2nd Edition
Development Economics Theory and Practice
This second edition of Development Economics: Theory and Practice continues to provide students and practitioners with the perspectives and tools they need to think analytically and critically about the current major economic development issues in the world.
Alain de Janvry and Elisabeth Sadoulet identify seven key dimensions of development—growth, poverty, vulnerability, inequality, basic needs, sustainability, and quality of life—and use them to structure the contents of the text. The book gives a historical perspective on the evolution of thought in development. It uses theory and empirical analysis to present readers with a full picture of how development works, how its successes and failures can be assessed, and how alternatives can be introduced. The authors demonstrate how diagnostics, design of programs and policies, and impact evaluation can be used to seek new solutions to the suffering and violence caused by development failures.
In the second edition, more attention has been given to ongoing developments, such as:
- pursuit of the Sustainable Development Goals
- continuously rising global and national inequality
- health as a domestic and international public good
- cash transfers for social protection
- carbon trading for sustainability
This text is fully engaged with the most cutting-edge research in the field and equips readers with analytical tools for impact evaluation of development programs and policies, illustrated with numerous examples. It is underpinned throughout by a wealth of student-friendly features, including case studies, quantitative problem sets, end-of-chapter questions, and extensive references. Excel and Stata exercises are available as digital supplements for students and instructors.
This unique text is ideal for those taking courses in development economics, economic growth, and development policy, and will provide an excellent foundation for those wishing to pursue careers in development.
Introduction
Economic development
Development economics
Why should we be interested in development economics?
1 What is Development? Indicators and Issues
Seven dimensions of development
Income and income growth
Poverty and hunger
Inequality and inequity
Vulnerability to poverty
Basic needs: human development
Sustainability in the use of natural resources
Quality of life
Development goes beyond income, but can income growth deliver development?
Conclusion: development is multidimensional, so can we agree on what it is?
2 The State of Development
Income growth and the convergence club
Poverty and hunger
Inequality
Basic human needs
Sustainability in resource use
Quality of life
Conclusion
3 History of Thought in Development Economics
Introduction: why history matters
Basic principles in analysing the history of thought in development economics
Selected schools of thought in development
Conclusion
4 Impact Evaluation of Development Policies and Programs
How do we know what works for development?
Objectives and overview of impact evaluation
Methods of impact evaluation
Experimental design—rct
Matching method to construct control groups: propensity score matching
Difference-in-differences method
Generalization of the diff-in-diffs approach: roll-outs with panel data
Regression discontinuity designs (rdd)
Event analysis and event-severity analysis
Instrumental variables estimation
Making impact evaluation more useful for policy purposes
Qualitative methods
Appendix 4: Econometrics of Impact Analysis
Randomization
Propensity score matching
Difference-in-differences
Staggered entry with panel data: roll-out of a program
Regression discontinuity
Event analysis
Instrumental variables estimation
5 Poverty and Vulnerability Analysis
Characterize welfare: choice of an indicator of wellbeing
Separating the poor from the non-poor: choosing a poverty line (z)
Poverty profile and aggregate indicators
Vulnerability
Other aspects of poverty
Correlates of poverty: who are the poor? Where do they live? What do they do? How do they live?
The geography of poverty: poverty maps
Are there behavioral poverty traps?
Reducing poverty
6 Inequality and Inequity
Describing and measuring inequality
Decomposing inequality
Relationship between level of income (gdppc) and inequality: empirical evidence on the kuznets inverted u-curve
The long-term evolution of inequality
Pro-poor growth and the growth incidence curve
The growth-inequality-poverty development triangle
What roles for ethnic fractionalization and genetic diversity?
What role for equity in development?
Inclusive growth
7 International Trade and Industrialization Strategies
Trade openness
Gains from trade: why countries trade, but not everyone gains
Absolute, comparative, and competitive advantage
Trade policy and indicators of protection
Using trade policy for development: tariffs and subsidies
Dynamic gains from trade: import-substitution industrialization as a policy gamble
Trade and industrialization strategies: how to choose?
Is trade good for growth?
Is trade good for poverty reduction?
Trade and the environment
Trade and food security
Decline of the wto and threats to multilateralism
8 Explaining Economic Growth: The Macro Level
The growth puzzle
Generic modeling of income growth
Capital accumulation for growth: the Harrod-Domar model
Productivity growth and factor deepening: growth accounting in the Solow model
Economic growth and structural transformation
The role of agriculture in growth: dual-economy models
The role of agriculture in growth: other models
Endogenous economic growth
9 Exchange Rate Policies and Development
Trade, financial flows, and exchange rate
Exchange-rate regimes
The real exchange rater and its effect on real balances
Two examples of exchange-rate shocks
10 The Economics of Farm Households
Importance of farm households
Definitions of farm households
Farm-household behavior models
Responses to market signals: separability
Net buyers, net sellers, and food security
Can the family farm be competitive and survive?
Risk and self-insurance in household behavior
Intra-household allocation of resources and gender roles
11 Population and Development
Definitions: demographic concepts
Some data for world population
History of world population and demographic transition
Causes of population growth
Population policy
Other issues in population and development
12 Labor and Migration
Labor and employment
Rural-urban migration
Extensions of the model and empirical results
Impacts of migration
Conclusion
13 Financial Services for The Poor
The generic-lender problem
Commercial banks
Local moneylenders, or "usurers"
Local sources of credit based on interlinkages in value chains
Informal institutions: Roscas
Village banks and self-help groups
The microfinance revolution: group lending
Mfis with individual loans: proximity lending
Other issues in microfinance lending
Impact evaluations on microfinance lending
Increasing savings: offering saving opportunities and incentives
Can the poor be insured? The promise of index-based weather insurance
Mobile money and digital credit
Conclusions on mfis: how useful are they for poverty reduction?
14 Social Programs and Targeting
Determinants of income and paths out of poverty
A typology of social programs
The targeting of social programs: benefits and costs
Errors in targeting: exclusion (type i) and inclusion (type ii) errors
Targeting methods
Quality of targeting
Other issues in implementation of transfers
Using social-safety-net (ssn) programs for efficiency gains and growth
Impact evaluation of social programs: some examples
The debate over cash transfers vs development programs for poverty reduction
15 Sustainable Development and The Environment
Links between development, resource conservation, and environmental sustainability
Negative externalities
Incomplete property rights
Public goods
The sustainability objective
Dilemmas in the environment-development relation
Introducing new markets: payments for environmental services
16 Common Property Resources and Determinants of Cooperation
Why are there common property resources?
Economics of cpr use
Grounds for pessimism about cooperative behavior
Cooperative outcomes in non-cooperative games
Determinants of cooperation and collective action
Why secure property rights over land matter for economic development
17 Human Capital: Education and Health
Why are education and health important for development?
Indicators and status of education
What determines the levels of schooling?
Estimating the return to education
Policy issue: conditional cash transfers
Indicators and status of health
What determines health achievements?
Impact of health on development outcomes
Issues in health policies: the debate around subsidies
18 Agriculture for Development
Agriculture for development
The state of world agriculture
Determinants of agricultural growth
Food security in developing countries
The political economy of agriculture for development
19 Development Aid and Its Effectiveness
Overview
Aid in a historial perspective
The evolution of foreign aid
Fungibility of foreign aid
Aid effectiveness from a macro perspective
Evaluating the impact of foreign aid from a micro perspective
The practice of foreign aid
Aid strategies for greater effectiveness: what can be done?
The debate on foreign aid
Conclusion: toward a new aid architecture
20 Institutional Innovations and Development
Institutions and development
Assumptions underlying the new institutional economics
Market failures induced by transaction costs
Institutional responses to market failures
Mechanisms of institutional change
Examples of institutional innovations that help reduce transaction costs and/or compensate for market failures
21 Political Economy and The Role of The State
Introduction
Theories of the state
The functionalist state
The pluralist state: public choice
Economics of public authority: rent-seeking, political influence, and corruption
Strategies to limit rent-seeking
Biography
Alain de Janvry is Professor at the Department of Agricultural and Resource Economics and the Goldman School of Public Policy, University of California, Berkeley, USA.
Elisabeth Sadoulet is Professor at the Department of Agricultural and Resource Economics, University of California, Berkeley, USA.
Praise for the first edition:
"This is a great book that fills many gaps in the existing textbook options, including rich material coming out of the RCT revolution, while sustaining depth on the classic questions in development." — Samuel Bazzi, Professor of Economics at Boston University, USA.
"Overall, I strongly recommend using this textbook for economic development. It is rich with material, examples, and case studies. It includes extensive discussions on data and studies using the randomized control trial approach, which is widely used in development research nowadays." — Rotua Lumbantobing, Assistant Professor of Economics at Western Connecticut State University, USA
