beyond GDP? Welfare across Countries and Time, NBER Working Paper Stiglitz, Joseph, Amarty Sen and Jean-Paul Fitoussi (2009): Report by the Commission on the Measurement of Economic Performance and Social Progress, Chapter 2: Quality of Life, pp

2 Session 2: International Finance & Financial Globalization: A Few Basics The balance of payments. International financial positions. Global (in)flows to developing countries and global (out)flows from developing countries. Reinhart, Carmen and Kenneth Rogoff (2014): Serial Default and the Paradox of Rich-to-Poor Capital Flows, American Economic Review, 94(2). Alfaro, Laura, Sebnem Kalemli-Ozcan, and Vadym Volosovych (2007): Capital Flows in a Globalized World: The Role of Policies and Institutions, in Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, Sebastian Edwards, editor, pp Session 3: Development Aid and External influence How do we define Official Development Assistance? Who gives aid? Following which criteria is aid allocated? Is development aid efficient? The legitimacy crisis of development aid. Qian, Nancy (2015): Making Progress on Foreign Aid, Annual Review of Economics, Annual Reviews, 7(1): Alesina, Alberto and David Dollar (2000): Who Gives Foreign Aid to Whom and Why?, Journal of Economic Growth, 5(2): Dreher, Axel, Peter Nunnenkamp and Rainer Thiele (2008): Does US Aid Buy UN General Assembly Votes? A Disaggregated Analysis, Public Choice, 136: Galiani, Sebastian and Stephan Knack and Lixin Colin Xu and Ben Zou (2017): The Effect of Aid on Growth: Evidence from a Quasi-Experiment, Journal of Economic Growth, 22(1): Session 4: The Exchange Rates & the Hidden Wealth of Nations Exchange rates. The example of the CFA franc. The exorbitant privilege. Tax heavens and the hidden wealth of nations. The cost of tax evasion. Zuckman, Gabriel (2015): The Hidden Wealth of Nations, The Scourge of Tax Havens, University of Chicago Press. Introduction. Zuckman, Gabriel (2013): The Missing Wealth of Nations, Are Europe and the US net Debtors or Creditors?, Quarterly Journal of Economics, 128(3): Gourinchas, Pierre-Olivier and Hélène Rey (2007), From World Banker to World Venture Capitalist: U.S. External Adjustment and the Exorbitant Privilege, in Richard H. Clarida, editor, G7 Current Account Imbalances: Sustainability and Adjustment, University of Chicago Press

3 Session 5: Does History Matter? Historical Persistence and Poverty Traps How rich countries got rich and why other places are different: overview. How to explain differential paths of growth among New World economies? Poverty traps. Persistence and reversals. What factors have determined which countries prosper? Persistent factors vs. factors that can be changed with specific economic policies: overview. Diamond, Jared (1997): Guns, Germs and Steel: The Fates of Human Societies, Prologue. Diamond, Jared (2005): Collapse: How Societies Choose to Fail or Succeed, Chapter 14. Easterly, William R. (2002): The Elusive Quest for Growth, Chapter 8. Acemoglu, Daron, Simon Johnson, James A. Robinson (2001): The Colonial Origins of Comparative Development: An Empirical Investigation, American Economic Review, 91: Acemoglu, Daron, Simon Johnson, James A. Robinson (2005): The Rise of Europe: Atlantic Trade, Institutional Change and Economic Growth, American Economic Review, 95: Comin, Diego, William Easterly and Erick Gong (2010): Was the Wealth of Nations Determined in 1000 BC? American Economic Journal: Macroeconomics, 2 (3): Diamond, Jared and James A. Robinson (2010): Natural Experiments of History, Cambridge, MA: Harvard University Press. Introduction and Conclusion. Engerman, Stanley L. and Kenneth L. Sokoloff (1997): Factor Endowments, Institutions, and Differential Paths of Growth among New World Economies: A View from Economic Historians of the United States, In How Latin America Fell Behind, (ed.) Stephen Haber, Stanford: Stanford University Press, pp Michalopoulos, Stelios and Elias Pappaioannou (2011): The Long-Run Effects of the Scramble for Africa, NBER Working Paper Nunn, Nathan (2009): The Importance of History for Economic Development, Annual Review of Economics, 1(1): Session 6: Why Does History Matter? Historical Persistence: Theory and Empirical Illustrations How to explain historical persistence? Multiple equilibria and path dependence. Cultural norms of behavior. Ambrus, Attila, Erica Field and Robert Gonzalez (2017): Loss in the Time of Cholera: Long-run Impact of a Disease Epidemic on the Urban Landscape. Working Paper. Fisman, Raymond and Edward Miguel (2008): Corruption, Norms, and Legal Enforcement: Evidence from Diplomatic Parking Tickets, Journal of Political Economy, 115(6): Davis, Donald and David Weinstein (2002): Bones, Bombs, and Break Points: The Geography of Economic Activity, American Economic Review, 92(5): Ichino, Andrea and Giovanni Maggi (2000): Work Environment and Individual Background: Explaining Regional Shirking Differentials in a Large Italian Firm, Quarterly Journal of Economics, 115(3):

4 Session 7: The Role of Geography Are there country-specific characteristics that determine economic fate? Or, is prosperity just the result of luck? (Why) does geography matter? Diamond, Jared (1997): Guns, Germs and Steel: The Fates of Human Societies, Chapter 2. Easterly, William R. (2002): The Elusive Quest for Growth, Chapter 13. Acemoglu, Daron, Simon Johnson, and James Robinson (2001): Reversal of Fortunes, Quarterly Journal of Economics, 117: Session 8: The Role of Institutions The development of the State. The importance of good institutions for economic development. Inclusive vs. extractive institutions. What are the important capabilities of the State? How to measure State capacity? Acemoglu, Daron and James Robinson (2012): Why Nations Fail: The Origins of Power, Prosperity, and Poverty, Chapter 1. Besley, Timothy and Torsten Persson (2011): Pillars of Prosperity: The Political Economics of Development Clusters, Chapter 1. Easterly, William R. (2002): The Elusive Quest for Growth, Chapter 11. Besley, Timothy and Torsten Persson (2011): Pillars of Prosperity: The Political Economics of Development Clusters, Chapter 2. Session 9: Against a Europe/US-centered view of development A quick overview of the comparative development literature. An illustration: the persistence of precolonial institutions. The impact of precolonial centralization on the provision of public goods nowadays. The role of precolonial ethnic institutions in shaping comparative regional development within African countries. How to explain the persistence in precolonial institutions despite colonization? Gennaioli, Nicola and Ilia Rainer (2007): The Modern Impact of Precolonial Centralization in Africa, Journal of Economic Growth, 12(3): Osafo-Kwaako, Philip and James Robinson (2013): Political Centralization in Pre-Colonial Africa, Journal of Comparative Economics, 41(1), Pomeranz, Kenneth (2002): Political Economy and Ecology on the Eve on Industrialization: Europe, China, and the Global Conjuncture, The American Historical Review, 107(2 :

5 Cogneau, Denis and Alexander Moradi (2014): Borders That Divide: Education and Religion in Ghana and Togo Since Colonial Times, The Journal of Economic History, 74(3): Michalopoulos, Stelios and Elias Papaionnou (2013): Pre-colonial Ethnic Institutions and Contemporary African Development, Econometrica, 81(1): Session 10: Rent Seeking and Corruption Corruption and the (mis)provision of public goods. How to enhance effective and active monitoring of public goods delivery? How to fight corruption for achieving long-term sustainable and inclusive growth in developing countries? Vote-buying and reciprocity. Easterly, William R. (2002): The Elusive Quest for Growth, Chapter 12. Shleifer, Andrei and Robert W. Vishny (1993): Corruption, Quarterly Journal of Economics, 108(3): Bertrand, Marianne, Simeon Djankov and Rema Hanna and Sendhil Mullainathan (2007): Obtaining a Driving License in India: An Experimental Approach to Studying Corruption, Quarterly Journal of Economics, 122(4): Finan, Frederico and Laura A. Schechter (2012): Vote-Buying and Reciprocity, Econometrica, 80(2): Olken, Benjamin (2007): Monitoring Corruption: Evidence from a Field Experiment in Indonesia, Journal of Political Economy, 115(2): Olken, Benjamin and Rohini Pande (2012): Corruption in Developing Countries, Annual Review of Economics. Session 11: Culture & Religion The historical origins of gender norms. To what extent the higher economic prosperity of Protestant regions can be attributed to a Protestant work ethic? Did Protestant economies rather prosper because of an increase in education? Or because of the introduction of specific technologies, e.g. the printing press? How do culture and social capital affect economic development, and through what channels? What are the economic effects of trust? Barro, Robert and Rachel McCleary (2003): Religion and Economic Growth, American Sociological Review. Guiso, Luigi, Paola Sapienza, and Luigi Zingales (2012): Civic Capital as the Missing Link. In: The Handbook of Social Economics. Ed. Jess Benhabib, Alberto Bisin, Matthew O. Jackson, Elsevier, pp Alesina, Alberto, Paola Giulano and Nathan Nunn (2013): On the Origins of Gender Roles: Women and the Plough, Quarterly Journal of Economics, 182(2), Becker, Sascha and Ludger Woessman (2009): Was Weber Wrong? A Human Capital Theory of Protestant Economic History, Quarterly Journal of Economics, 124(2):

6 Cagé, Julia and Valeria Rueda (2016): The Long-Term Effects of the Printing Press in sub-saharan Africa, American Economic Journal: Applied Economics. Cantoni, Davide (2014): The Economic Effects of the Protestant Reformation: Testing the Weber Hypothesis in the German Lands, Journal of the European Economic Association, Forthcoming. Dittmar, Jeremiah (2011): Information Technology and Economic Change: The Impact of the Printing Press, Quarterly Journal of Economics, 126 (3): Guiso, Luigi, Paola Sapienza, and Luigi Zingales (2004): The Role of Social Capital in Financial Development, American Economic Review, 94(3): Guiso, Luigi, Paola Sapienza, and Luigi Zingales (2008): Long-Term Persistence, Mimeo, University of Chicago. Session 12: Media and Economic Development What is the relationship between the quality of the media, political well-being and economic development? The examples of women empowerment and HIV prevention. How did an independent and informative press emerge in sub-saharan Africa? Is an informative press a potent check on corruption? Does it enhance effective and active monitoring of public goods delivery? Is it an instrument of public accountability? The example of development aid. Cagé, Julia (2015): The Economics of the African Media. In: The Oxford Handbook of Africa and Economics. Oxford: Oxford University Press. Casey, Kate (2015): Crossing Party Lines: The Effects of Information on Redistributive Politics, American Economic Review, 105(8): Dupas, Pascaline (2011): Do Teenagers Respond to HIB Risk Information? Evidence from a Field Experiment in Kenya, American Economic Journal: Applied Economics, 3(1): Jensen, R. and Emily Oster (2009): The Power of TV: Cable Television and Women s Status in India, Quarterly Journal of Economics, 124(3): La Ferrara, Eliana, Alberto Chong, and Suzanne Duryea (2012): Soap Operas and Fertility: Evidence from Brazil, American Economic Journal: Applied Economics, 4(4): 1-3. Reinikka, Ritva, and Jakob Svensson (2004): Local Capture: Evidence from a Central Government Transfer Program in Uganda, Quarterly Journal of Economics, 119(2):