Institutions, Governance, and International Development

PADM-GP 2201 Jan 2017

Professor Salo V. Coslovsky Puck Building, Office 3096 [email protected] Office Hours: By appointment (email me)

BOBST LL139

This version: Jan 6th 2017

Course description

This course introduces students to key concepts pertaining to institutional and governance reform in low- and middle-income countries. International development became a topic of explicit concern after World War II, when the Western world grappled with the reconstruction of Europe, decolonization in large parts of Africa and Asia, and the relatively low standards of living in Latin America. It was a time of deep ideological divides and partisan alliances; and also of hope for a new world order, as symbolized by the birth of entities such as the United Nations, the World Bank, the General Agreement on Tariffs and Trade (GATT, later WTO) and the International Monetary Fund.

Since then, progress has been uneven. On one hand, the proportion of the global population living in poverty has decreased considerably and access to life sustaining services such as health, housing, electricity and education has gone up. On the other hand, problems still abound, not only in low-income countries but pretty much everywhere.

The challenge of international development remains enormous, and the meaning, ethics, and appropriateness of this enterprise continue to be highly political and therefore hotly contested. Not surprisingly, reasonable people disagree on what development is, what should be pursued first, how it ought to be done, and who should pay the costs and reap the benefits.

This course addresses a narrow slice of this large pie. To be clear, it does not examine the politics and practices of foreign aid, it does not focus on NGOs or social enterprises, and it does not emphasize the role played by international and multilateral organizations. Rather, it examines two critical challenges faced by local politicians, policy-makers, activists and their allies around the world: (1) how to create vibrant and dynamic markets (including markets for products, services, capital, and labor), and (2) how to create resilient and responsive government agencies that can complement, sustain and tame these markets. Correspondingly, the course is divided into two modules. The first one, named “Institutions” provides a brief survey of the history of development thinking, from the “Big Push” to the contemporary emphasis

1 on institutions, governance, and beyond. The second module explores the challenges of governance, i.e. the processes and structures that society adopts to manage its collective affairs.

By design, this course avoids offering blueprints or one-right-answers to the perceived pathologies of underdevelopment. Rather, it encourages students to search for the levers of change that matter given the constraints that actors face. Rigorous analysis is essential to this task, but at the end of the day development professionals must be creative to find opportunities for constructive action.

Course objectives

By the end of the course students will:

1. Understand the evolution of the theory and practice of institutional and governance reform in developing countries

2. Acquire a critical perspective on blueprints, received wisdoms and other misconceptions prevalent in international development thinking

3. Identify some of the roles played by national and local governments, private businesses, NGOs, citizens and international organizations in promoting economic development

4. Think analytically and strategically about existing levers of institutional reform, improved governance and opportunities for pragmatic change

5. Be a step closer to becoming reflective practitioners, i.e. professionals endowed with a sophisticated grasp of the opportunities, limits and dangers of action in the international development field

Requirements

Grades will be based on participation (30%), two short assignments (15% each) and a final assignment (40%).

Active participation (30%) means attending both class and field visits and contributing to the discussions. Students can contribute by asking good questions and answering questions posed by others.

The first short assignment (10%) consists of a one-page memo detailing one dirigiste, heavy-handed, purposefully distortionary policy adopted in a country of your choice. These types of policies were particularly prevalent from 1940s to 1980s so you might have to do some archival research. More details will be discussed in class. This assignment is due on Monday Jan 9th, and it will be graded as pass-fail.

The second short assignment (10%) consists of a one-page memo examining one effort to improve the quality of the public service in a country of your choice. Your memo will draw from one recent academic article it should include some details about the effort, its logic of action, and whether it delivers results. Again, more details will be discussed in class. This assignment is due on Friday, Jan 13th and it will graded as pass-fail.

2 The final assignment (40%) consists of a personal reflection or a research paper on a topic of your choice and that connects directly to themes discussed in class. The reflection is individual. The research paper can be written individually, in pairs or trios. Students form their own groups, but everyone in a group receives the same grade. The assignment should have between 5 and 10 (double-spaced) pages, including title, bibliography and footnotes in the format indicated below. It is due on Friday, Jan 20th.

Voluntary additional assignments

In the spirit of crowdsourcing, I invite students to contribute to future iterations of the course, in two ways. First, students may submit newspaper and magazine articles, podcasts, short videos, short clips of documentaries, maps, charts, and other resources that illustrate, challenge, or establish a dialogue with the theories, problems and interventions discussed in class, to be added to the course. I am particularly interested in submissions that enrich the classroom experience (i.e. that I can use during the class).

Each submission must be accompanied by a brief memo (from one paragraph to one page) introducing the piece, explaining its main point, and arguing why it should be added to the course / syllabus (and where). Please refrain from suggesting academic articles, especially if they have been assigned in other classes, as I want to avoid unnecessary overlap.

Second, students may also submit insightful comments on any of the readings listed on the syllabus. Comments should range from one paragraph to one page, and should explain why the reading should be promoted (from recommended to required), demoted (from required to recommended), removed from the syllabus, or transferred to a different section. I am not asking for summaries or a list of reasons why the author is “wrong”. A good memo analyzes the pedagogical merit of the piece. Students may also suggest novel questions for discussion or reflection associated with any of the assigned readings.

Submissions are individual and voluntary. The short memo that accompanies each submission will be graded and each one carries the weight of 5%, up to a maximum of 10%. This means that a student who submits two pieces and gets a perfect score on both sees his/her final grade for the course increase by 1.0 point. A student who does not submit anything, or gets a zero, does not suffer any penalty.

Format and submission:

All assignments should be written on Times New Roman size 12, doubled-spaced lines (not 1.5), one inch margins all around. I read a lot of papers and can tell whether a student has respected these guidelines or not. Failure to follow these simple directions may negatively affect your grade.

The assignments must include in-line citations (not footnotes or endnotes) and a bibliography at the end of the document. For instance:

“…this type of engagement has been called responsive (Ayres and Braithwaite 1992, Braithwaite 2005), flexible (Bardach and Kagan 1982), tit-for-tat (Scholz 1984), creative (May and Burby 1998), and adaptive (Hawkins 1984).”

The complete citation goes in the bibliography. Use footnotes for commentary or to make a side point.

3 Please remember to include your name and mailbox number in the paper and use the following format to name your files: IGID [semester year] [your last name] [assignment]

For instance: IGID J2017 Alvarez midterm.doc

To submit your assignments, go to: http://www.dropitto.me/salocoslovsky. From there, you can upload the file directly to my computer. You will need a password, which I will distribute in class.

The website does not provide a confirmation, but there is no need to worry. So far, no assignment submitted through this method ever got lost in cyberspace. If for any reason I cannot find your assignment, I will contact you. Please refrain from emailing me a copy of your assignment “just in case”, or asking me if I got your submission.

Grading Policy:

There is no curve in this course. Everyone may receive an A or everyone may receive an F. Students who fail to submit the required assignments will automatically receive an F for the course, unless you ask for an incomplete and meet the school’s criteria. At the end of the semester, I use the weights listed below to calculate your final score, and convert it back to a letter grade according to the following table:

Numeric Grade Letter Grade Incomplete Incomplete <4.00 F 4.00 – 5.00 C 5.00 – 6.00 B- 6.00 – 7.00 B 7.00 – 8.00 B+ 8.00 – 9.00 A- >9.00 A

(Borderline cases will be decided based on contribution to the class)

I do not look forward to failing any student. If you are having difficulty keeping up, talk to me so we can devise a remedial plan for you to catch up and, hopefully, excel in the course.

Late Policy and Incompletes

Extensions will be granted only in case of emergency. This policy is adopted out of respect to those who have abided by deadlines, despite equally hectic schedules. Papers handed in late without extensions will be penalized 0.25 points per day. For more information on the official school policy, see Wagner’s website: http://wagner.nyu.edu/students/policies/incompletes.php . A note on Academic Integrity and Plagiarism

I take matters of academic integrity very seriously. It is your responsibility to identify quotes and to cite facts and borrowed ideas. If you need guidance, please consult the NYU-Wagner Academic Code (http://wagner.nyu.edu/students/policies/) and additional references listed there. You may also consult the teaching assistants, tutors, or the designated librarian at Bobst. Naturally, you may consult me at

4 any time. Please note that NYU-Wagner subscribes to a commercial service that compares papers to a gigantic database to flag plagiarism. I will refer all cases of plagiarism to the appropriate disciplinary committee, either at Wagner or at the student’s home school.

Classroom Etiquette

Come prepared to engage with your fellow students, professor, and the material to be discussed. I assume everyone has read the articles and chapters indicated in this syllabus. I may start the class by asking a student to summarize the main points to initiate the discussion so come prepared. If you have professional (or personal) experience relevant to the discussion, share it with the class. In the past, students have said that learning from colleagues with relevant experiences was a highlight.

Many people bring their laptops or tablets / iPads to class. That is fine if you are taking notes or sporadically consulting relevant materials online. Access to internet can be handy to find data or settle a factual dispute. However, do not navigate the web, check your facebook page, post on twitter, read the news, respond to email or conduct any activity not directly related to the class. I will not be seeing your screen, but those sitting next to you will, and aimless navigation can be distracting. Please respect your colleagues and keep your focus.

Finally, occasional absences are tolerated and do not need justification. Systematic non-attendance will affect your grade and may lead to an F or Incomplete

Readings

In the past, students have asked for a textbook. There are some textbooks devoted to international development out there, but none covers the materials we cover in this course. This is not necessarily a coincidence or a market opportunity. Rather, it is an indication that international development remains a contested field, without a main corpus of agreed upon theories, and is therefore filled with hopes and possibilities.

All required readings are available on NYU Classes. In the past, we tried assembling a Course Packet, but students complained about the high price and low quality of the copies.

This syllabus contains 38 required and 56 recommended readings. Given that the course meets 14 times, students are assigned, on average, 2.7 required and 4 recommended readings per session. The median publication date for the required readings is 2006.5 (i.e. half of readings were published between 2007 and today; median for recommended is similar). Approximately 30% of all readings have a woman as a prominent author. If we consider only the required readings, 47% of them analyze events in a low- income country or region; approximately 1/3 of them refer to events in Latin America, 1/3 in Asia, and 1/3 in Africa and Eastern Europe.

Assigned readings cover a wide range of topics. Authors come from different countries and represent different political positions, academic disciplines and research traditions. Some articles refer to high- income countries such as the US, and are assigned to call attention to an important theoretical point. Other texts may seem old, but to dismiss them is a mistake. They are assigned because they make important points that remain valid, or are the original articulation of a powerful idea.

5 Students come to this course with diverse interests and heterogeneous backgrounds. The syllabus includes a range of optional readings to help students advance even further. Feel free to read any selection of the optional readings. Bringing them up in class knowledgeably will boost your participation grade. Some of the optional readings are on NYU Classes, others are online, and some may require a visit to the library.

If you face difficulty understanding technical terms, you have two main options: you can ask for clarification during class, or you can look the term up. The library has different dictionaries of economics, political science, and sociology. Some providers have put glossaries and encyclopedias online. For instance, you can try “The Concise Cyclopedia of Economics” maintained by Liberty Inc. and “Economics A-Z”, published by The Economist. Despite its checkered reputation among academics, Wikipedia can provide good pointers as well.

This course in context

This is an introductory course and therefore it does not include some important, often cited, and sometimes-controversial topics related to international development. Many of these topics are covered in the other international development courses offered by core Wagner faculty, including those taught by Paul Smoke, Jonathan Morduch, Natasha Iskander, Rajeev Dehejia, and John Gershman.

Other faculty at NYU who teach courses relevant to international development include Rosalind Fredericks and Gianpaolo Baiocchi (both at Gallatin) and Gustavo Setrini and Dana Burde (both at Steinhardt). Make sure to check their course offerings.

The full list of international development courses and pre-approved NYU-wide development electives is provided at: http://wagner.nyu.edu/courses/otherlistings#international

Still, the scope of international development is so large that some topics may not be covered at all. If you think any particular topic deserves additional coverage in this class, you may join (or form) a student group to organize events, or talk to me and I will be happy to help you engage on your own.

Class dynamics, how to read academic articles and other good habits of mind

Classes will be a mix of lecture, discussion, and applied exercises. All classes mix theory (i.e. generalizations) and practice (i.e. concrete examples), and these two systematically inform each other.

Living with anxiety: Sometimes students point out that this course is a reality shock that dismantles prior certainties and policy beliefs. Albeit disconcerting (even upsetting), this is often a step in the right direction. Yet, nihilism is not the goal. In addition to criticizing other people’s ideas, students should strive to ask the questions that allows one to make meaningful distinctions, identify relevant variables, and devise better theories and interventions. Remember, one of the goals of this course is to help you become a reflective practitioner

Reading academic articles: Academic articles are a diverse genre. Some may flow like a compelling novel while others are dry and filled with jargon and complex equations. Independent of the writing style of the author or the tools of the discipline, your task is to identify the main problem or research question; the method deployed by the author(s) to answer the question, and the conclusion. Do not be sidetracked by side points and minor details.

6 Politics of development: Issues of power, inequality, and minority representation are interspersed throughout the semester. Whenever we discuss a new theory or element of the development puzzle, you should try to identify how the proposed theory and resulting interventions affect the distribution of power in society and creates (or negates) opportunities for a more inclusive and participatory economy.

Also, do not fall prey to the easy dichotomy of identifying everything that comes from abroad or are of a different persuasion than “the local people” as colonialist, detrimental, abusive, imperialist or exploitative, and everything that is home-grown as genuine, selfless and beneficial. In the real world, there is plenty of exploitation within countries, conducted by otherwise equals. Likewise, there is plenty of positive change triggered and supported by foreign entities and individuals. To be able to identify (and possibly create) cross-cutting alliances is a crucial skill for anyone interested in understanding and promoting development.

Along similar lines, students sometimes advocate for everything local and participatory. These tend to be good things, but as warlords, ward bosses, “caciques”, “coronéis”, and other incarnations of the local autocrat have repeatedly shown, not everything local is wholesome, selfless, and beneficial to the poor. Moreover, what some people define as development can be disruptive to others, and these people will surely oppose the change. Do not forget the politics.

Legitimacy and Authority: Students come to class with different experiences. If you think you cannot contribute to the course because you were born and raised in the US and not in a developing country, you are wrong. Direct experience with the challenges of development is nice, but not necessary (or sufficient) for engagement. All students, independent of social class or national origin, use their capacity to draw analogies, think abstractly, and empathize with the “other” to stay on top of the readings and discussions.

Additional Resources

Wagner tutors are available to help students with their writing skills. Please see details on http://wagner.nyu.edu/students/services/writing.php . This webpage has additional details on other useful resources, including NYU Writing Center and several links concerning plagiarism and how to cite properly. Also, make sure to read the document titled “How to write a memo”, available on that same webpage and on this link: http://wagner.nyu.edu/students/services/files/WritingMemos.pdf

The web has some interesting diagnostic tools to help you write better. After you finish writing your paper but before you submit it, you can obtain automated readability statistics here: https://igm.rit.edu/~jxs/services/TestReadability.html and some additional feedback here: http://writersdiet.com/?page_id=4 . Use these services to improve your prose.

7 Getting up to speed, moving forward

If you want to learn more about international development prior to this course, want to regain fluency, or simply want to survey the field, you can read a selection of the books below, listed in no particular order, and accessible to a general audience:

These books are optional / recommended for your enjoyment and general education. They are not part of the course and will not be discussed in class

 McMillan, J. (2003) Reinventing the Bazaar: A Natural History of the Market

 Chang, HJ. Kicking Away the Ladder: Development Strategy in Historical Perspective

 Yuen Yuen Ang (2016) How China Escaped the Poverty Trap

 Helpman, Elhanan. The Mystery of Economic Growth

 Rodrik, D. (2003) In Search of Prosperity

 Banerjee A and E. Duflo, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty

 Acemoglu D and J. Robinson, Why Nations Fail

 Tracy Kidder, Mountains Beyond Mountains

 Mallaby, Sebastian (2006) The World's Banker: A Story of Failed States, Financial Crises, and the Wealth and Poverty of Nations

Other online resources (in no particular order):

Development Drums Podcast http://developmentdrums.org/

Planet Money Podcast http://www.npr.org/sections/money/

Chris Blattman’s Blog http://chrisblattman.com/

Development Impact http://blogs.worldbank.org/impactevaluations/

Let’s Talk Development http://blogs.worldbank.org/developmenttalk/

Centre for the Study of African Economies http://blogs.csae.ox.ac.uk/

Center for Global Development http://www.cgdev.org/section/opinions/blogs

The Development Set https://medium.com/the-development-set

8 Course Schedule

Fri, Jan 6 Class 1: 9:00 to 10:40 Poverty and the Challenges of International Development Class 2: 11:00 to 12:40 How to create a job?

Mon, Jan 9 Class 3: 9:00 to 10:40 The Developmental State (assignment 1 is due) Class 4: 11:00 to 12:40 Market reforms Field visit: 2:00 NYU Office of Global Programs

Tue, Jan 10 Class 5: 9:00 to 10:40 The Microeconomic agenda Class 6: 11:00 to 12:40 Property rights Field visit: 3:00 New York City Economic Development Corporation

Wed, Jan 11 Class 7: 9:00 to 10:40 Private contracts and the rule of law Class 8: 11:00 to 12:40 Fostering performance in the private sector Field visit: 3:00 ReBoot

Thu, Jan 12 Class 9: 9:00 to 10:40 Collective action in the marketplace Class 10: 11:00 to 12:40 State Capacity Field visit: 2:00 (TBD) UNICEF’s Office of Emergency Programmes

Fri, Jan 13 Class 11: 9:00 to 10:40 Delivering Public Services I (assignment 2 is due) Class 12: 11:00 to 12:40 Delivering Public Services II Class 13: 1:45 to 3:25 Working with corruption Class 14: 3:45 to 5:25 In-class reflections

Fri, Jan 20 Final assignment is due

9 Class 1

Poverty and the Challenges of International Development

1 - Required Readings

Boo, Katherine. (2013) Beyond the Beautiful Forevers [book]

Hirschman, Albert O. (1963) "The Contriving of Reform." In: Journeys Toward Progress: Studies of Economic Policy-Making in Latin America. New York, NY: The Twentieth Century Fund, pp. 251-264 and 271-275.

2 – Recommended Readings

Banerjee, A. and Duflo E (2007) The Economic Lives of the Poor, Journal of Economic Perspectives

Hobbes, Michael (2013) Why is Zambia so Poor? The Pacific Standard

Rodrik, Dani (2014) When Ideas Trump Interests: Preferences, Worldviews, and Policy Innovations, Journal of Economic Perspectives 28(1):189-208

3- The readings in context (pointers for readers)

The two required pieces provide a frame for the course. On one side, Katherine Boo’s book gives a vivid and fine-grained portrait of urban poverty. This book is non-fiction; as stated by the author, every single character is real and every single fact is true. When reading this book, you should pay attention to the numerous challenges faced by the main characters, and also the challenges faced by a would-be reformer intent on promoting development in that corner of the world. On the other side, Albert Hirschman’s chapter identifies some of the under-utilized levers and opportunities for positive reform. When reading this piece, try to imagine how you would find possibilities where others only see constraints.

On the recommended list, the review article by Banerjee and Duflo allows us to see whether Boo’s portrayal of poverty can be generalized to other settings and countries. The article by Hobbes examines some of the development challenges faced by Zambia, and how they can seem impossible to solve. And Rodrik’s piece provides a more contemporary take on Hirschman’s propositions.

10 Class 2

How to create a job

1 - Required Readings

Amsden, Alice (2010) Say’s Law, Poverty Persistence, and Employment Neglect. Journal of Human Development and Capabilities: A Multi-Disciplinary Journal for People-Centered Development. Vol 1, Issue 1. Pp 57-66.

Rosenstein-Rodan, Paul. (1943). Problems of Industrialization of Eastern and Southeastern Europe. The Economic Journal, vol.53, no 210/211 (Jun-Sep 1943), pp 202-211

Black, Eugene (1952) The World Bank at Work, Foreign Affairs

Ravaillon, Martin. (2016) The World Bank: Why it is Still Needed and Why It Still Disappoints, Journal of Economic Perspectives 30(1):77-94

Gunder Frank, Andre (1966) The Development of Underdevelopment. Monthly Review. 18(4): 17-31

Munk, Nina (2007) Jeffrey Sachs’s $200 Billion Dollar Dream, Vanity Fair [see also her subsequent book, “The Idealist”]

McMillan, Margaret and Harttgen, K (2014) What is Driving the ‘African Growth Miracle’?

Banerjee, Abhijit, Duflo, Esther et al (2015) A Multifaceted Program Causes Lasting Progress for the Very Poor: Evidence from Six Countries

In this session we discuss a classic article by Rosenstein-Rodan, and a more recent piece by Alice Amsden. When reading the piece by Rodan, think of Eastern and Southern Europe as developing countries, and pay attention to his diagnostic of what holds those countries back, his prescription on how these obstacles can be removed, and who should be in charge. When reading the piece by Alice Amsden, notice how she argues against the layering of multiple and relatively small “social” interventions and defends purposeful policies that create jobs. Once again, pay attention to her diagnostic of what holds low- and middle-income countries back, how these obstacles can be removed, and who should be in charge.

To complement this discussion, we read a historical piece by Eugene Black (the World Bank’s second president), in which he explains the WB’s strategy, together with a recent piece by Martin Ravaillon, an economist who spent 25 years at the Bank, in which he assesses the same topic 60 years later What would Rodan and Amsden think of the Bank’s strategy in over time?

11 Class 3

The Developmental State

1 – Required Readings

There are no required readings. The discussion will revolve around your assignment (see below)

Hamilton, Alexander (1791) Report on Manufactures

Johnson, Chalmers (1982) MITI and the Japanese Miracle [book]

Amsden, Alice (1989) Asia’s Next Giant: South Korea and Late Industrialization [book]

Wade, Robert (1990) Governing the Market [book]

Castells, Manuel (1992) Four Asian Tigers with a Dragon Head

Evans, Peter (1995) Embedded Autonomy [book]

Mazzucatto, Mariana (2011) The Entrepreneurial State [pamphlet, followed by book of same title]

Cohen S. and Bradford DeLong (2016) Concrete Economics

Over the years, governments all around the world have taken bold action to steer their economies into more rewarding territory. Some of these governments came to be known as “Developmental States”. In this session, we will use your 1st assignments to conduct a crowdsourced exercise to create a repertoire of practices of the Developmental State. There are no required readings. But to help you prepare, I suggest you acquaint yourself with the arguments advanced by some of the books listed above.

4 – The assignment

Each student should choose a country and find at least one developmental policy adopted by its government. By “developmental “, I mean the heavy-handed, highly interventionist policies that were in vogue in most of the Third World (i.e. low-income, not communist countries) between the end of WWII (1945) and the fall of the Soviet Union (1991). Examples include tariffs, quotas, subsidies, price controls in product, capital, and labor markets, state-owned enterprises, minimum content requirements, and massive investment in infra-structure and other public goods.

Your summary should include country, year(s), the policy, its goals, and its results. Much has been written about Japan, South Korea, Taiwan, Brazil, India, and China. If possible, you should examine policies adopted in the Middle East, North and Sub-Saharan Africa, Mexico, Central America, the Caribbean, and other countries in Asia, such as Thailand and the Philippines.

12 Class 4

Market Reforms

Krueger, Anne. (1990). “Government Failures in Development,” Journal of Economic Perspectives. Vol. 4, No. 3, pp. 9-23.

DeLong, B. J. and Eichengreen B. (1991), The Marshall Plan as a Structural Adjustment Program

Sachs, Jeffrey. (2006) The End of Poverty, Bolivia’s High-Altitude Hyperinflation (chapter 5)

2 - Recommended Readings

Bhagwati (1982), Directly Unproductive Profit-Seeking (DUP) Activities

Strange, Susan (1995). The Defective State

Williamson, John (1990) What Washington Means by Policy Reform? Chapter 2 from Latin American Adjustment: How Much Has Happened? Edited by John Williamson. Pages 7-20.

Sachs, Jeffrey (2012). What I did in Russia

Babb, Sarah (2013) The Washington Consensus as transnational policy paradigm: its origins, trajectory and likely successor. Review of International Political Economy

In this session, we discuss a classic piece by Anne Krueger, in which she analyzes the failings of government as an agent of economic development. To complement her perspective, I recommend Jagdish Bhagwati’s classic piece titled “DUP”. When reading these pieces, try to identify the problems caused by excessive government intervention in the economy.

We also read an assessment of the Marshall Plan by Bradford deLong and Barry Eichengreen. Scholars and policy-makers often use history to illuminate the path ahead. In this case, what does the Marshall Plan tells us about the best way to prop up a failing economy? To complement this piece, I highly recommend John Williamson’s original formulation of the “Washington Consensus”. For a comprehensive overview, you can also read Sarah Babb’s article

Finally, we read a testimonial by Jeffrey Sachs on how he helped Bolivia overcome serious macroeconomic malfunctions in the mid-1980s. In a subsequent (recommended) piece, he describes his involvement in Russia. Drawing from the readings, what was the tenor of his advice to Bolivia? And given what he saw and did in Bolivia, would Sachs agree or disagree with Krueger’s diagnostic, and deLong & Eichengreen (and Williamson’s) policy advice?

13 Class 5

The Microeconomic Agenda

1 – Required Readings:

Djankov. Simeon (2016) The Doing Business Project: How it Started. Correspondence, Journal of Economic Perspectives

Besley and Burgess (2004) Can Labor Regulation Hinder Economic Performance? Evidence from India, Quarterly Journal of Economics

Hsieh, Chang-Tai and Klenow P. (2009) Misallocation and Manufacturing TFP in China and India. Quarterly Journal of Economics 124(4)

Divanbeige R. and Rita Ramalho (2015) Business Regulation and Growth

2 – Recommended Readings:

Djankov et al (2002), The Regulation of Entry, Quarterly Journal of Economics

Aghion, P et al (2008) The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India, American Economic Review 98(4):1397-1412

Huang, Yasheng (2012) How Did China Take Off? Journal of Economic Perspectives 26(4):147-170

Deregulation and increased competition is a mainstay of policy advice in low- and middle-income countries. To get started, please read Djankov brief letter to JEP explaining the origins and mechanics of the “Doing Business Project”, an effort to measure the burden of regulations around the world. The other three pieces use sophisticated econometric techniques to measure the impact of regulations on markets. When reading these pieces, you do not have to dwell on the mathematics. Rather, try to identify the alleged problems associated with excessive regulations and the authors’ implicit or explicit policy advice. And then, you should shift gears and try to think why so many regulations were adopted in the first place, and what would happen if they were all removed.

14 Class 6

Property Rights

McMillan, John (2008) Market Institutions, Palgrave Dictionary of Economics

De Soto (2001) The Mystery of Capital, Finance and Development, International Monetary Fund

Field, Erica (2007) Entitled to Work: Urban Property Rights and Labor Supply in Peru

2 – Recommended Readings:

North, D. (1991) Institutions, Journal of Economic Perspectives, 5(1): 97-112. [Highly recommended]

World Bank (1998) Beyond the Washington Consensus: Institutions Matter

Galiani and Schagrodsky (2010): Property Rights for the Poor: Effects of Land Titling, Journal of Public Economics

Rose, Carol (1988) Crystals and Mud in Property Law, Stanford Law Review

Mitchell, Timothy (2008) Rethinking Economy

First of all, if you have not read Douglass North’s classic piece on “Institutions” (listed under “Recommended”), please do so.

In this session, we will discuss McMillan’s brief explanation of “Market Institutions”. This article provides a frame for many of our future discussions. As a complement, you can also read (or skim) the World Bank’s report titled “Beyond the Washington Consensus”, or McMillan’s book (2002), Reinventing the Bazaar. When reading these pieces, keep the following questions in mind: what are institutions, why do we need them, and how do they change?

Then, we read Hernando de Soto’s article about “property rights”. When reading this piece (a summary of his famous book of same name), try to identify why property rights matter, and who should be in charge of providing (and protecting) it. Finally, we discuss an article by Erica Field assessing whether a de Soto-inspired intervention in Peru delivered the expected results. To complement this piece, I recommend the article by Galiani and Schagrodsky (2010). They use different data and methods to assess the same question.

Finally, as a counterpoint, I recommend Timothy Mitchel’s piece, in which he sharply criticizes Field’s research and the logic that it represents, and Carol Rose’s piece, in which she examines US property law to see if it meets the standards set by de Soto.

15 Class 7

Private contracts and the rule of law

Fafchamps, Marcel and Bart Minten (2001). Property Rights in a Flea Market Economy. Economic Development and Cultural Change. 49(2)

Black, Bernard (2000) "The Core Institutions that Support Strong Securities Markets," Business Lawyer, Vol. 55, pp. 1565-1607

Farrell, Henry (2015) Dark Leviathan, Aeon Magazine

Warren, Elizabeth (2007) Unsafe at Any Rate, Democracy Journal

La Porta et al (1997) Legal Determinants of External Finance, The Journal of Finance

McMillan and Woodruff (2002) The Central Role of Entrepreneurs in Transition Economies, JEP

Geertz, C. (1978) The Bazaar Economy: Information and Search in Peasant Marketing

We start this session discussing Fafchamps and Minten (2001)’s assessment of the market for grains in Madagascar. This article is fairly long, but we are not interested in the mathematics. Rather, try to put yourself in the traders’ shoes, and understand how they behave, why they do it, and what are the aggregate consequences caused by their behavior. To complement this piece, you can read Clifford Geertz’s famous description of a market in rural Morocco. You can also read McMillan and Woodruff (2002) overview of entrepreneurs in Russia, Poland, China and Vietnam during the transition from Communism to Capitalism. What is the main limitation that these buyers and sellers face? Should we care about them? If so, how can these bottlenecks be removed?

Scaling things up, we will discuss Bernard Black’s piece. Instead of discussing tangible products, he analyzes the pre-requisites for the establishment of a successful capital market. This theme (law & finance) has generated enormous amount of research since Black wrote this piece.

Finally, we discuss Farrell’s (2015) vivid description of the “silk road”, a secret online market for illegal drugs, arms, and services. When reading this piece, try to identify the reason why this market fell apart, what it would need to thrive, and how this ingredient could be provided.

16 Class 8

Fostering performance in the private sector

Nicholas Bloom, John Van Reenen. (2010) Why Do Management Practices Differ across Firms and Countries? Journal of Economic Perspectives. vol. 24, no. 1 (pp. 203-24) [skim for background]

Hirschman, Albert O. (1958) The Strategy of Economic Growth; chapter 1 (skip pp 14-24; chapter 4 recommended)

Tendler, J. and M. Amorim (1996) Small Firms and their Helpers, 24(3): 407-426

Schrank, A. (2013) From disguised protectionism to rewarding regulation: The impact of trade- related labor standards in the Dominican Republic. Regulation & Governance. 7(3): 299–320

Syverson C (2011) What determines productivity? Journal of Economic Literature

Dubin, Kenneth (2012), Adjusting to the Law The Role of Beliefs in Firms’ Responses to Regulation, Politics and Society

Brown, Drusilla, Rajeev Dehejia, Robertson (2013) Is there an efficiency case for international labor standards?

The article by Bloom and Van Reenen provides the necessary background for the class. In a nutshell, the authors find that private-sector firms do not always optimize their performance or maximize their results (see also Syverson 2011 in the recommended list). This finding presents us with a theoretical challenge and a practical opportunity. On the theory side, what is holding these firms back, given that competitive markets should have wiped them out? One possible answer is provided by Dubin (2012), who interviewed managers in Spain. What else could be going on?

On the practical side, how can the government foster greater productivity and performance? To help us think it through, we discuss Hirschman’s idea of pacing or inducement devices. And then, we read Tendler’s and Schrank’s articles to get a sense of what these devices might look like in practice. Can you think of other ways that the government can help private firms improve their performance? And, at a conceptual level, are we still discussing the provision of “institutions” in the sense advanced by McMillan, North and others, or are we talking about a different mode of action?

17 Class 9

Collective action in the marketplace

Skyrm, Brian (2001) The Stag Hunt, Presidential Address, American Philosophical Association.

Naseer, Farooq (2005) Whither Quality? Incentives in the Sugarcane Market in Pakistan

Coslovsky, S. (2014) Economic Development without Pre-Requisites: How Bolivian producers met strict food safety standards and dominated the global brazil nut market, World Development. Volume 54, Pages 32–45

Iskander, Lowe and Riordan (2010) The rise and fall of a micro-learning region: Mexican immigrants and construction in center-south Philadelphia

Nadvi, K (1999) Collective Efficiency and Collective Failures: The response of the Sialkot Surgical Instrument Clusters to Global Quality Pressures, World Development

Locke, Richard (2001) Building Trust

Sabel, Charles et al (2012) Export Pioneers in Latin America. IADB

Akerlof (1970) Market for Lemons, Quarterly Journal of Economics

Markets, clusters and supply chains require a governance structure to function properly. During this session we read a theoretical piece by Brian Skyrm (2001) that discusses the importance of coordination. Next, we read a paper by Naseer Farooq (2005) that examines the market for sugarcane in Pakistan so we can discuss what happens when certain governance structures are absent. Finally, we read an article that I wrote that compares the performance of the same industry in both Brazil and Bolivia, and examines how one of them acquired proper governance structures while the other fell behind. To complement this piece, you might want to read the pieces by Natasha Iskander, Richard Locke, Khalid Nadvi, and the various chapters of the book edited by Charles Sabel, as they provide many additional examples of the broad phenomenon. When reading these pieces, try to consider what these governance structures look like, the role they play, and how they can be acquired.

If you are feeling ambitious, you can also read Akerlof (1970) and try to understand how his discussion of quality assurance (and information asymmetry more generally) connects with the other readings assigned for today.

18 Class 10

State Capacity

Dixit, Avinash (2012) Bureaucracy, its Reform, and Development

Blumenthal WM (1979) Candid Reflections of a Businessman in Washington, Fortune Magazine, Jan 29. Pp. 36-49.

Gordon, A (2000) Taking Liberties. City Limits.

Leonard, David (1991), African Successes: Four Public Managers of Kenyan Rural Development [book]

Evans, Peter and James Rauch (1999) Bureaucracy and Growth: A Cross-National Analysis of the Effects of "Weberian" State Structures on Economic Growth, American Journal of Sociology

Chetkovich, Carol and David Kirp (2001) Cases and Controversies: How novitiates are trained to be masters of the public policy universe, Journal of Policy Analysis and Management 20 (2), pp 283-314

In this session, we read a paper by Avinash Dixit in which he discusses why public servants do what they do, and why “bad” performance might seem like a chronic feature of government agencies. Even though he is drawing mostly from James Q. Wilson’s vivid book “Bureaucracy” (1989), Dixit’s summary can be a bit dry and abstract. As you read it, try to think of examples to illustrate the different points that he makes.

To help in this task, we also read two testimonies by former public officials describing the challenges they faced. W. Michael Blumenthal was the CEO of a large corporation and served as Secretary of Treasury for President Carter. Akka Gordon was a caseworker with NYC Child Protection Services. What did they see, what did they learn, and in which ways do their experiences illustrate or challenge the points raised by Dixit?

19 Class 11

Delivering public services I

There are no required readings. The discussion will revolve around your assignments.

Kremer et al (2013) The Challenge of Education and Learning in the Developing World, Science 340, 297-300.

Chaudhury et al (2006) Missing in Action: Teacher and Health Worker Absence in Developing Countries. Journal of Economic Perspectives, Vol 20, pp No 1. 91-116

Das et al (2008) The Quality of Medical Advice in Low Income Countries. Journal of Economic Perspectives. Vol 22, No 2. Pp 93-114

Muralidharan K. et al (2016) The Fiscal Cost of Weak Governance: Evidence from Teacher Absence in India

Russakoff, Dale (2014), Schooled, New Yorker [see her subsequent book, “The Prize”]

The recommended readings by Kremer, Chaudhury, Das, Muralidharan and their co-authors provide a bleak picture of government capacity in low- and middle-income countries. You don’t have to dwell on the details, but you should get acquainted with the main points that they make. In turn, the article by Dale Russakoff explains how a group of high-powered philanthropists and ambitious politicians from both parties strived to fix such a problem in Newark, NJ, to little avail.

4- The assignment

How can we tackle the problems outlined by the articles above? To answer this question, you should choose, read, and summarize into a one-page memo a recent academic article that examines an effort to improve the delivery of any public service in a low- or middle-income country. When reading your chosen article, try to discern the policy that the government implemented, its logic of action, and the results it delivered.

20 Class 12

Delivering Public Services II

Tendler J. and S. Freedheim (1996) Trust in a Rent-Seeking World: Health and Government Transformed in Northeastern Brazil. World Development. Volume 22, Issue 12, December 1994, Pages 1771-1791

Ravitch, Diane (2012) Schools we can envy, New York Review of Books

Mangla, Akshay. (2014) "Bureaucratic Norms and State Capacity: Implementing Primary Education in India's Himalayan Region." Harvard Business School Working Paper, No. 14-099

Rasul and Rogger (2012) Management of Bureaucrats and Public Service Delivery: Evidence from the Nigerian Civil Service (read abstract / highlights only, mathematics not required, for a summary interpretation, see discussion by Markus Goldstein at World Bank’s Impact Evaluation blog)

Joshi, A (1999) Progressive Bureaucracy: An Oxymoron? The case of joint forest management in India

Masud. Mohammad (2002) Co-producing citizen security: The citizen-police liason committee in Karachi. IDS working paper 172

Coslovsky and Nigam (2016) Building Prosecutorial Autonomy from Within

Ton, Zeynep (2012), Why Good Jobs are Good for Retailers, HBR (see also her book “The Good Jobs Strategy”]

Three of the readings are case studies of successful delivery of public services. Tendler examines preventative health in Brazil; Ravitch examines primary education in Finland; and Mangla analyzes primary school in India. Finally, the piece by Rasul and Rogge provide a large-n study of the same question, in Nigeria (read the abstract / highlights only). What is the common thread that runs through these studies? How were these programs designed? Were there risks involved in their implementation? How can their success be replicated?

21 Class 13

Working with corruption

Hirschman, Albert (1965) Obstacles to Development: A Classification and a Quasi-Vanishing Act, Economic Development and Cultural Change 13: 4, 385-393

Teaford, Jon C. (1984). The Unheralded Triumph: City Government in America, 1870-1900. Baltimore: Johns Hopkins Press. Chapter 1

Darden, Keith (2008) The Integrity of Corrupt States: Graft as an Informal State Institution, Politics & Society. vol. 36 no. 1 pp. 35-59

Ha, Yong-Chool and Myung-koo Kang. (2011). Creating a Capable Bureaucracy with Loyalists: The Internal Dynamics of the South Korean Developmental State, 1948-1979. Comparative Political Studies vol. 44 no. 1. pp 78-108

Scott, James C. (1969). "Corruption, Machine Politics, and Political Change." American Political Science Review 63 (no. 4, December): 1142-1158.

Ellwood, John, Patashnik, Eric (1993). "In Praise of Pork." The Public Interest (110):19-33.

Davis, Jennifer, (2004) “Corruption in Public Services: Experiences from South Asia’s Water and Sanitation Sector”. World Development, Vol. 32 (2004), No. 1, pp. 53-71.

Arriola, L. (2009) Patronage and Political Stability in Africa, Comparative Political Studies

In this session we examine the problems of corruption, clientelism, patronage and other maladies that often affect the public sector. On his piece, Hirschman provides a provocative argument concerning perceived “obstacles to development”. How do we know what is an obstacle, and what should be done about them? The other three pieces help us apply Hirschman’s framework to the problem of corruption. This is a charged topic, and students often have strong (and deeply ingrained) opinions about corruption. When reading these pieces, try to identify your own beliefs concerning the relationship between corruption and development, whether they should be updated, and how.

22 Class 14

In Class Reflection - wrap up

1 - Required

Wright, Erik Olin. (2015) How to be an Anticapitalist Today, Jacobin Magazine

2 - Recommended

3 – The readings in context (pointers for readers)

Erik Olin Wright is a well-known sociologist who wrote a provocative piece about capitalism and inequality. As we think about international development, are we arguing against Wright or with him? If the latter, he lays out different modes of action. Where do you see yourself? Have your ideas changed?

Above all, students should come to class prepared to reflect on the whole course, their personal experiences, and what they have learned. Accretions to knowledge are good, but real learning often requires that we change our minds. What have you changed your mind about?