Development Economics, Winter 2011 Thomas Gall tgall@uni-bonn.

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Oce Hour: Wed, 1112 Lenn estr. 35 Second Floor

Development Economics for Bachelor Students The course presents current theories of poverty and underdevelopment, for instance those emphasizing links to nancial market frictions, inequality, health, political economy, and institutions, as well as their empirical support. Policies that seek to address these issues will be considered, with a special emphasis on empirical evaluation of their ecacy. The course will follow a problem based approach, presenting methodological background (growth theory, some contract theory, instrumental variables estimation and randomized controlled trials) as it is needed. Classes will be taught in English. Presentation slides will be made available on the internet after class and most of the lectures are covered in one of the textbooks. Textbooks: (*) Ray, Debraj: 1998, Development Economics. Princeton University Press. Todaro, Michael P., and Stephen C. Smith: 2011, Economic Development (11th ed.). Pearson Education.

Plan of the Term and Syllabus

A list of articles follows that will be covered (or touched on) in the lecture. Note that these articles are not required reading but rather additional background material. Material that is substantially used in the lecture and might therefore be considered particularly useful for studying is indicated by a star (*). 10.10.: Introduction (*) Banerjee, A. V. and E. Duo: 2007, Economic Lives of the Poor. Journal of Economic Perspectives 21(1), 141167. (*) Banerjee, A. V. and E. Duo: 2008, What is Middle Class About the Middle Classes Around the World?. Journal of Economic Perspectives 22(4), 328. Besley, T. and R. Burgess: 2003, Halving Global Poverty. Journal of Economic Perspectives 17(3), 322. 1

Chen, S. and M. Ravallion: 2004, How Have the Worlds Poorest Fared Since the Early 1980s?. Policy Research Working Paper Series 3341, The World Bank. (*) Deaton, A.: 2006, Global Patterns of Income and Health: Facts, Interpretations and Policies. WIDER Lecture. 12.10. to 19.10.: Economic Growth and Convergence (*) Chapters 3-5 in Ray (1998)., D.: 1998, Development Economics. University Press. Princeton

Chapters 1, 4 and 5 in Barro, R. J. and X. Sala-i-Martin: 1999, Economic Growth. MIT Press. (*) Banerjee, A. V. and E. Duo: 2005, Growth Theory Through the Lens of Development Economics. In: P. Aghion and S. N. Durlauf (eds.): Handbook of Economic Growth Vol. 1A. Amsterdam: Elsevier, pp. 473552. (*) Banerjee, A. V. and K. Munshi: 2004, How Eciently is Capital Allocated? Evidence from the Knitted Garment Industry in Tirupur. Review of Economic Studies 71(1), 1942. Caselli, F.: 2005, Accounting for Cross-Country Income Dierences. In: P. Aghion and S. Durlauf (eds.): Handbook of Economic Growth, Vol. 1. North-Holland, pp. 385472. Hsieh, C.-T. and P. Klenow: 2009, Misallocation and Manufacturing TFP in China and India. Quarterly Journal of Economics 124(4), 14031448. (*) Mankiw, N. G., D. Romer, and D. N. Weil: 1992, A Contribution to the Empirics of Economic Growth. Quarterly Journal of Economics 107(2), 407 437. de Fontenay, C. C.: 2004, The Dual role of Market Power in the Big Push: From Evidence to Theory. Journal of Development Economics 75(1), 221238. (*) Murphy, K. M., A. Shleifer, and R. W. Vishny: 1989, Industrialization and the Big Push. Journal of Political Economy 97(5), 10031026. Rosenstein-Rodan, P.N: 1943, Problems of Industrialisation of Eastern and Southeastern Europe. Economic Journal 53(210), 202-211.

24.10.: Tutorial Class 26.10. to 2.11.: Imperfect Capital Markets and Micro Finance (*) Chapter 7.2.8-9, 14.1-14.3, 14.5 in Ray (1998) Aleem, I.: 1990, Imperfect Information, Screening and the Cost of Informal Lending: A Study of a Rural Credit Market in Pakistan. World Bank Economic Review 4(3), 329349. (*) Banerjee, A. V.: 2003, Contracting Constraints, Credit Markets and Economic Development. In: M. Dewatripont, L. P. Hansen, and S. J. Turnovsky (eds.): Advances in Economics and Econometrics, Eighth World Congress, Volume III,. Cambridge: Cambridge University Press, pp. 146. Banerjee, A. V. and E. Duo: 2008, Do Firms Want to Borrow More? Testing Credit Constraints Using a Directed Lending Program. MIT Working Paper. Banerjee, A. V. and A. F. Newman: 1993, Occupational Choice and the Process of Development. Journal of Political Economy 101(2), 274298. (*) Galor, O. and J. Zeira: 1993, Income Distribution and Macroeconomics. Review of Economic Studies 60, 3552. Besley, T., S. Coate, and G. C. Loury: 1993, The Economics of Rotating Savings and Credit Associations. American Economic Review 83(4), 792810. (*) Ghatak, M. and T. W. Guinnane: 1999, The Economics of Lending with Joint Liability: Theory and Practice. Journal of Development Economics 60(1), 195228. Murdoch, J.: 1999, The Micronance Promise. Journal of Economic Literature 37(4), 15691614. Morduch, J., R. Cull, and A. Demirguc-Kunt: 2009, Micronance Meets the Market. Journal of Economic Perspectives 23(1), 167192. 7.11.: Tutorial Class 9.11. to 16.11.: Health and Education (*) Chapter 8.3.-8.4 and 13.4 in Ray (1998). Chapter 8 in Todaro and Smith (2011).

Banerjee, A., A. Deaton, and E. Duo: 2004. Wealth, Health, and Health Services in Rural Rajasthan. American Economic Review 94(2), 326330. Deaton, A.: 2003. Health, Inequality and Economic Development. Economic Literature 41(1), 113158. Journal of

Duo, E.: 2001. Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment. American Economic Review 91(4), 795813. (*) Kremer, M. and E. Miguel: 2004. Worms: Identifying Impacts on Education and Health in the Presence of Treatment Externalities. Econometrica 72(1), 159-217. Hanushek, E. and L. Woessmann: 2007. The Role of Cognitive Skills in Economic Development. Journal of Economic Literature 46(3), 607668 (*) Schultz, T.P.: 2004. School Subsidies for the Poor: Evaluating the Mexican Progresa Poverty Program. Journal of Development Economics 74, 199250. Subramanian, S. and A. Deaton: 1996. The Demand for Food and Calories. Journal of Political Economy 104(1), 133162. 21.11.: Tutorial Class 23.11. to 5.12.: Gender, Ethnicity, Discrimination (*) Anderson, S. and D. Ray: 2010. Missing Women: Age and Disease. Review of Economic Studies 77(4), 12621300. Chattopadhyay, R. and E. Duo: 2004. Women as Policy Makers: Evidence from a Randomized Policy Experiment in India. Econometrica 72(5), 14091443. Hanna, R. and L. Linden: 2009. Measuring Discrimination in Education. NBER Working Paper 15057. Ho, K. and P. Pandey: 2006. Discrimination, Social Identity, and Durable Inequalities. American Economic Review 96(2), 206211. Munshi, K. and M. Rosenzweig: 2006. Traditional Institutions Meet the Modern World: Caste, Gender, and Schooling Choice in a Globalizing Economy. American Economic Review 96(4), 12251252. (*) Pande, R.: 2003. Can Mandated Political Representation Provide Disadvantaged Minorities Policy Inuence? Theory and Evidence from India. American Economic Review 93(4), 11321151. 4

(*) Qian, N.: 2008. Missing Women and the Price of Tea in China: The Eect of Sex Specic Earnings on Sex Imbalance. Quarterly Journal of Economics 123(3), 12511285. Sen, A.:1992. Missing Women. British Medical Journal 304, 587588 7.12.: Tutorial Class 12.12. to 19.12.: Institutions (*) Acemoglu, D., S. Johnson, and J. A. Robinson: 2001, The Colonial Origins of Comparative Development: An Empirical Investigation. American Economic Review 91(5), 13691401. Acemoglu, D., S. Johnson, and J. A. Robinson: 2002, Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution. Quarterly Journal of Economics 118(5), 12311294. Banerjee, A. V. and L. Iyer: 2005, History, Institutions and Economic Performance: The Legacy of Colonial Land Tenure Systems in India. American Economic Review 95(4), 11901213. (*) Engerman, S. L. and K. L. Sokolo: 2002, Factor Endowments, Inequality, and Paths of Institutional and Economic Development among New World Economies. Economia 3, 41109. Engerman, S. L. and K. L. Sokolo: 2006, Colonialism, Inequality, and Long-run Paths of Development. In: A. V. Banerjee, D. Mookherjee, and R. B enabou (eds.): Understanding Poverty. Oxford University Press, Chapt. 3. Glaeser, E. L., R. La Porta, F. Lopez-de-Silanes, and A. Shleifer: 2004, Do Institutions Cause Growth?. Journal of Economic Growth 9(3), 271303. North, D. C.: 1990, Institutions: Institutional Change and Economic Performance. Cambridge University Press. (*) Nunn, N.: 2008, The Long Term Eects of Africas Slave Trades. Quarterly Journal of Economics 123(1), 139176. Rodrik, D., A. Subramanian and F. Trebbi: 2004, Institutions Rule: The Primacy of Institutions over Geography and Integration in Economic Development. Journal of Economic Growth 9(2), 131165.

21.12.: Tutorial Class 9.1. to 16.1.: Political Economy and Corruption Chapter 7.2.5-6 in Ray (1998) (*) Alesina, A. and D. Rodrik: 1994, Distributive Politics and Economic Growth. Quarterly Journal of Economics 109(2), 465490. Barro, R. J.: 1996, Democracy and Economic Growth. Growth 1(1), 127. Journal of Economic

Bertrand, M., S. Djankov, R. Hanna and S. Mullainathan. Obtaining a Driving License in India: An Experimental Approach to Studying Corruption. Quarterly Journal of Economics 122(4), 16391676. Besley, T. and R. Bugess: 2004, Can Labor Regulation Hinder Economic Performance? Evidence from India. Quarterly Journal of Economics 119(1), 91-134. Mauro, P.: 1995, Corruption and Growth. Quarterly Journal of Economics 110 (3), 681712. Mulligan, C. B., X. Sala-i-Martin, and R. Gil: 2004, Do Democracies Have Dierent Public Policies than Nondemocracies?. Journal of Economic Perspectives 18(1), 5174. (*) Olken, B.: 2007. Monitoring Corruption: Evidence from a Field Experiment in Indonesia. Journal of Political Economy 115 (2), 200-249. Persson, T. and G. Tabellini: 1994, Is Inequality Harmful for Growth?. American Economic Review 84(3), 600621. Persson, T. and G. Tabellini: 2008, The growth eects of democracy: Is it heterogenous and how can it be estimated?. In: E. Helpman (ed.): Institutions and Economic Performance. Harvard University Press. (*) Shleifer, A. and R.W. Vishny: 1993. Corruption. Quarterly Journal of Economics 108(3), 599617. 18.1.: Tutorial Class 23.1. to 30.1.: Optional Topic 1.2.: Tutorial Class