Introduction The primary goal of this class is to provide an introduction to the microeconomics of development. Given the broadness of the field, this class is not intended to be comprehensive, but rather to provide in depth analysis of frontier research in specific topics. Throughout the class, we will provide theoretical frameworks of analysis and focus on different empirical applications. The first part of the class will focus of the institutional and political economics of development from a microeconomic perspective, discussing topics such as corruption, patronage, distortions from voter s preferences, and civil conflict. In the second part, we will discuss key issues of development, such as the limits to the accumulation of human capital, labor markets and migration, the environment and development, entrepeneurship and firm growth, among others. The course will also cover a number of key methodological issues that are essential to study such topics empirically, including in the context of Randomized Controlled Trials. Please note that we will focus on micro topics. Of course there are also many important macro aspects of development economics, such as growth, institutions and trade. The reading list is intentionally long, to give those of you interested in the field an opportunity to dig deeper into some of the topics in this area. The lectures will cover the material with * s in detail and also discuss the material without * s, but in less detail. You are expected to carefully read all the papers marked with an *. Reference Textbooks and Related Material Books: Abhijit Banerjee and Esther Duflo (2011) Poor Economics,. Public Affairs, NY Imbens, Guido and Jeff Wooldridge (2008) Recent Developments in the Econometrics of Program Evaluation, NBER Working paper #14251. Banerjee A. and E. Duflo (2009). The Experimental Approach to Development Economics, Annual Review of Economics 1(1), 151-178. Handbook of Development Economics: Pretty much all chapters in Volumes I, III (A and B) and IV. Elsevier. Ray, Debraj (1998) Development economics, Princeton University Press. Bardhan, Pranab and Christopher Udry. (2000). Development Microeconomics. Oxford University Press: New York. Deaton, Angus. (1997). The Analysis of Household Surveys: A Microeconometric Approach to Development Policy. Johns Hopkins University Press: Baltimore, Maryland. Topics in Applied
Duflo, Esther, Rachel Glennerster, and Michael Kremer. (2006). Using Randomization in Development Economics Research: A Toolkit, NBER Technical Working Paper #333 [http://www.nber.org/papers/t0333] Current debates in development economics: Refer to the Boston Review for recent public debates on development policy: Banerjee, Abhijit. (2006). Making Aid Work: How to Fight Global Poverty Effectively, Boston Review, July/August 2006. [http://bostonreview.net/br31.4/contents.php] Bardhan, Pranab. (2008). What Makes a Miracle: Some myths about the rise of China and India, Boston Review, January/February 2008. [http://www.bostonreview.net/br33.1/bardhan.php] Miguel, Edward (2008). Is it Africa s Turn? Progress in the World s Poorest Region, Boston Review, May/June 2008. [http://bostonreview.net/br33.3/ndf_africa.php] The following books are some of the more influential ones in the field of economic development. Esther Duflo and Abhijit Banerjee, Growth Theory Through the Lens of Development Economics William Easterly (2001). The Elusive Quest for Economic Growth: Economists Adventures and Misadventures in the Tropics. William Easterly (2006). The White Man s Burden: Why the West s Efforts to Aid the Rest Have Done So Much Ill, and So Little Good. Paul Collier (2007). The Bottom Billion. Jeffrey Sachs (2006). The End of Poverty: Economic Possibilities for Our Time. Mullainathan, Sendhil and Eldar Shcafir (2013) Scarcity: Why having too little Mean so Much Several blogs feature frequent discussions of new development working papers: http://blogs.worldbank.org/impactevaluations/ http://blogs.cgdev.org/globaldevelopment/ http://blogs.cgdev.org/globalhealth/ http://africacan.worldbank.org/ http://psdblog.worldbank.org/psdblog/ http://chrisblattman.com/ Topics in Applied
http://karengrepin.blogspot.com/ http://www.owen.org/ http://sahelblog.wordpress.com/ http://marcfbellemare.com/wordpress/ Lectures We have two lectures a week. Being punctual is not only going to be greatly appreciated but will also be enforced using the good old method of public shaming. The starred papers are required readings, and we will cover all of them in varying degrees of detail. In contrast, you are not expected to read the non-starred references, although we will sometimes discuss specific findings from these studies in class, and you are expected to know what we discuss in class. But these additional papers are only for your information in case you are interested in studying specific topics in more depth. Even so, countless more references could be added so if you wish to know about additional sources for your own enjoyment or professional/research agenda just let me know. Part I: Institutional and Political Foundations of Development: Lecture 1: Voter Preferences and Distortions: Citizen-candidates, identity and policy outcomes * Chattopadhyay, Raghabendra and Esther Duflo (2004). Women as Policy Makers: Evidence from a Randomized Policy Experiment in India, Econometrica, 72(5), 1409-1443. *Pande, Rohini (2003). Can Mandated Political Representation Increase Policy Influence for Disadvantaged Minorities? Theory and Evidence from India, American Economic Review, 93(4), 1132-1151. Beaman, Lori, Raghabendra Chattopadhyay, Esther Duflo, Rohini Pande and Petia Topalova (2009) "Powerful Women: Does Exposure Reduce Bias?" Quarterly Journal of Economics, Vol. 124(4): 1497-1540 Banerjee, Abhijit V. and Rohini Pande (2011) Parochial Politics: Ethnic Preferences and Politician Corruption WP, Harvard University. [http://www.hks.harvard.edu/fs/rpande/papers/parochial_politics.pdf] Lecture 2: Voter Preferences and Distortions: Patronage politics * Hsieh, Chang-Tai, Edward Miguel, Daniel Ortega, and Francisco Rodriguez. (2011). The Price of Political Opposition: Evidence from Venezuela s Maisanta, American Economic Journal: Applied Economics, Vol. 3(2), 196-214. Topics in Applied
*Manacorda, Marco, Edward Miguel, and Andrea Vigorito. (2011). Government Transfers and Political Support, American Economic Journal: Applied Economics, Vol. 3(3): 1:28. *Leonard Wantchekon and Thomas Fujiwara (2014). Can Informed Public Deliberation Overcome Clientelism? Experimental Evidence from Benin. American Economic Journal: Applied Economics, forthcoming. Dixit A. and J. Londregan (1996), The Determinants of Success of Special Interests in Redistributive Politics, Journal of Politics, Vol. 58 (4): 1132-1155. Robinson, James A. (1998) Theories of Bad Policies, Journal of Policy Reform, Vol. 1, 1-45. Wantchekon, Leonard (2003), "Clientelism and Voting Behavior: Evidence from a Field Experiment in Benin", World Politics, Vol. 55: 399-422. Lecture 3: Political Connections and Rents * Fisman, Ray (2001). Estimating the Value of Political Connections, American Economic Review, 91: 1095-1102. * Khwaja, Asim, and Atif Mian. (2005). Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market, Quarterly Journal of Economics, 120(4). * Sukhtankar, Sandip (2012). Sweetening the Deal? Political Connections and Sugar Mills in India, American Economic Journal: Applied Economics, Vol. 4(3): 43 63 Dube, Arin, Ethan Kaplan, and Suresh Naidu (2011). Coups, Corporations, and Classified Information, Quarterly Journal of Economics, Vol. 126(3): 1375-1409. Shleifer, Andrei and Robert Vishny (1994). Politicians and Firms, Quarterly Journal of Economics, Vol. 109(4): 995-1025. Lecture 4: Political Corruption * Olken, Ben. (2007). Monitoring Corruption: Evidence from a Field Experiment in Indonesia, Journal of Political Economy, Vol. 115(2): 200-249. * Reinikka, Ritva, and Jakob Svensson. (2004). Local Capture: Evidence from a Central Government Transfer Program in Uganda, Quarterly Journal of Economics, Vol. 119 (2). Becker, Gary and Stigler, George (1974), "Law Enforcement, Malfeasance, and Compensation of Enforcers," Journal of Legal Studies, Vol. 3(1): 1-18. Bardhan, Pranab (1997). Corruption and Development: A Review of Issues, Journal of Economic Literature, Vol. 35(3): 1320-1346 Topics in Applied
Svennson, Jacob (2003). Eight Questions about Corruption, Journal of Economic Perspectives, Vol. 19(3): 19 42. Olken, Benjamin A. and Rohini Pande (2011). Corruption in Developing Countries, NBER Working Paper No. 17398 Bertrand, Marianne, Djankov, Simeon, Hanna, Rema and Mullainathan, Sendhil (2007) "Obtaining a Driver s License in India: An Experimental Approach to Studying Corruption," Quarterly Journal of Economics, Vol 122 (4) 1l639-1676. Mauro, Paulo (1995), "Corruption and Growth," Quarterly Journal of Economics, Vol 110 (30): 681-712. Shleifer, Andrei and Vishny, Robert (1993).Corruption,.Quarterly Journal of Economics, 108 (3) 599-617. Banerjee, Abhijit (1997). A Theory of Misgovernance. Quarterly Journal of Economics,112, 1289-1332. Banerjee, Abhijit, Rema Hanna, and Sendhil Mullainathan (2009), "Corruption." mimeo, Harvard. Lecture 5: Civil Conflict *Blattman, Christopher and Edward Miguel (2010). Civil War, Journal of Economic Literature, 48(1): 3-57. *Besley, Timothy and Torsten Persson (2010) State Capacity, Conflict and Development, Econometrica, 78, 1-34. *Dube, Oeindrila and Juan Vargas (2011) Commodity Price Shocks and Civil Conflict: Evidence from Colombia. Review of Economic Studies Davis, Donald R., and David Weinstein. (2002). Bones, Bombs, and Breakpoints: The Geography of Economic Activity, American Economic Review, 92(5). Miguel, Edward, Shanker Satyanath, and Ernest Sergenti. (2004). Economic Shocks and Civil Conflict: An Instrumental Variables Approach, Journal of Political Economy, 112(4), 725-753. [Read also the critique by Ciccone et al and the response by Miguel et al] Chassang, Sylvain, and Gerard Padro-i-Miquel. (2007). Mutual Fear and Civil War, unpublished working paper. Grossman, Herschell I. (1991). A General Equilibrium Model of Insurrections, American Economic Review, 81(4), 912-921. Powell, Robert. (2006). War as a Commitment Problem, International Organization, 60, 169-203. Fearon, James (1995), "Rationalist Explanations for War," International Organization 49, 379-414. Dal Bo, Ernesto and Pedro Dal Bo (2004), "Workers, Warriors, and Criminals: Social Conflict in General Equilibrium", mimeo, UC Berkeley. Topics in Applied
Esteban, Joan and Debraj Ray (2008), "On the Salience of Ethnic Conflict", American Economic Review 98 (5), pp. 2185-2202. Caselli, Francesco and John Coleman (2006), "On the Theory of Ethnic Conflict," mimeo, LSE. World Bank. 2003. Chapter 1: Civil War as Development in Reverse. In Breaking the Conflict Trap, p13-32. Collier, Paul. 2009. Development in Dangerous Places: A Forum on Global Poverty and Intervention. Boston Review, Not in reader, but can be accessed online, http://new.bostonreview.net/br34.4/collier.php Part II: Key Issues in Development Lecture 6: Returns to Education, Constraints to Human capital Accumulation *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. *Banerjee, Abhijit V., Shawn Cole, Esther Duflo, and Leigh Linden. (2007). Remedying Education: Evidence from Two Randomized Experiments in India, Quarterly Journal of Economics, 122(3), 1235-1264. [http://www.mitpressjournals.org/doi/abs/10.1162/qjec.122.3.1235] *Muralidharan, Karthik and Venkatesh Sundararaman. (2011). Teacher Performance Pay: Experimental Evidence from India, Journal of Political Economy. Kremer, Michael, Rebecca Thornton, and Edward Miguel. (2008). Incentives to Learn, Review of Economics and Statistics. Jensen, R (2010). The (perceived) Returns to Education and the Demand for Schooling. Quarterly Journal of Economics, 125(2), 515-548. Jensen, Robert. 2012. "Do Labor Market Opportunities Affect Young Women's Work and Family Decisions? Experimental Evidence from India," Quarterly Journal of Economics, 127(2): 753-792. Jayachandran, Seema and A. Lleras-Muney. 2009. Life Expectancy and Human Capital Investments: Evidence from Maternal Mortality Declines, Quarterly Journal of Economics, 124(1): 349-397. Lecture 7: Labor markets and migration * Banerjee, Abhijit, and Andrew Newman. (1998). Information, the Dual Economy, and Development, Review of Economic Studies, 65 (4), 631-653. Topics in Applied
* Munshi, Kaivan, and Mark Rosenzweig. (2006). Traditional Institutions Meet the Modern World: Caste, Gender, and Schooling in a Globalizing Economy, American Economic Review, 96(4), 1225-1252. * Rosenzweig, Mark. (1988). Chapter 15: Labor markets in low-income countries, Handbook of Development Economics Vol 1, Hollis Chenery and T.N. Srinivasan (ed.s). [http://econpapers.repec.org/bookchap/eeedevhes/1.htm] *McKenzie, David, Caroline Theoharides, and Dean Yang (forthcoming), Distortions in the International Migrant Labor Market: Evidence from Filipino Migration and Wage Responses to Destination Country Economic Shocks, American Economic Journal: Applied Economics. *Yang, Dean (2006), Why Do Migrants Return to Poor Countries? Evidence from Philippine Migrants Responses to Exchange Rate Shocks, Review of Economics and Statistics, 88(4), pp. 715-735. Bryan, Gharad, Shyamal Chaudhuri, and A. Mushfiq Mobarak (2014), Escaping Famine through Seasonal Migration, Econometrica. Mckenzie, David and Hillel Rapoport (2010), Self-Selection Patterns in Mexico-U.S. Migration: The Role of Migration Networks, Review of Economics and Statistics, 92(4), pp. 811-821. Woodruff, Christopher and Rene Zenteno, Migrant Networks and Microenterprises in Mexico, Journal of Development Economics, 82(2), 2007, pp. 509-528. Lecture 8: Environment and development * Foster, Andrew, and Mark Rosenzweig. (2003). Economic Growth and the Rise of Forests, Quarterly Journal of Economics, 118 (2), 601-637.[http://www.mitpressjournals.org/doi/pdf/10.1162/003355303321675464] * Jayachandran, Seema. (2006). Air Quality and Early-Life Mortality: Evidence from Indonesia s Wildfires, forthcoming Journal of Human Resources. * Kremer, Michael, Jessica Leino, Edward Miguel, and Alix Zwane. (2008). Spring Cleaning: A Randomized Evaluation of Source Water Quality Improvement, Quarterly Journal of Economics. Lecture 9: Resource allocation and firm productivity *Hsieh, Chang-Tai, and Peter Klenow. (2007). Misallocation and Manufacturing TFP In China and India, Quarterly Journal of Economics. *McKenzie, David, and Chris Woodruff. (2007). Returns to Capital in Microenterprises: Evidence from a Field Experiment, Quarterly Journal of Economics, 123(4), 1329-1372. *Goldstein, Markus and Chris Udry. 2008. The Profits of Power: Land Rights and Agricultural Investment in Ghana, Journal of Political Economy, 116(6): 981-1022. Topics in Applied
Bardhan, Pranab and Chris Udry. 1999. Household Economics, chapter 2 in Development Microeconomics. Oxford University Press. 8-18. Udry, Christopher. 1996. Gender, Agricultural Production, and the Theory of the Household, Journal of Political Economy, 104(5): 1010-104. Hsieh, Chang-Tai and Peter J. Klenow. 2012. The Life Cycle of Plants in India and Mexico. Lecture 10: Ethnic and social divisions * Easterly, William, and Ross Levine. (1997). Africa s growth tragedy: policies and ethnic divisions, Quarterly Journal of Economics, 112 (4), 1203-1250. [JSTOR] * Habyarimana, James, Macartan Humphreys, Daniel Posner, and Jeremy Weinstein. (2007). Why Does Ethnic Diversity Undermine Public Goods Provision? An Experimental Approach, American Political Science Review, 101(4), 709-725. * Miguel, Edward. (2004). Tribe or Nation? Nation-building and Public Goods in Kenya versus Tanzania, World Politics, 56, 327-362. * Pande, Rohini. (2003). Can Mandated Political Representation Increase Policy Influence for Disadvantaged Minorities? Theory and Evidence from India, American Economic Review, 93(4), 1132-1151. Teaching Methodology Assessment and Grading System The class grade will be a combination of active class participation and attendance, referee reports on two papers presented by job candidates in the field this year, one empirical problem set, and a research proposal. Student presentations (+ class attendance + participation = 20%): Each student is expected to make a 30-minute presentation on a paper related to the week s topic. The paper can be taken from the reading list, or chosen by the student, but previously approved by the instructor. Each student should communicate the instructor by e-mail which paper is he/she planning to present (this should be done the first week of classes). In the presentation, you should emphasize: (i) relevance of the paper and motivation, (ii) related literature, (iii) discussion of the results of the paper, (iv) empirical/theoretical contributions, (v) general assessment and comments. Referee reports on papers by job market candidates (10 percent each): Each referee report should be 2-3 pages double-spaced. The report should start off with a oneparagraph summary of the main argument of the article. You should describe your main 3-4 points in detail as if you were writing directly Topics in Applied
to the author. Conclude the report with more minor comments. A good referee report not only clearly states the shortcomings of the work, but also lays out constructive, detailed and realistic suggestions for improvement. Replication exercise (20%). You need to find a paper, related to course content, for which the data are available online. You will then replicate key results using Stata and add some new analysis using the same data. One research proposal, 8-9 pages double-spaced (40%): The research proposal should briefly (3-4 pages) survey an existing literature in a topic related with what was discussed during the class, and then describe a planned research project. All students must meet with either the instructor (in office hours) to discuss their proposal. It is due the last day of classes. There is no final exam. Topics in Applied