Econ 681 – Development Economics



ECON 6440-R01– Community Economic Development

Spring 2011

Dr. Subha Mani

Dealy Hall, Fifth Floor, Room E520

Fordham University

Email – smani@fordham.edu

Lectures – Monday, 7.30-9.20 pm, Dealy Hall 112

Office hours – Monday 1.30-3.30 pm; Thursday 1.30-2.30pm, all other times by appointment only

Objective: Health, education and income are used as key markers of development in a community. The objective of the course is to provide you an understanding of factors and characteristics that determine economic development in a community. In this course, the household is the major unit of analysis. We focus on areas of human capital (health and education) accumulation, poverty, program evaluation and microfinance. The papers used here use an empirical approach to understand development issues at the microeconomic level.

Course requirements: This course requires you to submit five referee reports. Each referee report accounts for 5% of your final grade. In addition, you will have in class presentations, a take home midterm and a final project.

The final grade for the course will be calculated as a weighted average of the referee reports, class presentations, midterm, final exam and class participation; where the weights will be assigned as follows:

Referee report – 20%

Class presentation – 15%

Midterm – 25%

Final Project – 35%

Class participation – 5%

For the purpose of this class, you will be divided into three groups. You will be responsible as a group for the in class presentation and the final project. The details for the final project will be discussed in class.

You will get points for class participation only if you make a correct argument or have good questions in class. A large part of the class participation grade will depend upon your knowledge of the reading to be discussed during class time. Required readings are marked as read * and must be read ahead of time.

You must have working knowledge of some basic concepts in econometrics such as Ordinary Least Square (OLS) estimation and hypothesis testing.

I will only occasionally review the essential econometrics needed for understanding the papers discussed in the reading list. It is for you try and understand the econometrics technique first by yourself from Wooldridge (2002). I will address only specific questions.

Background readings in development economics and econometrics

Perkins, D., S. Radelet, D. Lindauer. 2006. Economics of Development, 6th edition, Norton.

*World Bank’s World Development Report, Oxford: Oxford University Press from various years (each year focuses on a different topic).

Deaton, A. 1997. The Analysis of Household Surveys: Microeconometric Approach to Development Policy. Baltimore: Johns Hopkins University Press.

The books are mostly for reference purposes only. There is no required textbook for the course.

Reading list

The * readings are required readings, all of which will be available on blackboard.

1. Introduction to Development Economics

In this section, we will use microeconomic indicators of well being to measure country’s economic performance. These microeconomic indicators are constructed using household survey data from developing countries. There are no required readings for this introductory section. You can simply rely on class notes that will be posted on blackboard. In this section we will cover the following – (a) measures of well being constructed using micro level data and to understand the difference between macro and micro measures, (b) understand the living conditions of the poor around the world, and (c) understanding the role of human behavior in development problems.

Banerjee, A and E. Duflo. 2007. The Economic Lives of the Poor, Journal of Economic Perspectives, vol 2(1), 141-167

Mullainathan, S. 2010. Development Economics through the lens of psychology, Proceedings of the Annual Bank Conference on Development Economics, forthcoming.

2. Poverty

In this section we will learn to construct measures of poverty, most important indicator of well economic well being.

*Ravallion, M. 1998. Poverty Lines in Theory and Practice. Living Standards Measurement Study. Working Paper No. 133, Washington, D.C.: World Bank.

*Ravallian, M. and B, Bidani. 1994. How Robust is a Poverty Profile? World Bank Economic Review 8(1): 75-102.

World Bank. 2001. World Development Report: Attacking Poverty 2000/2001. Washington, DC: World Bank, pp. 15-29.

Lanjouw, P. and M. Ravallion. (1995). Poverty and Household Size. Economic Journal 105: 1415-1434.

Deaton, A. 2003. Measuring Poverty in a Growing World. Available at:

3. Program Evaluation

In this section, we will use empirical methods used by academicians and policy makers to assess the effectiveness of programs and policies such as the food for education policy, conditional cash transfer program, and nutrition supplement program.

There are two kinds of empirical frameworks – natural experiments and field experiments used to evaluate programs and policies.

Dr. Mitra and I will be coordinating and teaching this section jointly; she will focus on evaluation methods using natural experiments, while I will focus on field experiments.

We will have three lectures in this topic, the first lecture will be give by Dr. Mitra and the two follow-up lectures will be given by me. Dates for this will be announced in class.

*Duflo, E., R. Glennerster and M. Kremer. 2008. Using Randomization in Development Economics Research: A Toolkit, in T.P. Schultz and J. Strauss (eds.), Handbook of Development Economics, Volume 4, Amsterdam: North Holland Press (selected sections only).

*Duflo, E. 2006. Field Experiments in Development Economics. [available at: ]

Banerjee, A, E. Duflo. 2009. The Experimental Approach to Development Economics [ ]

Banerjee, A., E. Duflo, R. Glennerster, C. Kinnan. 2009. The Miracle of Microfinance? Evidence from a Randomized Evaluation [available at: ]

Miguel E. and M. Kremer. 2004. Worms: Identifying Impacts on Education and Health in the Presence of Treatment Externalities, Econometrica, 72.1:159-217

*Banerjee, A, S. Cole, E. Duflo and L. Linden. 2007. Remedying Education: Evidence from Two Randomized Experiments in India, The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1235-1264

*Cohen, J. and P. Dupas. 2009. Free Distribution or Cost-Sharing? Evidence from a Randomized Malaria Prevention Experiment, forthcoming in Quarterly Journal of Economics [available at: ]

*Bobonis, G., E. Miguel, C. P-Sharma. 2006. Iron Deficiency Anemia and School Participation, Journal of Human Resources, vol 41 (4), 692-721. [available at: ]

4. Human Capital

Health and education are two important dimensions of human capital accumulation. Human capital is significant determinant of growth and welfare. In this section, we are introduced to the different short-run and long-run measures of health and education among children and adults. We analyze how to identify the various determinants of health and educational outcomes that guide policy prescription.

4.1 Education

*Orazem, P. and E. King. 2008. Schooling in Developing Countries: The Roles of Supply, Demand and Government policy, in T.P. Schultz and J. Strauss (eds.), Handbook of Development Economics, Volume 4, Amsterdam: North Holland Press.

*Birdsall, N. 1985. Public Inputs and Child Schooling in Brazil. Journal of Development Economics, 18 (1), 67–86.

*Brown, P. H., and Park, A. 2002. Education and Poverty in Rural China." Economics of Education Review no. 21: 523-41.

Filmer, D., and Pritchett L., 1999. The Effect of Household Wealth on Educational Attainment: Evidence From 35 countries, Population and Development Review 25(1).

Glewwe, P. 2002. Schools and Skills in Developing Countries: Education Policies and Socioeconomic Outcomes, Journal of Economic Literature no. XI (June 2002): 463-82.

Glewwe, P. and Jacoby, H. 1995. An Economic Analysis of Delayed Primary School Enrollment in a Low Income Country: The Role of Early Childhood Nutrition, The Review of Economics and Statistics no. 77 (Feb 1995): 156-69.

Returns to Education

*Psacharopoulos, G. and H. A. Patrinos. (2004). Returns to Investment in Education: A Further Update. Education Economics 12(2): 111-134.

Schultz, T. P.. 1988. Education investments and Returns. Handbook of Development Economics, vol 3, Edited by H. Chenery and T. N. Srinivasan. Amsterdam: North Holland Press.

Angrist, J. and V. Lavy. 1997. The Effect of a Change in Language of Instruction on the Returns to Schooling in Morocco, Journal of Labor Economics, 15:S48-76.

Duflo, E. 2001. Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence From an Unusual Policy Experiment, American Economic Review, 91:795-813.

4.2 Health

*Strauss, J. and Thomas, D. 2008. Health over the Life Course, forthcoming in the Handbook of Development Economics vol. 4, edited by T. Paul Schultz and John Strauss eds., Amsterdam: North Holland Press.

*Barrera, A. (1990). The Interactive Effects of Mother’s Schooling and Unsupplemented Breastfeeding on Child Health. Journal of Development Economics 34(1/2): 81-98.

*Ghuman, S., J., Behrman, J., Borja, S., Gultiano, and E., King. (2005). Family Background, Service Providers, and Early Childhood Development in Philippines: Proxies and Interactions. Economic Development and Cultural Change, pp 129-164.

Mani, S. (2007). The Role of the Household and Community in Determining Child Health. Dissertation, mimeo.

Duncan, T., V. Lavy, and J. Strauss. 1996. Public Policy and Anthropometric Outcomes in the Côte D’Ivoire. Journal of Public Economics 61(2):155-92

Cebu Study Team. 1992. A Child Health Production Function Estimated from Longitudinal Data. Journal of Development Economics 38(2): 323-351.

Thomas, D., J., Strauss, and M., Henriques. 1990. Child survival, Height for Age and Household Characteristics in Brazil. Journal of Development Economics 33: 197-234.

Thomas, D., J., Strauss and M., Henriques. 1991. How does Mother's Education affect Child Height. Journal of Human Resources 26( 2): 183-211.

Returns to Good Health

*Strauss, J. and D., Thomas. 1998. Health, Nutrition, and Economic Development. Journal of Economic Literature 36(2): 766-817.

*Thomas, D. and J., Strauss. 1997. Health, Wealth, and Wages of Men and Women in Urban Brazil. Journal of Econometrics 77(1): 159-186.

Thomas, D. et. al. 2005. Casual Effect of Health on Labor Market Outcomes: Experimental Evidence. Working Paper, Duke University.

5. Microfinance

In this topic we will learn about the key features of microfinance and how successful is it in improving welfare outcomes? What is the future of this very popular form of household finance?

*Morduch, J. 1999. The Microfinance Promise. Journal of Economic Literature, vol. 37 (4), pp 1569-1614.

Morduch, J. 2000. The Microfinance Schism. World Development, vol. 28 (4), pp 617-629.

Morduch, J. 1999. The Role of Subsidies in Microfinance – Evidence from Grameen Bank, Journal of Development Economics, vol. 60, pp 229-248.

Gine, X., P. Jakiela, D. Karlan, J. Morduch. 2006. Microfinance Games, Working papers 2102, the field experiments website.

Gine, X. and D. S. Karlan, 2006. Group Versus Individual Liability: A Field Experiment in the Philippines, Policy Research Working Paper Series 4008, The World Bank.

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