2nd Edition

Development Economics Theory and Practice

By Alain de Janvry, Elisabeth Sadoulet Copyright 2021
    572 Pages 166 Color Illustrations
    by Routledge

    572 Pages 166 Color Illustrations
    by Routledge


    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.


    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


    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