Syllabus, Spring 2013 John F. Kennedy School of Government Harvard University

ECONOMIC DEVELOPMENT: THEORY, EVIDENCE AND POLICY PED 102M

Class: Monday & Wednesday 10:10-11:30am, L140 (For first 2 weeks, class meets Wednesday 10:10-11:30am in L140 and Friday 8:40am in Land)

Review sessions: Friday, 8:40am (Land) and 10:10am (Starr) (First review session will be Monday, April 1 during regular class meeting time, L140)

First day of class is Wednesday, March 27th

Professor Asim Khwaja Professor Rohini Pande Professor Dani Rodrik Rubenstein 317 Rubenstein 318 Littauer 212

Office hours: TBA Office hours: TBA Office hours: TBA (sign up via website) (sign up via website) (sign up on sheet outside L-212)

Assistant: Brittany Hill Assistant: Julie DeBenedictis Office: Rubenstein -310G Office: Littauer-209 Email: [email protected] Email: [email protected]

COURSE INFORMATION This is a one-module continuation of PED-101, focusing on policy design issues. It will build on the concepts learned in PED-101, applying the framework developed in the fall while using additional tools learned in the second semester of the MPA/ID first year curriculum. Topics covered will include growth, industrial policy, education, finance, and governance.

Teaching fellows: Yusuf Neggers: [email protected].

Course assistants: TBA COURSE REQUIREMENTS AND GRADING

The course grade will be based on the following, with weights in parentheses:  Two problem sets (40%)  Class participation (30%)  Slide deck presenting a proposed policy design (30%)

The problem sets and final slide deck will be coordinated with other MPA/ID core courses (DPI- 401 & API-110), in order to provide students with opportunities to apply theoretical concepts learned in these courses to policy design challenges.

The final assignment will consist of approximately five slides that: (1) identify a welfare issue to be addressed; (2) specify a conceptual design to be tested; and (3) provide justification for the chosen approach. Students will also be expected to analyze institutional aspects of the same welfare issue for their final assignment for DPI-401. As a result, topics should be selected to complement the requirements of both assignments.

Students are expected to attend one Friday section. These sections will review lectures and provide theory and econometric guidance for a better understanding of course material and preparation for exams.

Class discussion is strongly encouraged and will impact participation grades. Students should have read required readings prior to the class for which they were assigned.

READING LIST INFORMATION:

The reading list below indicates the URLs for those papers that can be downloaded from the internet. The majority of the papers and articles for this course are available online and are easily accessible through these links. If the links become broken then you can find the articles by searching Harvard library’s E-Journals using the following link: http://sfx.hul.harvard.edu/sfx_local/az/, which can also be reached by the following steps: http://www.harvard.edu/  “Resources & Offices”  “Library and Academic Resources”  “Find E-Journals”. Type in the journal name and select a database that has issues for the year of the article. Each database is set up differently, but the citation will have all the information necessary to obtain the article.

All further reading that is not available online will be placed on reserve in the HKS library. Please check the class page frequently for announcements and other information. (Students who register for this course through FAS should see Julie DeBenedictis to get access to the class page.)

CROSS REGISTRATION:

The class is a core requirement for students in the MPA/ID program. No cross-registration will be permitted except by special permission from the instructors. IMPORTANT DATES AND COURSE STRUCTURE: SPRING MODULE

Day Date Topic Professor 1 Wed March 27 Growth diagnostics framework Rodrik 2 Fri March 29 (8:40am, Land) Growth application Rodrik Mon April 1 (10:10am, L140) REVIEW 3 Wed April 3 Industrial policy framework Rodrik 4 Fri April 5 (8:40am, Land) Industrial policy application Rodrik Fri April 5 (10:10am, Starr) REVIEW 5 Mon April 8 Education policy framework Khwaja Tues April 9 Problem Set 1 due (joint with DPI-401) 6 Wed April 10 Education application Khwaja Fri April 12 REVIEW 7 Mon April 15 Finance policy framework Pande 8 Wed April 17 Finance application Khwaja Fri April 19 REVIEW 9 Mon April 22 Governance policy framework Pande 10 Wed April 24 Governance application Khwaja Wed April 24 Problem Set 2 due (joint with API-110) Fri April 26 REVIEW 11 Mon April 29 Final wrap-up Pande & Khwaja Fri May 3 Slide deck due

Readings (TBC) Required readings are marked with a star (*), recommended readings are not starred.

Most readings are available online (by clicking on the title). Readings not available online can be found on reserve at the HKS library. See above description for more detailed instructions.

COURSE OUTLINE AND TENTATIVE READINGS

A. Growth diagnostics (DR: March 27 and March 29)

i. Framework (March 27) * Hausmann, Ricardo, Dani Rodrik and Andres Velasco. 2008. “Growth Diagnostics” in J. Stiglitz and N. Serra, Eds., The Washington Consensus Reconsidered: Towards a New Global Governance, New York: Oxford University Press.

* Hausmann, Ricardo, Bailey Klinger, and Rodrigo Wagner. 2008. Doing Growth Diagnostics in Practice: A 'Mindbook'. Harvard CID Working Paper 177.

Dixit, Avinash. 2006. Evaluating Recipes for Development Success. World Bank Policy Research Working Paper No. 3859. ii. Application (March 29) * Dube, Oeindrila, Ricardo Hausmann, and Dani Rodrik. 2007. South Africa: Identifying the Binding Constraints on Shared Growth. Unpublished working paper.

* Rodrik, Dani. 2008. Understanding South Africa’s Economic Puzzles, Economics of Transition, 16(4): 769-797.

B. Industrial policy (DR: April 3, 5)

i. Framework (April 3) *Rodrik, Dani. 2007. Industrial Policy for the Twenty-First Century, in Rodrik, One Economics, Many Recipes, Princeton, NJ: Princeton University Press, pp. 99-152.

* Cimoli, Mario, Giovanni Dosi, R. Nelson, and Joseph E. Stiglitz. 2009. “Institutions and Policies Shaping Industrial Development: An Introductory Note,” chap. 2 in Cimoli, Dosi, and Stiglitz, eds., Industrial Policy and Development, Oxford: Oxford University Press, pp. 19-38. (On Course Website)

Rodrik, Dani. 2008. Normalizing Industrial Policy. Commission on Growth and Development Working Paper No. 3.

ii. Application (April 5) * Devlin, Robert, and Graciela Moguillansky. 2012. What’s New in the New Industrial Policy in Latin America? World Bank Policy Research Working Paper 6191.

*Hausmann, Ricardo, Dani Rodrik, and Charles Sabel. 2008. Reconfiguring Industrial Policy: A Framework with Applications to South Africa, HKS Working Paper.

Sabel, Charles. 2012. Self-Discovery as a Coordination Problem, chap. 1 in C. Sabel et al., eds, Export Pioneers in Latin America, Washington: Inter-American Development Bank, pp. 1-46.

C. Education Policy (AK: April 8, 10)

i. Framework (April 8) *Duflo, Esther, Rema Hanna and Stephen Ryan. 2012. Incentives Work: Getting Teachers to Come to School. American Economic Review, 102(4): 1241-1278.

*Muralidharan, Karthik & Venkatesh Sundararaman. 2011. Teacher Performance Pay: Experimental Evidence from India. Journal of Political Economy, 119(1): 39-77.

ii. Application (April 10) *HKS Case: Primary Education in Pakistan, Show Me the Evidence (On Course Website)

*Andrabi, Tahir, Jishnu Das & Asim Khwaja. 2009. Report Cards: The Impact of Providing School and Child Test-scores on Educational Markets. Working paper. Andrabi, Tahir, Jishnu Das, Asim Khwaja, Tara Vishwanath, Tristan Zajonc & the LEAPS Team. 2007. Learning and Educational Achievements in Punjab Schools (LEAPS): Insights to Inform the Policy Debate, Executive Summary.

D. Finance (RP: April 15, AK: April 17)

i. Framework (RP: April 15) Karlan, Dean and Jonathan Zinman. 2009. Observing Unobservables: Identifying Information Asymmetries with a Consumer Credit Field Experiment. Econometrica, 77(6): 1993-2008.

*Field, Erica, Rohini Pande, John Papp and Natalia Rigol. 2012. Does the Classic Microfinance Model Discourage Entrepreneurship Among the Poor? Experimental Evidence from India. Working paper.

Banerjee, Abhijit, Pranam Bardhan, Esther Duflo, Erica Field, Dean Karlan, Asim Khwaja, Dilip Mookherjee, Rohini Pande, & Raghuram Rajan. 2010. Microcredit is not the Enemy. Financial Times, 13 December 2010.

Field, Erica, Rohini Pande, John Papp, & Y. Jeanette Park. 2012. Repayment Flexibility Can Reduce Financial Stress: A Randomized Control Trial with Microfinance Clients in India, PLoS ONE 7(9): e45679. doi:10.1371/journal/pone.0045679

Ray, Debraj. 1998. Development Economics. Princeton, NJ: Princeton University Press, chapter 14. (On Reserve)

ii. Application (AK: April 17) *Springer Monograph. Entrepreneurial Finance Lab. (On Course Website)

*Larson, Greg. How a New Tool is Unlocking Entrepreneurship in Africa. Harvard Kennedy School Review.

*Iyer, Rajkamal, Asim Khwaja, Erzo Luttmer, & Kelly Shue. 2009. Screening in New Credit Markets: Can Individual Lenders Infer Borrower Creditworthiness in Peer-to-Peer Lending? NBER Working Paper No. 15242.

Jack, William and Tavneet Suri. 2009. The Economics of M-PESA. Working paper.

Rangan, V. Kasturi and Katharine Lee. Root Capital. HBS Case. Publication date: Sep 25, 2009. Prod. #: 510035-PDF-ENG . (On Course Website)

Lin, Mingfeng, Siva Viswanathan, and N. R. Prabhala. 2009. Judging Borrowers by the Company they Keep: Social Networks and Adverse Selection in Online Peer-to-Peer Lending. Working paper, University of Maryland.

E. Governance (RP: April 22, AK: April 24)

i. TBA ii. TBA

F. Final Wrap-Up (RP & AK: April 29)

i. TBA