ECONOMIC DEVELOPMENT

Transcription

1 Economic Development Dr. Robert A. Blewett Economics/African Studies 336 Hepburn 217 MW 1:40 to 3:10 p.m. in Hepburn 113 Fall ECONOMIC DEVELOPMENT The Purpose of the Course. This is an upper-division economics seminar examining the problems of economic growth and development in the less developed countries (LDC's) of Asia, Africa and Latin America. Although a variety of approaches to development economics will be studied, the analysis of new institutionalist economics will be emphasized. By the end of the semester, participants should be able to understand: (1) the economic diversity, as well as the diversity of development problems, among LDC's; (2) the conditions necessary or conducive to economic growth and the institutional hindrances to growth; (3) the economic implications of alternative development strategies and policies. Prerequisites. ECON 251, 252, and either ECON 200 or MATH 113 or by permission. Required Books Paul Collier. The Bottom Billion: Why the Poorest Countries Are Failing and What Can Be Done About It. Oxford University Press, 2007 William Easterly. The Elusive Quest for Growth: Economists Adventures and Misadventures in the Tropics. The MIT Press, Dean Karlan and Jacob Appel. More Than Good Intentions: Improving the Ways the World s Poor Borrow, Save, Farm, Learn, and Stay Healthy. Plume, Theodore H. Moran. Harnessing Foreign Direct Investment for Development: Policies for Developed and Developing Countries. Center for Global Development, 2006 (available in pdf format on Sakai). Dani Rodrik. One Economics, Many Recipes: Globalization, Institutions, and Economic Growth. Princeton University Press, Giorgio Secondi, Editor. The Development Economics Reader. Routledge, Office Hours. Posted office hours are Mondays and Wednesdays 3:15 to 4:00 p.m. I am usually around afternoons on Tuesdays and Thursdays as well as Fridays. However, it is a very bad time to visit me before our class meets. Otherwise, please feel free to stop by for help, advice, or just to talk. If I am out, please leave your phone number or an address and I will try to contact you. Evaluation. The final course grade will be based upon the following: Class Participation 10% Response Papers/Presentations 10% Assigned Papers 30% Test Essays 50% Tentative Course Schedule First Day of Class ~ Wednesday 29 August Last Day Add/Drop ~ Thursday 6 September Test #1 ~ Monday 1 October Mid-Semester Break ~ 11 to 14 October Test #2 ~ Monday 5 November Thanksgiving Break ~ 17 to 25 November Last Day of Class ~ Wednesday 12 December Test #3 ~ Monday 17 December at 1:30 p.m.

2 Course Policies: Students are responsible for course assignments and announcements posted on Sakai ( for this course, as well as messages sent to their campus addresses. Announcements should be checked, at a minimum, the day before class meets. The success of the course will depend heavily upon the contributions of each student. Students are expected to come to class prepared and willing to contribute to the class discussion. Hence, evaluation of student participation will determine 10 percent of the course grade. Of course class attendance is necessary for participation. Response papers and short presentations on course materials will be frequently assigned and count toward another 10 percent of the course grade.. Assigned papers, with variable credit, account for 30 percent of the final course grade. These may be relatively short (three-to-five pages) or longer (five-to-ten pages). Three tests will be given during the semester. Each test will consist of two essay questions selected from study questions previously handed out. Each essay will be graded separately. The best four of these six essays determine 50 percent of your final course grade, with the exception that at least one of the graded test essays from Test #3 will be used in the determination of the final course grade. There will be no late tests given. If a student misses a test, for any reason whatsoever, the questions on that test will be among the questions dropped. However, a student may arrange to take a test early. Test #3 will be held during the finals week on Monday 17 December at 1:30 p.m. Tentative Course Outline A. Introduction: The Economic Facts of Life. 1. What is Economic Growth? 2. What is Economic Development? 3. Indicators of Development. 4. Historical Background. 5. Global Poverty. B. Why Are Most Nations Poor and a Few Rich? 1. Noncontroversial Theory: Investment, Savings and Capital Flows. 2. Macroeconomics of Growth: 19th Century Theories. 3. Macroeconomics of Growth: Late 20th Century Theories. 4. Neo-Classical Growth Theory Extensions 5. New Growth Theory. 6. Population and Growth. 7. Education and Growth. C. FDI, Capital Flows and Globalization. 1. The Theory of Comparative Advantage. 2. Globalization and New Growth Theory. 3. Clusters, Value Chains, MFNs. 4. Do FDI Flows Help or Hinder Growth? D. Poverty Traps 1. Types of Traps. 2. Conflict and Trap. 3. Landlocked Country Trap. 4. Resource Trap & Extractive Industries. 5. Corruption and Bad Governance Trap. 6. Foreign Aid Debate E. Applied Microeconomics: The Problem of Missing Markets. 1. The Economics of Contracts. 2. Middlemen Networks. 3. The Informal Sector. 4. Financial Sector Development. 5. Microfinance 6. Randomized Control Trials F. New Institutional Economics 1. Eastern Europe in the 1990s 2. Problems with Growth Theory. 3. Diagnostics and Strategies. 4. Role of Institutions 5. Globalization and Marginalization. 6. Comparing Authors G. Exporting the China Model 1. The Shenzhen and Other China Models. 2. Charter Cities. 3. China in Africa.

3 Economic Development Economics/African Studies 336 Fall 2012 TENTATIVE OUTLINE & READINGS [Updated August 28, 2012] A. INTRODUCTION: THE ECONOMIC FACTS OF LIFE. 1. What is Economic Growth? A cartoon from The New Yorker. EASTERLY, Preface & Prologue (pp. x-xiii) EASTERLY, Ch. 1, To Help the Poor (pp. 5-19). READER, Ch. 5, Beyond Classical and Keynesian Macroeconomic Policy (Paul M. Romer, pp ). 2. What is Economic Development? READER, Ch. 1, New Directions in Development Thinking (World Bank, pp. 9-28). "Growth is Good" The Economist, 27 May 2000 (2p.). 3. Indicators of Development. READER, Ch. 2, The Human Development Paradigm ( Mahbub ul Haq, pp ). Optional: UNDP, "Technical note 1: Calculating the Human Development Index," Human Development Report 2010, pp Optional: UNDP, Calculating the Human Development Indices (2008, converted PowerPoint file) hdr.undp.org/en/media/hdr_ _tech_note_1.pdf READER, Ch. 3, Perspectives on the Economic Development of India and China (Amartya Sen, pp ). 4. Historical Background. Optional Video: Hans Rosling, New insights on poverty and life around the world (TED Talks, June 26, 2007), Optional: Gapminder, Human Development Trends 2005, Optional: The Gapminder World is available for download: Global Poverty "Economic Focus: Another day, Another $1.08" The Economist, 26 April 2007 (1p.). New Data Show 1.4 Billion Live On Less Than US$1.25 A Day," World Bank (26 August 2008), ~theSitePK:4607,00.html. Xavier Sala-i-Martin, "Falling Poverty and Income Inequality: A Global Phenomenon" The Frazer Institute (October 2006), 7p. Optional: Dollar Street is available for download: B. WHY ARE MOST NATIONS POOR AND A FEW RICH? 1. Noncontroversial Theory: Investment, Savings and Capital Flows. Wikipedia, Balance of Payments, 2. Macroeconomics of Growth: 19th Century Theories. EASTERLY, Ch. 2, "Aid for Investment" (pp ) William Easterly, "The Ghost of Financing Gap: How the Harrod-Domar Model Still Haunts Development Practices" (1999). 3. Macroeconomics of Growth: Late 20th Century Theories Charles I. Jones, "Ch. 5: The Solow Growth Model in Macroeconomics (W.W. Norton, 2008), pp EASTERLY, Ch. 3, "Solow's Surprise" (pp ). 4. Neo-Classical Growth Theory Extensions. Lant Pritchet, "Forget Convergence " Finance & Development 33 (June 1996): READER, Ch. 9, Institutions Matter, But Not for Everything: The Role of Geography and Resource Endowments in Development Shouldn't Be Underestimated (Jeffrey D. Sachs, pp ). Ricardo Hausmann, "Prisoners of Geography," Foreign Policy 122 (January/February 2001): READER, Ch. 10, Democracy and Growth (Robert J. Barro. pp ). READER, Ch. 11, The Mystery of Capital (Hernando de Soto, pp ).

4 TENTATIVE OUTLINE & READINGS Economic Development ECON/AFS 336 Fall 2012 Page 2 of 4 5. New Growth Theory. Charles I. Jones, "Ch. 6: Growth and Ideas" in Macroeconomics (W.W. Norton, 2008), pp EASTERLY, review the limitations of the Solow Model (pp ). Prepare for class by downloading Talking Points: Easterly Chapters 8 & 9. EASTERLY, Ch. 8, "Tales of Increasing Returns" (pp ). EASTERLY, Ch. 9, "Creative Destruction" (pp ). 6. Education and Growth EASTERLY, Ch. 4, "Educated for What?" (pp.71-86) READER, Ch. 23, The Learning Deficit (The Economist, pp ). READER, Ch. 24 The Ten-Cent Solution (Clive Crook, pp ). READER, Ch. 25, A World of Opportunity (The Economist, pp ). 7. Population and Growth View the video: MARAGOLI (1976, 58 min) READER, Ch. 18 "Fanisi's Choice"(John Tierney, pp. 232) A follow-up to the Maragoli video. READER, Ch. 19 The Ultimate Resource (Julian L. Simon, pp ). EASTERLY, Ch. 5, "Cash for Condoms" (pp ). C. FDI, CAPITAL FLOWS AND GLOBALIZATION. 1. The Theory of Comparative Advantage. P.J. O'Rourke, "On Comparative Advantage" excerpt from Eat the Rich (New York: Atlantic Monthly Press, 1998), pp Globalization and New Growth Theory READER, Ch. 37, Why Trade Liberalisation Is Good for Growth (Anne O. Krueger, pp ). Matt Ridley, "Why Some Islanders Build Better Crab Traps" Wall Street Journal, 2 October 2010, p. C4. "Bananas: Expelled from Eden" The Economist, 18 December 1997 (4p). Optional: Katrina Alexandraki, "Preference Erosion: Cause for Alarm?" Finance & Development 42 (March 2005): Clusters, Value Chains, MFN s Michael E. Porter, "Clusters and the New Economics of Competition" Harvard Business Review (Nov/Dec 1998), pp Joan Magretta, "Fast, Global, and Entrepreneurial: Supply Chain Management Hong Kong Style, an Interview with Victor Fung, " Harvard Business Review (September/October 1998), pp Bruce Kogut, "International business: The new bottom line" Foreign Policy (Spring 1998), pp Do FDI Flows Help or Hinder Growth? MORAN, Introduction (pp. 1-5). MORAN, Ch. 1, Using Globalization to Improve the Development of Host Countries (pp. 6-44). MORAN, Ch. 2, Enhancing the Ability of Poor Countries to Attract and Harness FDI for Development (pp ). MORAN, Ch. 5, Improving Efforts to Support Developing Country Growth through FDI (pp ). MORAN, Ch. 6, Conclusions and Policy Implications (pp ). D. POVERTY TRAPS 1. Types of Traps. COLLIER, The Preface (pp. ix-xiii). COLLIER, Ch. 1, Falling Behind and Falling Apart (pp.1-13). 2. Conflict Trap COLLIER, Ch. 2, The Conflict Trap (pp ). Jeffrey Gettleman, "Africa's Forever Wars: Why the continent's conflicts never end" Foreign Policy (March/April 2010), 7p.

5 TENTATIVE OUTLINE & READINGS Economic Development ECON/AFS 336 Fall 2012 Page 3 of 4 3. Resource Trap & Extractive Industries "The Curse of Oil: The Paradox of Plenty" The Economist, 20 December 2005, 4p. COLLIER, Ch. 3, "The Natural Resource Trap" (pp ). MORAN, Ch. 3, FDI in Extractive Industries and Infrastructure (23p). 4. Landlocked Country Trap COLLIER, Ch. 4, "Landlocked with Bad Neighbors" (pp ). 5. Corruption and Bad Governance as a Trap. COLLIER, Ch. 5, "Bad Governance in a Small Country" (pp ). EASTERLY, Ch. 11, Governments Can Kill Growth (pp ). EASTERLY, Ch. 12, Corruption and Growth (pp ). EASTERLY, Ch. 13, Polarized Peoples (pp ). 6. The Foreign Aid Debate COLLIER, Ch. 7, "Aid to the Rescue" (pp ). John B. Taylor, "Chapter 5: Accountability at the World Bank and Beyond" Global Financial Warriors (W.W. Norton, 2007), pp [His memoir of serving as Undersecretary of State for International Affairs.] READER, Ch. 46, Upstairs, Downstairs (Jeffrey Sachs, pp ). READER, Ch. 48, Can Extreme Poverty Be Eliminated? (Jeffrey D. Sachs, pp ). EASTERLY, Ch. 6, "Loans That Were, the Growth That Wasn't" (pp ). EASTERLY, Ch. 7, "Forgive Us Our Debts" (pp ). "The Millennium Development Goals: Global Targets, Local Ingenuity" The Economist, 25 September 2010, 3p. E. APPLIED MICROECONOMICS: THE MISSING MARKETS PROBLEM. 1. The Economics of Financial and Insurance Contracts. Joost de Laat, "Financial Development and Economic Growth," Chapter 2 in Microfinance Institutions (St. Lawrence U., unpublished honors thesis, 1998). 11p. Joost de Laat, "Why Credit Markets Fail the Poor," Chapter 3 in Microfinance Institutions (St. Lawrence U., unpublished honors thesis, 1998), 8p. 2. Middlemen Networks Marcel Fafchamps, Networks, Communities, and Markets in Sub-Saharan Africa: Implications for Firm Growth and Investment, Journal of African Economies, 10 (2001, supplement): The Informal Sector. Emily Chamlee-Wright, Savings and Accumulation Strategies of Urban Market Women in Harare, Zimbabwe Economic Development and Cultural Change 50 (4, 2002): Lisa Daniels, Factors that influence the expansion of the microenterprise sector: results from three national s.surveys in Zimbabwe, Journal of International Development 15(2003): Financial Sector Development. READER, Ch. 33, Unleashing India's Potential: The Key Is to Modernize the Financial System (Diana Farrell & Susan Lund, pp ). READER, Ch. 36, The Hidden Wealth of the Poor (The Economist, pp ). 5. Microfinance READER, Ch. 34, Banker to the Poor (Muhammad Yunus, pp ). READER, Ch. 35, Small Change: Bank That Pioneered Loans for the Poor Hits Repayment Snag (Daniel Pearl & Michael M. Phillips, pp ). Solomon Moore, Using Small Loans to Generate Big Profits Wall Street Journal, Monday 23 July 2012, p.c1. Optional: David Roodman's Microfinance Open Book Blog Center for Global Development,

6 TENTATIVE OUTLINE & READINGS Economic Development ECON/AFS 336 Fall 2012 Page 4 of 4 F. NEW INSTITUTIONAL ECONOMICS: A 21 ST CENTURY APPROACH 1. Problems with Growth Theory. READER, Ch. 12, Why the Middle East Is Economically Underdeveloped: Historical Mechanisms of Institutional Stagnation (Kuran, pp ). RODRIK, Ch. 1, Fifty Years of Growth (pp ). 2. Diagnostics and Strategies. RODRIK, Ch. 2, Growth Diagnostics (pp ). RODRIK, Ch. 3, Synthesis: A Practical Approach to Growth Strategies (pp ). 3. Role of Institutions RODRIK, Ch. 4, Industrial Policy for the Twenty-first Century (pp ). RODRIK, Ch. 5, Institutions for High-Quality Growth (pp ). 4. Globalization and Marginalization. COLLIER, Ch. 6, On Missing the Boat (pp ). RODRIK, Ch. 8, The Global Governance of Trade As If Development Mattered (pp ). RODRIK, Ch. 9, Globalization for Whom? (pp ). COLLIER, Ch. 10, Trade Policy for Reversing Marginalization (pp ). 5. Comparing Our Authors. EASTERLY, Ch. 14, Conclusion (pp ). COLLIER, Ch. 11, An Agenda for Action (pp ). COLLIER, Postscript (pp ). RODRIK, Ch. 6, Getting Institutions Right (pp ). G. EXPORTING THE CHINA MODEL 1. The Shenzhen and Other China Models. Liu Kaiming, Chapter 2: The Shenzhen miracle Chinese Economy 40 (3) (May 2007): Yasheng Huang, Rethinking the Beijing consensus, Asia Policy 11 (January 2011): Charter Cities. Charter Cities, "Charter cities: concept," Paul Romer, "Technologies, rules, and progress: The case for charter cities," Center for Global Development Essay (March 2010), Washington, DC: Center for Global Development, 13p. Optional: Charter Cities website and blog, Charter Cities, Optional Video: Paul Romer's radical idea: Charter cities (TEDGlobal, July 2009) Optional Video: "Paul Romer: The world's first charter city?" (TED2011, March 2011), 3. China in Africa. Ronald I. McKinnon, Review: China in Africa: The Washington consensus versus the Beijing consensus, International Finance 13 (3) (Winter 2010): Deborah Brautigam & Tang Xiaoying, "African Shenzhen: China s special economic zones in Africa" J. of Modern African Studies, 49 (2011): Optional: R.A. Blewett, Contrasting the China Model with the China Miracle: Are Charter Cities China s Growth Legacy? (2011). Optional: Africa in China (Deborah Brautigam s blog),