41433 - DEVELOPMENT ECONOMICS

Learning outcomes

The course analyzes the factors that constrain growth and development in Low Income Countries (LICs) whose economy is characterized by weak institutions, severe market imperfections such as imperfect labor markets, and lack of access to credit. The analysis will be conducted using standard methods of the economists’ toolkit, including economic modeling, game theory, and behavioral economics.  The course will extensively refer to empirical studies and field work to investigate the effectiveness of the policies designed to improve social welfare in developing countries. At the end of the course, students will be able to: 1) discuss and analyze theoretical models referring to market imperfections characterizing LICs; 2) understand the empirical methods that are used by the profession to study developing countries; 3) identify the connections between the theoretical literature and the outstanding empirical evidence.

Course contents

The course will discuss key topics in Development Economics:

1) The Solow Model: Theory and Empirical Evidence

3) Poverty Traps

2) Foreign Aid

3) Health

4) Education

5) Risk and Insurance

6) Credit Markets

7) Microcredit

8) History, Institutions, and Culture

Knowledge of microeconomics, macroeconomics, and basic statistics is extremely important.

Suggested reading on methods: "Mastering Metrics: The Path from Cause to Effect" by Joshua D. Angrist and Jörn-Steffen Pischke

Readings/Bibliography

During the course several papers will be discussed. Knowledge of econometric methods is important to understand the content of these papers.

Below you can find a preliminary (and incomplete) list of papers to be discussed:

Mankiw, G., 2022. Macroeconomics, 11th edition. Chapters 8 and 9.

Banerjee, Abhijit V. & Duflo, Esther, 2005. ”Growth Theory through the Lens of Development Economics,” Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 7, pages 473-552, Elsevier.

Banerjee, Abhijit V. & Duflo, Esther, 2011. Poor economics: a radical rethinking of the way to fight global poverty. Public Affairs.

Kraay, A. and McKenzie, D., 2014. Do poverty traps exist? Assessing the evidence. Journal of Economic Perspectives, 28(3), pp.127-148.

Dreher, A., LMichalopoulos, S. and Papaioannou, E., 2013. Pre‐colonial ethnic institutions and contemporary African development. Econometrica, 81(1), pp.113-152.ang, V. and Reinsberg, B., 2024. Aid effectiveness and donor motives. World Development, 176, p.106501.

Miguel, E. and Kremer, M., 2004. Worms: identifying impacts on education and health in the presence of treatment externalities. Econometrica, 72(1), pp.159-217.

Cohen, J. and Dupas, P., 2010. Free distribution or cost-sharing? Evidence from a randomized malaria prevention experiment. The Quarterly Journal of Economics, 125(1), pp.1-45.

Lowes, S. and Montero, E., 2021. The legacy of colonial medicine in Central Africa. American Economic Review, 111(4), pp.1284-1314.

Duflo, Esther. 2001. ”Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment.” American Economic Review, 91(4): 795-813.

Bold, T., Filmer, D., Martin, G., Molina, E., Stacy, B., Rockmore, C., Svensson, J. and Wane, W., 2017. Enrollment without learning: Teacher effort, knowledge, and skill in primary schools in Africa. Journal of Economic Perspectives, 31(4), pp.185-204.

Robert Jensen, ”The (Perceived) Returns to Education and the Demand for Schooling” Quarterly Journal of Economics 125 (2) (2010): 515-548.

Banerjee, Abhijit, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan. 2015. ”The Miracle of Microfinance? Evidence from a Randomized Evaluation.” American Economic Journal: Applied Economics, 7(1): 22-53.

Cole, S., Giné, X., Tobacman, J., Topalova, P., Townsend, R. and Vickery, J., 2013. Barriers to household risk management: Evidence from India. American Economic Journal: Applied Economics, 5(1), pp.104-135.

Karlan, D., Osei, R., Osei-Akoto, I. and Udry, C., 2014. Agricultural decisions after relaxing credit and risk constraints. The Quarterly Journal of Economics, 129(2), pp.597-652.

Khwaja, Asim, and Atif Mian. (2005). Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market, Quarterly Journal of Economics, 120(4).

Banerjee, A., Karlan, D. and Zinman, J., 2015. Six randomized evaluations of microcredit: Introduction and further steps. American Economic Journal: Applied Economics, 7(1), pp.1-21.

Field, Erica, Rohini Pande, John Papp and Natalia Rigol. 2013.”Does the Classic Microfinance Model Discourage Entrepreneurship among the Poor? Experimental Evidence from India.” American Economic Review, 103(6): 2196-2226.

Acemoglu, D., Johnson, S. and Robinson, J.A., 2001. The colonial origins of comparative development: An empirical investigation. American economic review, 91(5), pp.1369-1401.

Michalopoulos, S. and Papaioannou, E., 2013. Pre‐colonial ethnic institutions and contemporary African development. Econometrica, 81(1), pp.113-152.

Teaching methods

Slides and Blackboard

Assessment methods

Written examination and presentation.

The maximum possible score is 30 cum laude, in case all anwers are correct, complete and formally rigorous.

The grade is graduated as follows:

<18 failed
18-23 sufficient
24-27 good
28-30 very good
30 e lode excellent

Teaching tools

PDF slides of the course distributed to students through Virtuale.

Office hours

See the website of Sara Lazzaroni