14.74
Foundations of Development Policy
Explores the foundations of policy making in developing countries, with the goal of spelling out various policy options and quantifying the trade-offs between them. Topics include education, health, fertility, adoption of technological innovations, financial markets (credit, savings, and insurance), markets for land and labor, political factors, and international considerations (aid, trade, and multinational firms). Some basic familiarity with probability and/or statistics is useful for this class. Students taking graduate version complete additional assignments.
Spring 2009
Topics
- Introduction: the vicious circle of poverty
- Nutrition and productivity: interrelationships
- Education
- Health: a case study from Rajasthan
- Gender discrimination
- Bargaining within families
- In-class student presentations
- Land
- Savings
- Insurance
- Credit markets
- Formal and informal institutions
- Limits to social policy: corruption
Readings
- The textbook for this class is Debraj Ray’s Development Economics . However, we will rely mostly on articles.
- Introduction: the vicious circle of poverty
- a) World development report 2009
- b) A quiet violence: view from a Bangladesh village: Hartmann (1983)
- c) “Economic Lives of the Poor”: Banerjee and Duflo (2007)
- d) “What is Middle Class About the Middle Classes?”: Banerjee and Duflo (2008)
- e) “Aging and Death under a Dollar a Day”: Banerjee and Duflo (2007)
- *Hartmann, Betsy, and James K. Boyce. “The Trials of a Poor Peasant Family.” Chapter 12 in A Quiet Violence: View from a Bangladesh Village . Oakland, CA: Food First, 1985. ISBN: 9780935028164.
- *Banerjee, A. V., and E. Duflo. “The Economic Lives of the Poor.” Journal of Economic Perspectives 21, no. 1 (2007): 141-167.
- ———. “What is Middle Class about the Middle Classes around the World?” Journal of Economic Perspectives 22, no. 2 (2008): 3-28.
- Nutrition and productivity: interrelationships
- \> i) From income to nutrition: \> \> > (1) Income to nutrition: a study of Maharashtra, India: Subramanian and Deaton (1996) \> > \> > (2) Monetary transfer to the elderly can lead to better nutrition for children. A study of old age pension in South Africa: Duflo (2003) \> \> ii) From nutrition to income: \> \> > (1) Ray, chapter 8. In particular, sections 8.3 and 8.4 \> > \> > (2) Thomas et al. (2004)
- Subramanian, S., and A. Deaton. “The Demand for Food and Calories.” Journal of Political Economy 104, no. 1 (1996): 133-162.
- Duflo, E. “Grandmothers and Granddaughters: Old-Age Pensions and Intrahousehold Allocation in South Africa.” World Bank Economic Review 17, no. 1 (2003): 1-25.
- *[Ray] chapter 8, especially sections 8.3 and 8.4.
- a) An overview of the problems: educational choice in India. Why are the levels of education so low? Do parents care about education? Can they afford it? What is education good for?: The probe report on basic education in India (1999)
- b) Improving access: An example of an effective program of school construction in Indonesia: Duflo (2001)
- c) Holding teachers accountable: Duflo and Hanna (2005); Kremer and Glewwe (2003)
- d) An example that it is possible to improve the quality of education: Banerjee, Cole, Duflo, and Linden (2004)
- *The PROBE Team in association with the Centre for Development Economics. Public Report on Basic Education in India . New York, NY: Oxford University Press, 1999. ISBN: 9780195648706.
- *Duflo, E. “Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment.” American Economic Review 91, no. 4 (2001): 795-813.
- Health: a case study from Rajasthan
- Health status in Rajasthan: A case study (and a movie) that looks at various aspects of health delivery and health status: Banerjee, Deaton, and Duflo (2003)
- Gender discrimination
- a) Evidence of gender discrimination in India: Dreze and Sen (1995)
- c) How can we prove that there is gender discrimination in everyday life?: Deaton (1997)
- d) Consumption smoothing and excess female mortality in rural India: Rose (1999)
- e) The “Marriage Market”: Rao (1993)
- f) Discrimination and the value of girls: Qian (2005)
- *Dreze, Jean, and Amartya Sen. “Gender Inequality and Women’s Agency.” Chapter 7 in India: Economic Development and Social Opportunity . New York, NY: Oxford University Press, 1999, pp. 140-178.
- Rose, E. “Consumption Smoothing and Excess Female Mortality in Rural India.” Review of Economics and Statistics 81, no. 1 (1999): 41-49.
- Rao, V. “The Rising Price of Husbands: A Hedonic Analysis of Dowry Increases in Rural India.” Journal of Political Economy 101, no. 4 (1993): 666-677.
- Qian, Nancy. “Missing Women and the Price of Tea in China: The Effect of Relative Female Income on Sex Imbalance.” Mimeograph, Massachusetts Institute of Technology, 2005.
- Bargaining within families
- a) Income is not spent in the same way by women and by men: evidence from Brazil (Thomas (1990)), the United Kingdom Child Benefit allowance (Lundberg, Pollak, and Wales (1996)), a pension program in South Africa (Duflo (2003))
- b) Competition within the family is not limited to sharing the resources. It leads to lower productivity and lower welfare for all members in the family: Udry (1996); Duflo and Udry (2004)
- Thomas, D. “Intra-Household Resource Allocation: An Inferential Approach.” Journal of Human Resources 25, no. 4 (1990): 635-664.
- Lundberg, S. J., R. A. Pollak, and T. J. Wales. “Do Husbands and Wives Pool Their Resources? Evidence from the United Kingdom Child Benefit.” Journal of Human Resources 32, no. 4 (1996): 463-480.
- *Udry, C. “Gender, Agricultural Production, and the Theory of the Household.” Journal of Political Economy 101, no. 5 (1996): 1010-1045.
- a) Theoretical background: Ray, chapter 12
- b) Why land reform?: Banerjee (1999)
- c) A successful limited land reform in India: Banerjee, Gertier, and Ghatak (2002)
- [Ray] chapter 12.
- Banerjee, Abhijit V., Paul Gertier, and Maitreesh Ghatak. “Empowerment and Efficiency: Tenancy Reform in West Bengal.” Journal of Political Economy 110, no. 2 (April 2002): 239-280.
- a) Do poor people save in good times in anticipation of bad times? Savings by rice farmers in Thailand: Paxson (1992)
- b) Have poor people access to savings instruments: A micro-savings experiment in Mexico: Aportela (1998)
- *Paxson, C. H. “Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand.” American Economic Review 82, no. 1 (1992): 15-33.
- Aportela, F. “The Effects of Financial Access on Savings by Low-Income People.” Mimeograph, Massachusetts Institute of Technology, 1998.
- a) Ray, chapter 15
- b) Insurance is only partial: the consumption of household members in Cote d’Ivoire is linked to their income: Deaton (1997), pp 372-383
- c) In bad times are children taken out of school, and given less to eat? An example from Cote d’Ivoire: Jensen (2000)
- d) In West Africa, villagers lend to each other and achieve a certain degree of insurance: Udry (1990)
- e) Mutual insurance in the village does not happen in the void. It depends on the strength of local institutions: Townsend (1995)
- *[Ray] chapter 15.
- Jensen, R. “Agricultural Volatility and Investments in Children.” American Economic Review 90, no. 2 (2000): 399-405.
- *Udry, C. “Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy.” World Bank Economic Review 4, no. 3 (1990): 251-269.
- Credit markets
- a) Theoretical background: Ray, chapter 14
- b) Why do informal money lenders charge interest rates that are so high? Aleem (1990)
- c) An innovative form of lending: micro-credit: Morduch (1999)
- [Ray] chapter 14.
- Morduch, J. “The Microfinance Promise.” Journal of Economic Literature 37, no. 4 (1999): 1569-1614.
- Formal and informal institutions
- a) Collective action: Banerjee, Iyer, and Somanathan (2007)
- \> i) Norms helped to sustain long distance trade among Maghribi traders: Greif (1993) \> \> ii) However, successful informal institution can be an obstacle to the development of formal institutions: Greif (1994) \> \> iii) Social norms as an obstacle to the demographic transition: Munshi (2000)
- \> i) Institutions differ widely around the world: La Porta, de Silanes, Shleifer, and Vishny (1998) \> \> ii) Good institutions are important for economic performance: aggregate approach: Acemoglu, Johnson, and Robinson (2001) \> \> iii) Historical approach: In India, colonial history continues to impact today’s outcomes: Banerjee and Iyer (2002); Iyer (2003) \> \> iv) The mechanics of why institutions matter. A poor institutional environment may makes business difficult. A study of contracting and reputation in the Indian Software industry: Banerjee and Duflo (2000)
- Greif, A. “Contract Enforceability and Economic Institution in Early Trade: The Maghribi Traders Coalition.” American Economic Review 83, no. 3 (1993): 525-548.
- ———. “Cultural Beliefs and the Organization of Society: A Historical and Theoretical Reflection on Collectivist and Individualist Societies.” Journal of Political Economy 102, no. 5 (1994): 912-950.
- Munshi, K. “Social Norms and Individual Decisions During a Period of Change: An Application to the Demographic Transition.” Mimeograph, University of Pennsylvania, 2000.
- La Porta, R., F. L. de Silanes, A. Shleifer, and R. Vishny. “Law and Finance.” Journal of Political Economy 106, no. 6 (1998): 1113-1155.
- *Acemoglu, D., S. Johnson, and J. Robinson. “The Colonial Origins of Comparative Development: An Empirical Investigation.” American Economic Review 91, no. 5 (2001): 1369-1401.
- Limits to social policy: corruption
- a) Why is corruption costly? Shleifer and Vishny (1993)
- b) The cost of corruption: drivers’ licenses in New Delhi (Bertrand, Djankov, Hanna, and Mullainathan (2006)) and trucking in Indonesia (Olken and Barron (2007))
- c) Fighting Corruption: road in Indonesia: Olken (2005)
- The textbook for this class is Debraj Ray’s Development Economics . However, we will rely mostly on articles. There are many readings for this class. You are not expected to read every single article in detail, but you are expected to understand the methods used by the authors to reach their conclusions. Required readings are starred. Lecture notes will be distributed at each lecture. They are not a substitute for attending the class, but rather a study aid.
Prerequisites & course information
Subject meets with 14.740 Prereq: 14.01 U (Fall) Not offered regularly; consult department 4-0-8 units. HASS-S
Sources
- Course catalogue ↗2026–2027
- MIT OpenCourseWare ↗Spring 2009
- MIT OCW readings ↗
- MIT OCW calendar ↗
- MIT OCW syllabus ↗
- Historical MIT OpenCourseWare offering. Named reading entries and schedule topics are automatically extracted from the linked source pages.