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ECO501 : Development Economics

Course Overview

Course Synopsis

Development economics is one of the most attracting branches of the broader disciplines of economics and political economy. Development economics is the economics of poor, third world and developing countries like economies of Asia, Africa and Latin America. Economic development is a branch of economics which deals with the causes and cures of mass poverty. It pays attention on involuntary deprivation of fundamental material comforts of life, basic nutrition, shelter, minimally competent medical attention and primary education. The purpose to study development economics is to get familiarize about different growth and development theories and the problems of poverty, inequality, population growth, education and health of developing countries and policy options to overcome these problems.

Course Learning Outcomes

At the end of the course, you should be able to:

  • Know about introduction of economic development in a global perspective.
  • Familiar with comparative economic development.
  • Understand the classic theories of economic growth and development.
  • Know about poverty, inequality and economic development.
  • Learn about population growth and economic development: causes, consequences and controversies.
  • Understand about human capital: education and health in economic development.
  • Know about exogenous and endogenous growth theory.
  • Understand the production function approach to the analysis of growth.
  • Familiar with contemporary models of development and underdevelopment.
  • Learn about urbanization and rural urban migration: theory and policy.
  • Learn about agricultural transformation and rural development.
  • Learn about the environment and economic development.
  • Understand international trade theory and development strategy.
  • Learn about balance of payments, debt, financial crises and stabilization policies.
  • Familiar with foreign finance, investment, and aid: controversies and opportunities.
  • Learn about finance and fiscal policy for development.

Course Calendar

What is development economics?1Handouts
The nature of development economics1Handouts
Why study development economics?1Handouts
The important role of values in development economics1Handouts
What do we mean by development?1Handouts
The central role of women1Handouts
The three objectives of development1Handouts
The millennium development goals1Handouts
Common characteristics of developing countries2Handouts
Defining the developing world2Handouts
Basic indicators of development: real income, health, and education2Handouts
Holistic measures of living levels and capabilities2Handouts
Characteristics of the developing world: diversity within commonality3Handouts
How low-income countries today differ from developed countries in their earlier stages?3Handouts
Are living standards of developing and developed nations converging?3Handouts
Case study: Divergent development: Pakistan and Bangladesh:4Handouts
Classical growth theory4Handouts
Rostow stages of growth theory4Handouts
The Harrod-Domar growth model5Handouts
Structural change models5Handouts
The Neoclassical Counterrevolution: Market fundamentalism6Handouts
Components of economic growth6Handouts
The Solow Neoclassical growth model6Handouts
Distribution and development: seven critical questions:7Handouts
Measuring inequality7Handouts
Measuring absolute poverty7Handouts
Multidimensional Poverty Index8Handouts
Poverty, inequality, and social welfare8Handouts
Dualistic development and shifting Lorenz curves8Handouts
Kuznets’s Inverted U Hypothesis8Handouts
Growth, poverty and inequality9Handouts
Economic characteristics of high-poverty groups9Handouts
Policy options on income inequality and poverty: some basic considerations9Handouts
Summary and conclusions: the need for a package of policies9Handouts
The basic issue: population growth and the quality of life10Handouts
Population growth: past, present, and future10Handouts
Structure of the world’s population10Handouts
The hidden momentum of population growth10Handouts
The demographic transition10Handouts
The demographic transition model11Handouts
The Malthusian model11Handouts
The H.H theory of fertility11Handouts
The demand for children in developing countries12Handouts
Implications for development and fertility12Handouts
The consequences of high fertility: some conflicting perspectives12Handouts
Graded Discussion Board (GDB)
Goals and objectives: toward a consensus13Handouts
Some policy approaches13Handouts
What developing countries can do?13Handouts
What the developed countries can do?13Handouts
How developed countries can help developing countries with their population programs13Handouts
Case study - population, poverty, and development: China and India13Handouts
Human capital14Handouts
The central roles of education and health14Handouts
Education and health as joint investments for development14Handouts
Improving health and education: why increasing incomes is not sufficient14Handouts
Investing in education and health: the human capital approach14Handouts
Child labor14Handouts
Assumptions of the child labor multiple equilibria model15Handouts
Other approaches to child labor policy15Handouts
The gender gap: discrimination in education and health15Handouts
Closing the educational gender gap is important15Handouts
Health and gender15Handouts
Consequences of gender bias in health and education15Handouts
Educational systems and development16Handouts
Definition of political economy16Handouts
Determinants of the amount of schooling received by an individual16Handouts
Supply side16Handouts
Social versus private benefits and costs16Handouts
Distribution of education16Handouts
Education, inequality, and poverty16Handouts
Education, internal migration, and the brain drain16Handouts
Health measurement and distribution17Handouts
Disease burden17Handouts
Parasitic worms and other “neglected tropical diseases”17Handouts
Health, productivity, and policy17Handouts
Health systems policy17Handouts
Case study17Handouts
Actual growth rate (ga)18Handouts
Warranted equilibrium growth rate (gw)18Handouts
Natural growth rate (gn)18Handouts
The Solow neoclassical growth model18Handouts
Endogenous growth theory18Handouts
The Romer model18Handouts
Criticisms of endogenous growth theory18Handouts
The production function19Handouts
The Cobb-Douglas production function19Handouts
Limitations of the Cobb-Douglas production function19Handouts
Schools of thought in context: South Korea and Argentina19Handouts
Economic agent20Handouts
Big push20Handouts
O-Ring model20Handouts
Coordination failure20Handouts
Multiple equilibria: a diagrammatic approach20Handouts
The big push: a graphical model20Handouts
Conditions for multiple equilibria20Handouts
Technological externality20Handouts
Why the problem cannot be solved by a super-entrepreneur20Handouts
Michael kremer’s O-Ring theory of economic development21Handouts
The O-Ring model21Handouts
O-Ring production function21Handouts
Implications of the O-Ring theory21Handouts
Economic development as self-discovery21Handouts
The Hausmann-Rodrik-Velasco growth diagnostics framework21Handouts
Case of El Salvador21Handouts
Case of Brazil21Handouts
Case of Dominican Republic21Handouts
Case study: understanding a development miracle: China21Handouts
The migration and urbanization dilemma22Handouts
Urbanization: trends and projections22Handouts
Grand Quiz
Industrial districts23Handouts
The emergence of industrial districts or clusters in china23Handouts
The urban giantism problem23Handouts
First-city bias23Handouts
Causes of urban giantism23Handouts
The urban informal sector23Handouts
Policies for the urban informal sector23Handouts
Women in the informal sector23Handouts
Migration and development23Handouts
Toward an economic theory of rural-urban migration24Handouts
Todaro migration model24Handouts
Harris-Todaro model24Handouts
A verbal description of the Todaro model24Handouts
The Harris-Todaro migration model24Handouts
Five policy implications24Handouts
The imperative of agricultural progress and rural development25Handouts
Agricultural growth: past progress and current challenges25Handouts
Market failures and the need for government policy25Handouts
The structure of agrarian systems in the developing world26Handouts
Three systems of agriculture26Handouts
Peasant agriculture in Latin America, Asia, and Africa26Handouts
Agrarian patterns in Latin America: progress and remaining poverty challenges26Handouts
Subsistence agriculture and extensive cultivation in Africa26Handouts
The structure of agrarian systems in the developing world27Handouts
Transforming economies: problems of fragmentation and subdivision of peasant land in Asia27Handouts
The microeconomics of farmer behavior and agricultural development27Handouts
The transition from peasant subsistence to specialized commercial farming27Handouts
Subsistence farming: risk aversion, uncertainty, and survival27Handouts
The economics of sharecropping and interlocking factor markets28Handouts
The transition to mixed or diversified farming28Handouts
From divergence to specialization: modern commercial farming28Handouts
Learning about farming: the diffusion of pineapple growing in Ghana28Handouts
Core requirements of a strategy of agricultural and rural development28Handouts
Improving small-scale agriculture28Handouts
Technology and innovation28Handouts
Institutional and pricing policies: providing the necessary economic incentives28Handouts
Adapting to new opportunities and new constraints28Handouts
Conditions for rural development28Handouts
Economics and the environment29Handouts
Global warming29Handouts
Climate change29Handouts
Sustainable development and environmental accounting29Handouts
Population, resources, and the environment29Handouts
Poverty and the environment29Handouts
Growth versus the environment29Handouts
Rural development and the environment30Handouts
Urban development and the environment30Handouts
The global environment and economy30Handouts
The nature and pace of greenhouse gas–induced climate change30Handouts
Natural resource–based livelihoods as a pathway out of poverty: promise and limitations30Handouts
The scope of domestic-origin environmental degradation: an overview30Handouts
Rural development and the environment: a tale of two villages30Handouts
A village in Sub-Saharan Africa30Handouts
Environmental deterioration in villages30Handouts
Global warming and climate change: scope, mitigation, and adaptation31Handouts
Scope of the problem31Handouts
Economic models of environment issues31Handouts
Privately owned resources31Handouts
Public goods and bads: regional environmental degradation and the free-rider problem32Handouts
Limitations of the public-good framework32Handouts
Urban development and the environment32Handouts
Environmental problems of urban slums32Handouts
Industrialization and urban air pollution32Handouts
Problems of congestion, clean water, and sanitation32Handouts
Policy options in developing and developed countries33Handouts
What developing countries can do33Handouts
Proper resource pricing33Handouts
Community involvement33Handouts
Programs to improve the economic alternatives of the poor33Handouts
Raising the economic status of women33Handouts
Industrial emissions abatement policies33Handouts
Proactive stance toward climate change and environmental degradation33Handouts
How developed countries can help developing countries33Handouts
Trade policies33Handouts
Debt relief33Handouts
Development assistance33Handouts
What developed countries can do for the global environment33Handouts
Research and development33Handouts
Import restrictions33Handouts
Case study: A world of contrasts on one island: haiti and the Dominican republic34Handouts
Institutions: historical legacy34Handouts
Human capital34Handouts
Policy effects34Handouts
International trade theory and development strategy34Handouts
Economic globalization: an introduction34Handouts
International trade: some key issues34Handouts
Five basic questions about trade and development34Handouts
Difference between inward-looking or an outward-looking trade policy34Handouts
International trade: some key issues35Handouts
Importance of exports to different developing nations35Handouts
Types of exports35Handouts
UNIDO report highlights:35Handouts
Demand elasticities and export earnings instability35Handouts
The terms of trade and the Prebisch-Singer hypothesis35Handouts
The traditional theory of international trade35Handouts
Comparative advantage35Handouts
Comparative advantage theory: by David Ricardo36Handouts
Types of comparative advantage36Handouts
Relative factor endowments and international specialization: the neoclassical model36Handouts
Trade theory and development: the traditional arguments36Handouts
The critique of traditional free-trade theory in the context of developing-country experience36Handouts
Fixed resources, full employment, and the international immobility of capital and skilled labor36Handouts
Quiz # 02
Porter’s “competitive advantage” theory37Handouts
Unemployment, resource underutilization, and the vent-for-surplus theory of international trade37Handouts
Fixed, freely available technology and consumer sovereignty37Handouts
Most new products conceived / produced in the us in 20th century37Handouts
Traditional trade strategies for development: export promotion versus import substitution38Handouts
Export promotion: looking outward and seeing trade barriers38Handouts
Expanding exports of manufactured goods38Handouts
Import substitution: looking inward but still paying outward38Handouts
Tariffs, infant industries, and the theory of protection38Handouts
The IS industrialization strategy and results39Handouts
Tariff structures and effective protection39Handouts
Foreign-exchange rates, exchange controls, and the devaluation decision39Handouts
Trade pessimist arguments39Handouts
Trade optimist arguments39Handouts
Quiz # 03
International finance and investment: key issues40Handouts
A hypothetical illustration: deficits and debts40Handouts
The issue of payments deficits40Handouts
Some initial policy issues40Handouts
Trends in the balance of payments41Handouts
Accumulation of debt and emergence of the debt crisis41Handouts
Background and analysis41Handouts
Origins of the 1980s debt crisis41Handouts
Attempts at alleviation: macroeconomic instability, Classic IMF stabilization policies, and their critics41Handouts
The IMF stabilization program41Handouts
Tactics for debt relief42Handouts
“Odious debt” and its prevention42Handouts
Resolution of 1980s–1990s debt crises and continued vulnerabilities42Handouts
The HIPC initiative42Handouts
The global financial crisis and the developing countries42Handouts
Causes of the crisis and challenges to lasting recovery42Handouts
Distribution of influence among developing countries42Handouts
General policy framework42Handouts
Differing impacts across developing regions42Handouts
Prospects for recovery and stability42Handouts
Opportunities as well as dangers?42Handouts
The international flow of financial resources43Handouts
Private foreign direct investment and the multinational corporation43Handouts
Traditional economic arguments in support of private investment: filling savings, foreign-exchange, revenue, and management gaps43Handouts
Arguments against private foreign investment: widening gaps43Handouts
Reconciling the pros and cons43Handouts
Private portfolio investment: benefits and risks43Handouts
The role and growth of remittances43Handouts
Conceptual and measurement problems43Handouts
Why donors give aid44Handouts
Political motivations44Handouts
Economic motivations: two-gap models and other criteria44Handouts
Foreign-exchange constraints44Handouts
Growth and savings44Handouts
Economic motivations and self-interest44Handouts
Why recipient countries accept aid44Handouts
The role of nongovernmental organizations in aid44Handouts
The effects of aid44Handouts
The role of the financial system in economic development45Handouts
Differences between developed and developing-country financial systems45Handouts
The role of central banks and alternative arrangements45Handouts
Alternatives to central banks45Handouts
The role of development banking45Handouts
Informal finance and the rise of microfinance45Handouts
Traditional informal finance45Handouts
Microfinance institutions45Handouts
MFIs: three current policy debates45Handouts
Potential limitations of microfinance as a development strategy45Handouts
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