Introduction

Developing Areas, Less Developed Countries, the Periphery, the Third World, the South, Emerging Markets—each of these conceptually blurry terms evokes regions of the world where living standards are below (often well below) the global average. This course focuses on the changing material living standards of people in these regions.

After an introductory discussion of the relationship between economic growth and other measures of human development, the course begins at the macro level by drawing on contemporary growth theory to study the factors that shape the average level of material well-being in an economy. The course will then consider forces that shape the distribution of material goods within an economy, examining measures of poverty and inequality, and asking what we know about the aggregate relationship between economic growth and income distribution.

The course will then begin to look beneath these aggregate patterns, adopting a micro focus as we explore the economics of why some households, and why some people within households, are able to get ahead as their national economies grow, and while others fall behind. Particular attention will be paid to how these factors impinge on families’ ability to invest in the health and education of their children, and how those decisions shape the persistence of poverty. The HIV/AIDS pandemic in Southern Africa will also be investigated from this perspective. We will pay a great deal of attention to population, since it is considered by most to be one of the major hindrances to growth and by others to be the ultimate resource of a society.

Next we will consider trade, both in theory and in policy, and how it has affected developing countries; and state intervention in the economy by means of economic policy-making.

Finally, after a set of lectures on the logic and consequences of the liberalization and structural adjustment measures that define economic policy making in most contemporary developing countries, the course will examine one of the most contentious issues of our day, namely, the relationship between liberalization, globalization, growth and poverty.

Course Objectives

By the end of this class, you should:

1. Know a lot about the characteristics and reality of developing countries
   1. The prime focus of this class is learning the stylized facts of developing countries: the trends, averages, distributions, etc. of the more important variables that characterized economic development. Although we won’t follow a historical approach, you will learn about important milestones, such as the immediate post-WWII years, the Debt Crisis of the 1980s, etc. Mainly through the readings and the lectures, but also through your own work, you will be learn about the main international institutions that influence development (e.g., the World Bank, the WTO, the UNCTAD) and about the importance of the relevant domestic institutions.
   2. Through the homework and the paper, you will learn how to access and interpret policy statements from the government and other key players as well as actual data.
2. Know what are the main ethical issues and challenges is underdevelopment and in the process of development
   1. Development Ethics will be studied explicitly through several readings – from the Popes, from economists, from development ethicists.
   2. Because Economic Development is about changing the current economic state of a country towards a different state, and because studying development consists in identifying problems and proposing solutions, Development is intrinsically ethical. Implicitly, every class and every topic will touch on ethics.
   3. For the same reason, policy and ideology are tremendously important in this field. We’ll have several opportunities for looking at competing arguments for policy and for identifying the underlying economic ideology.
3. Know how to analyze these countries’ problems rigorously and scientifically.
   1. Because of our emphasis on facts, institutions, and events, this class will not emphasize economic theory (except in regards to the theory of economic growth and its historical development) or analytical/mathematical skills.
   2. Nevertheless, you will be expected to understand and use the relevant economic terminology in a way that is literate and useful, formulating economic arguments adequately, with the goal of being able to explain the main ideas/theories of economics in layman terms to anyone and to professional economists with appropriate level of sophistication.
   3. Because of the emphasis of facts, you will be expected to how statistical evidence is used to make a point about development; to locate and manipulate economic data; and ideally to conduct own empirical statistical analyses.
   4. Because of the emphasis of this class on Ethics and because development is a process that involves politics and culture as well as economics, you should be able to identify what economics can teach us and what it can’t, where it is useful and where it is limited.
4. Improve in your ability to express your thoughts and your findings
   1. Good thoughts improve with good expression. Building on what you already know about writing, the Research Paper will involve:
      1. Framing issues effectively and structuring arguments well
      2. Using appropriate evidence and theory
      3. Expressing yourself effectively and documenting your work appropriately

Readings

To accomplish these objectives, we will use the following books:

• Leading Issues in Economic Development (Paperback) by Gerald M. Meier (Author), James E. Rauch
• Economics of Development, Sixth Edition (Hardcover) by Dwight H. Perkins (Author), Steven Radelet (Author), David L. Lindauer (Author) ISBN 0393926524
• Development as Freedom, paperback edition Amartya Sen, ISBN 0385720270
  • Amartya Sen is a Nobel Laureate development economist and his book is essen-tial reading for understanding the current thinking on development ethics.
• A significant number of handouts (to be given out in class or as weblinks).
• StudySpace http://www2.wwnorton.com/college/econ/dev6/ Adel Varghese, Texas A&M University
  • This free student resource offers rich material to help students study and review effectively, including a complete Study Guide and quizzes to rein-force important concepts. It gives the student a useful review of the tools and techniques that economists use in dealing with the issues of this course. Its combination of worked and unworked problems provides a unique level of tutoring.
• Optional
  • The Elusive Quest for Growth, paperback edition by William Easterly, ISBN 0262550423
  • The End of Poverty: Economic Possibilities for Our Time, paperback edition by Jeffrey Sachs, ISBN 0143036580
    • Sachs and Easterly are both on-the-ground development economists of international repute who have opposing views on the most effective way to address third-world poverty.
    • Another interesting book is Elhanan Helpman's Mystery of Economic Growth.  Helpman is a very well-known growth theorist who wrote this book to explain the history and the cutting-edge of economic growth theory to the rest of us.  Yet another good read is After the Washington Consensus: Restarting Growth and Reform in Latin America by Pedro-Pablo Kuczynski and John Williamson  Kuczynski (an economist and a former Minister of Finance of Perú) and Williamson (a very well known policy economist who coined the term “the Washingon Consensus”) put together this collection of policy proposals for Latin America. It is a wonderful case study in development policies and problems.
  • Economic Development (8th Edition) by Michael P. Todaro and Stephen C. Smith, ISBN 0273-65549-3
    • Todaro/Smith is a standard, best-selling text that I have used in the past.

Requirements

• 4 Take Home Tests 45%
• Homework (including Response Questions) 20%
• Paper (including Proposal and Country Study) 25%
• Final Exam 15%
• Total 105%

Grading Scale

• Over 90 A
• 90 – 80 B
• 80 – 70 C
• 70 – 60 D
• below 60 F

Lectures and Readings

Both the lectures and the readings are crucial to this class. I will post lecture notes in the form of PowerPoint slides on the website and the homework will include questions about the reading.

Homework

You will get homework regularly. It should take little time to do. Turn in short answers to the homework: it's not intended to take a lot of time.

Response Questions: From the reading for the day, email 3 questions to the class.

The Take Home Exams

Economics is about trade-offs. To study 75% of the world and all of the world’s problems in one semester, one can’t do everything (for example, we can’t do a lot of the necessary math). So instead of devoting in-class time to exams, tests will have a take-home format, and will be based on the homework, the lectures, and the readings.

The Country Study

For this 2-3 page paper, research the general growth and development experience of a country of your choice. The purpose of the assignment is to get you to do some background reading on a country you are interested in. You may include all the information you want, but make sure to include

• data on growth and other key indicators,
• data on production, and
• data on resource endowments.
• Political and social factors can also be included.
• Finally, briefly describe the economy and history of the country.

Sources:

• Countries and Regions ([www.worldbank.org/html/extdr/regions.htm]),
• World Bank Development Data and Statistics ([www.worldbank.org/data/]),
• International Monetary Fund ([www.imf.org]),
• IMF World Economic Outlook ([www.imf.org/external/pubs/ft/weo/2001/03/]),
• United Nations Economic and Social Development ([www.un.org/ecosocdev/]),
• United Nations Statistics Division ([unstats.un.org/unsd/]),
• United Nations Development Program ([www.undp.org]),
• Human Development Report ([hdr.undp.org]).
• The Recommended Readings included in each homework assignment.
• The Library has interesting electronic resources at your disposal.

Paper Proposal

This class requires a page paper discussing in detail how a specific developing country has confronted a development problem. You must have the topic of your paper approved by me on the date indicated on the schedule. On that date you must hand to me

1. An interesting one-paragraph description of the country (which should be a summary of your Country Study) …
2. A topic you plan to study and how it relates to your country.
   1. This topic should be neither too narrow nor too broad.
   2. It should be drawn from the topics of the course.
      1. One good way of writing this “topic” is as a problem, and more specifically, as a conflict, in the sense that Literature uses the term. So your topic should suggest something is amiss and needs to be rectified.

   Write your topic as a single sentence that describes a conflict. For example: China has embraced capitalism in the economy but it is still rigidly communist in its political system. Then write a few more sentences that flesh the conflict out.

3. If written well, your conflict-sentence should suggest an outline. E.g.,
   1. China’s historical background as a communist country;
   2. Its reforms in the 1980s and 1990s;
   3. The (economic) problems it is facing or is likely to face because of the communist/capitalist problem (e.g., lack of property rights leads to slower technological progress);
   4. Proposed solutions.
4. A short bibliography
   1. This should include at least three long articles and/or books.
   2. You may use the readings from the class in the paper, but I want you to consult at least three other books/articles.

Research Paper

A. Topic: Pick one developing country and discuss how that country has confronted a specific problem of economic development. For example, you may write about poverty in Ghana, population growth in China, financial crises in Argentina, international trade in Brazil, the role of the state in Korea’s economic development, etc. The main point is to research a specific hypothesis or problem that you have learned in the class. (For example, since we did not talk about urbanization, agriculture, or the envi-ronment in the class, they are not open topics for the final paper.).

B. Structure:

1. Briefly describe the economy and history of the country you are studying (2-3 pages). You may simply copy and paste the Country Study, but you’ll probably want to rework it a little.
2. Describe the problem or issue that you will discuss and how it relates to the country you are studying (2-3 pages).
3. Discuss the policies the government has enacted, or plans to enact, to address the issue or problem (2-3 pages).
4. Lastly, analyze this problem from the point of view of a development economist and present your own analysis of the policies used by the government (4-6 pages). Your analysis should be based on your knowledge of economics and of the ethics of development. I’m looking for analysis, not opinion.
   1. The “economics” part of the paper will be based on the theory that we’ve learned in the course. A sound and deep grasp of the theory is essential for a good grade. For this purpose, you will be required to use the professional literature in economic development.
   2. The paper will be quantitatively oriented. That is, I am interested in seeing Statistics, at least in raw form (graphs and tables). Insofar as it is possible, you should analyze the data (say, using your knowledge from ECO 303: Statistics for the Social Sciences).
   3. The “ethics” part of the paper will be based both on the writings by the Popes we’ve read and the secular writings (i.e., Gasper, Sen, etc.). You may also bring in other authors. The main point of this section is whether the proposed policy is a good policy from the point of view of the people affected.

I will be grading you on the tools, concepts, and frameworks for thinking that you learned in the class. If you write a great paper but do not use much of what we learned in the class, you won’t get much credit.

C. Possible Sources: You may consult books, newspapers, magazines, or scholarly journal articles. I strongly encourage you to cite scholarly journal articles. Some scholarly journals which may help are: World Development, Latin American Research Review, Journal of Developing Areas, Journal of Development Studies, Economic Development and Cultural Change, and Journal of Development Economics. Another good source of articles is the World Bank Working Paper series. These working papers are available from the World Bank bookstore in [www.worldbank.org]. Possible sources of data include the World Development Report of the World Bank, the UN Statistical Tables, the UN Human Development Report, and the IMF World Financial Outlook. They are all available online.

For more sources, there are lists of suggested readings at the end of each chapter and the sources mentioned for the Country Study. Many of these sources are available at the library (especially at [www.jstor.org]) or for free on the internet. If they are not, you may find what you need through interlibrary loan. A good search engine in economics can be found through the Library’s Electronic Resources: this is Proquest. It’s an amazing database on economics articles, books, etc. To get this, go to http://www.lirn.net/services.shtml, type in the code 27516, then click “Connect to Proquest”, then select the Databases “ABI/Inform Global” and the “Business Module” of the Proquest Research Library (sorry, Proquest doesn’t know to distinguish between Business and Economics). Then click continue and search for your topic.

D. Citing Sources: You must cite the sources for the information used in your paper. It is necessary to always cite sources not only for direct quotes but also when you are paraphrasing data or arguments that are not your own. The paper must also include a bibliography. The bibliography should contain only those articles and books that you consulted (read) in writing the paper. You may use any generally accepted method of citing sources in your paper. I suggest citing sources by including after the information: (Authors, date of publication), with the full citation in the bibliography. Below are two examples, the first citing the source of a direct quote, the second citing the source of an argument which I paraphrase.

Example One: According to one authority, "bad writing does not get read" (McCloskey, 1987).

Example Two: Many economists write very badly (McCloskey, 1987). You should not.

You may use any generally accepted method in your bibliography. The only real rule is to use consistent format. I suggest that your bibliography refer to books and article in the following manners:

For books:

• Author(s), date published, Title of Book, publisher, city of publication.

For example:

Mitch, David, 1992, The Rise of Popular Literacy in Victorian England: the Influence of Private Choice and Public Policy, University of Pennsylvania Press, Philadelphia.

For journal articles:

• Author(s), date published, "Title of Article," Journal, Volume, Number, month of publication, page numbers.

For example:

Gindling, T. H., Marsha Goldfarb and Chun-Chig Chang, 1995, "Changing Re-turns to Education in Taiwan," World Development, Vol. 23, No. 2, February, pp. 343-356.

For the internet:

• Author (or organization), date published, “title of article or web page,” web address (you must provide me with enough information that I can find the information for myself).

For example:

• Inter-American Development Bank, 2001 (January 1), “Power Sharing,” [www.iadb.org/idbamerica/Englist/JAN01E/jan01e7.html].

  (Note: if you cannot identify the author or organization that provided the information on the internet, then DO NOT USE that information in your paper.)

E. Spelling, Grammar, and Style: I will expect excellent spelling and grammar. I suggest that you write your paper using a word processor and use the "spell-checker." Make sure to use formal, academic language.

F. Length of the Paper: The paper will be submitted in two stages. At first you will submit a short, 3-5 page paper (see the syllabus for dates). The point is for me to give you comments and direction. This exercise will greatly improve your grade.

The final paper must be between 10 and 15 double-spaced pages. The margins (top, bottom, left and right) cannot be more than one inch. The font used must be 12 point or smaller.

G. Grading: Your grade will be higher if you cite and use articles from professional journals, and if your paper is well-written and well-reasoned. The following is a rough guide to the grading:

1. Including a consistent Bibliography: 5 points.
2. Using formal academic language and citing the sources of the informa-tion you use (at the point where you use it): 15 points.
3. Required length, that is, 10 – 15 pages, font no larger than 12 points, margins no more than one inch: 10 points.
4. All the sections described in B (70 points):
   1. A description of the economy and history of the country you are studying, using the theoretical frameworks you’ve learned in the class, 5 points.
   2. A coherent description of the problem you will study, using the theoretical frameworks you’ve learned in the class, 15 points.
   3. A description of the policies used by the government, using the theoretical frameworks you’ve learned in the class, 15 points.
   4. Your own analysis of the problem and the policies: 35 points, to be shared by the theoretical economics (15 points), quantitative sup-port for your argument (5 points), and ethical analysis (15 points).
5. To repeat: I will be grading you on the tools, concepts, and frameworks for thinking that you learned in the class. If you write a great paper but do not use much of what we learned in the class, you won’t get much credit.

The Internet and Email

This course has an intranet page, http://mysite.avemaria.edu/gmartinez/Courses/ECON320/index.htm. I will post:

• ALL the Class Notes, Handouts, the Homework, the Answers to the Home-work, Study Guides, and Answers to Tests.
• The Syllabus
• Information on each Assignment plus Hints and Handouts.

It is your responsibility to check the Intranet page constantly, as updates will be made on a regular basis. Very, very little will be handed out in class.

I will communicate with you frequently through Email.

• You are REQUIRED to have a university email account.
• You will be responsible for keeping your email account below its maximum memory limit.

Final Advice

Do your work honestly. The point of the class is to LEARN, not to add up points for a grade. Do not kid yourself that you learn anything by copying the work of others. Plus, as Prof. Robert George said to a class of distinctly uncomfortable Princeton students, God will see you doing evil. You are here to learn to be a better person.

Form study groups.

Come to my office and meet with me. I have found that regular out-of-class meetings with the professor make a significant difference in student’s performance in a class. I strongly encourage you to meet me, especially in groups of two or three.

Course Schedule

Introduction to Development

Week 1, Day 1            Introduction; Video

Part One: Development and Growth

Development: What, When, How

Week 1, Day 2            1. Patterns of Development

                                       To Help the Poor, Easterly, Ch. 1

                                       Background, Helpman, Ch. 1

Week 2, Day 1           

 

Week 2, Day 2            2. Measuring Economic Growth and Development

Week 3, Day 1            3. Economic Growth: Concepts and Patterns

Week 3, Day 2            4. Theories of Economic Growth

                                       Older Theorizing on Development

                                       Aid for Investment, Easterly, Ch. 2

                                       Growth and Poverty Reduction: What are the Real Questions?, D. Rodrik

Week 4, Day 1            Neoclassical Growth Theory

                                       Solow's Surprise, Easterly, Ch. 3

                                       Accumulation, Helpman, Ch. 2

Week 4, Day 2            New Growth Theory

                                       Tales of Increasing Returns, Easterly, Ch. 8

                                       Productivity, Helpman, Ch. 3

Week 5, Day 1            Technology

                                       Creative Destruction: the Power of Technology, Easterly, Ch. 9

                                       Innovation, Helpman, Ch. 4

                                       The Role of Technology in Growth, D. Weil, Ch. 8 (handout)

                                       The Cutting Edge of Technology, D. Weil, Ch. 9 (handout)

Week 5, Day 2            5. States and Markets

                                       Institutions and politics, Helpman, Ch. 7

                                       Market Failure and Government Failure, Datta-Chaudhuri

                                       Corruption and Growth, Easterly, Ch. 12

                                       India's Market Reforms: Triumph of Hope Over Fear, Sachs, Ch. 9

Week 6, Day 1           

                                       Industrial Policy in an Export Propelled Economy: Lessons From South Korea's Experience, Westphal, JEP 4, 3

                                       The Latin American State, Fishlow, JEP 4, 3

                                       Reforming the State, Kuc/Will, Ch. 2

                                       Setting the Stage, Kuc/Will, Ch. 1

                                       Agenda for Restarting Growth and Reform, Kuc/Will, Overview

Development Ethics 

Week 6, Day 2            Ch 9.IV, Compendium of the Social Doctrine of the Church

                                       What is Development Ethics? Cases and Questions, D. Gasper, Ch. 1

                                       The Meaning of Development, D. Gasper, Ch. 2

Week 7, Day 1            Test 1

Part Two: Distribution and Human Resources

Week 7, Day 2            6. Inequality and Poverty

                                       Inequality, Helpman, Ch. 6

                                       Inequality: Now you see it, now you don't, F&D, IMF Sept 03

Week 8, Day 1           

                                       The Inequality Trap, F&D, IMF Dec 05

                                       Poverty as Capability Deprivation, A. Sen, Ch. 4

Week 8, Day 2            7. Population

                                       Population and Poverty: Achieving Equity, Equality and Sustainability (United Nations Population Fund, UNFPA), UNFPA, ch 1

                                       Contraceptive Imperialism and Third World Poverty, B. Kopp

                                       Arguments for Investing in Reproductive Health and Rights, UNFPA

Week 9, Day 1           

                                       Population, Resources, and the Environment, A. Wolfgram

                                       Cash for Condoms?, Easterly, Ch. 5

                                       Overpopulation? Scarcity or Lifeboat Economics?, J. Kasun, chs 1 & 2

Development Ethics 

Week 9, Day 2            Amartya Sen

                                       Ch. 1 The Perspective of Freedom

                                       Ch.2 The Ends and the Means of Development

                                       Ch.4 Poverty as Capability Deprivation

Part Three: Saving, Investment, and Capital Flows

Week 10, Day 1          11. Investment, Productivity, and Growth

Week 10, Day 2          no class

Week 11, Day 1          13. Financial Policy

Week 11, Day 2         

Part Four: Production and Trade

Week 12, Day 1          19. Trade and Development

                                       The Theory of Comparative Advantage - Over-view, Suranovic

                                       Market Access for Developing Countries' Exports, WB & IMF, pp. 4-14

                                       The Return of Dependency Theory, Ludema

                                       The Rise and Fall of the Dependency Movement, Sánchez

                                       Spreading the Wealth, Dollar/Kraay

Week 12, Day 2         

                                       Trading in Illusions, D. Rodrik

                                       Trade, Growth, and Poverty, F&D, IMF, Sept 01

                                       Globalization for Whom?, D. Rodrik

                                       International Trade and Economic Growth, ECLAC, pp. 29-52

                                       The Case for Trade Liberalization in Developing Countries, R. Dornbusch, JEP 6, 1

                                       The Limits of Trade Policy Reform in Developing Countries, D. Rodrik, JEP 6, 1

                                       Interdependence, Helpman, Ch 5

Week 13, Day 1          21. Managing an Open Economy

                                       Clinical Economics, Sachs, Ch. 4

                                       Bolivia's High-Altitude Hyperinflation, Sachs, Ch. 5

                                       A Primer on Emerging Market Crises, Dornbusch

Week 13, Day 2         

                                       The Mexican Peso Crisis, Whitt

                                       Battle for Argentina, Caballero/Dornbusch

Week 14, Day 1          Test 2

Week 14, Day 2          Presentations

Week 15, Day 1          Presentations

Week 15, Day 2          Reading Day