Development Economics : Theory and Practice book cover
2nd Edition

Development Economics
Theory and Practice

ISBN 9780367456474
Published May 31, 2021 by Routledge
572 Pages 166 Color Illustrations

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Book Description


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.

Table of Contents


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


Basic human needs

Sustainability in resource use

Quality of life


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


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


Propensity score matching


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


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


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


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


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

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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