PPHA 35556: Political Economy of Development in

Developing Countries

Dr. Emine Deniz,

Winter, 2021

E-mail: [email protected] Web: eminedeniz.com Office Hours: Appointment via e-mail to set-up Zoom

Class Hours: Tuesdays & Thursdays 2:40 - 4:00 pm

Course Description

The study of the inter-relationship between politics and economics is a lively one. In 1755, when Adam

Smith wrote: "Little else is required to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice, all the rest being brought about the natural course of things." he might not expected even after 400 years we would be in search of such a state. Yet alone, we would still be trying to understand the economic consequences of the political decisions, and the political consequences of the economic decisions.

This course provides students with a broad understanding of development economics and political econ- omy. The course is divided into five parts: Economic Growth and Development, Historical Legacies, State,

International Aid and Development, and Conflict. The class will start with a survey of literature on Eco- nomic Growth and Development. This module will provide us with an understanding of definition of development, how the definition has and still is changing, what are the factors that affect the change in our understanding of what development is. Next, we will talk about natural experiments of history. In this part of the class, we are going to look at how historical institutions, even accidents, help or hinder

1 Political Economy of Development in Developing Countries the development of countries and sometimes regions. The third part of our class will be on the relation- ship between the State and the development. We will explore questions such as but not limited to: What is the effect of state capacity, especially in the areas of fiscal and legal capacity, on development? Next is a module on International Development and Aid. What is development assistance? How should we analyze the effect of development assistance on the developing nations?Finally we will survey the liter- ature on conflict and its effect on development. We will define conflict very broadly and try to answer the following questions: How socio-political factors such as ethnic fractionalization, polarization, gender discrimination, systematic racism, and civil conflict affect economic outcomes? What are economic causes and consequences of political violence?

Required Materials

Readings will be uploaded to the course website. •

Prerequisites

This course requires undergraduate level knowledge on statistics, econometrics and game theory. Also, this is a heavy-reading course, in which students are expected to read all the material before class.

Course Structure

Class Structure

The class will be synchronous and asynchronous. Taking various constraints you might have into consider- ation, I will lecture on Tuesdays, record the lecture, and upload it to our Canvas website, For your privacy concerns, you can choose not to open your video stream or you can skip attending the synchronous lec- ture. We will discussion sections on Thursdays, which will not be recorded. Please try to attend as many of them as possible.

Assessments

Response Papers: You are going to choose a paper from Class 2 readings for 4 weeks. Then, you will • submit a response paper to the paper you have chosen for the week. This is going to be 20 % of your

grade.

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20% of your grade is your class participation. •

Literature Review/Research Proposal: 60 % •

How to Write ResponsePapers

Professor Macartan Humphreys has an incredible checklist for writing response papers. This part of the syllabus borrows from his.

A Checklist for Commenting on Papers Theory

Is the theory internally consistent? •

Is it consistent with past literature and findings? •

Is it novel or surprising? •

Are elements that are excluded or simplified plausibly unimportant for the outcomes? •

Is the theory general or specific? Are there more general theories on which this theory could draw • or contribute?

From Theory to Hypotheses

Is the theory really needed to generate the hypotheses? •

Does the theory generate more hypotheses than considered? •

Are the hypotheses really implied by the theory? Or are there ambiguities arising from say non- • monotonicities or multiple equilibria?

Does the theory specify mechanisms? •

Does the theory suggest heterogeneous effects? •

Hypotheses

Are the hypotheses complex? (eg in fact 2 or 3 hypotheses bundled together) •

Are the hypotheses falsifiable? •

Are mechanisms implied by the hypotheses? •

Evidence I: Design

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External validity: is the population examined representative of the larger population of interest? •

External validity: Are the conditions under which they are examined consistent with the conditions • of interest?

Measure validity: Do the measures capture the objects specified by the theory? •

Consistency: Is the empirical model used consistent with the theory? •

Mechanisms: Are mechanisms tested? How are they identified? •

Replicability: Has the study been done in a way that it can be replicated? •

Interpretation: Do the results admit rival interpretations? •

Evidence II: Analysis and Testing

Identification: are there concerns with reverse causality? •

Identification: are there concerns of omitted variable bias? •

Identification: does the model control for pre treatment variables only? Does it control or does it • match?

Identification: Are poorly identified claims flagged as such? •

Robustness: Are results robust to changes in the model, to subsetting the data, to changing the • period of measurement or of analysis, to the addition or exclusion of plausible controls?

Standard errors: does the calculation of test statistics make use of the design? Do standard errors • take account of plausibly clustering structures/differences in levels?

Presentation: Are the results presented in an intelligible way? Eg using fitted values or graphs? How • can this be improved?

Interpretation: Can no evidence of effect be interpreted as evidence of only weak effects? •

Evidence III: Other sources of bias

Measurement error: is error from sampling, case selection, or missing data plausibly correlated with • outcomes?

Spillovers / Contamination: Is it plausible that outcomes in control units were altered because of the • treatment received by the treated?

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Compliance: Did the treated really get treatment? Did the controls really not? •

Hawthorne effects: Are subjects modifying behavior simply because they know they are under • study?

Measurement: Is treatment the only systematic difference between treatment and control or are there • differences in how items were measured?

Implications of Bias: Are any sources of bias likely to work for or against the hypothesis tested? •

Policy Implications

Do the policy implications really follow from the results? •

If implemented would the policy changes have effects other thank those specified by the research? •

Have the policy claims been tested directly? •

Is the author overselling or underselling the findings? •

Credit where credit is due! Be sure to discuss the strengths as well as any weaknesses!

Unacceptable criticisms:

I don‘t like it •

It feels wrong •

It‘s answering the wrong question •

It left out a variable •

The model is too simple •

You should make criticisms of these forms only if you can substantively articulate why it matters

5/10 Political Economy of Development in Developing Countries Course Policies

Academic Integrity and Honesty

Students are required to comply with the university policy on academic integrity: Academic Honesty and Plagiarism

Accommodations

University Policy on the accommodations for disabilities can be found at: Disability Accommodations. If your status change during the course of the quarter, please do not hesisate to get in touch with the staff at Student Disability Services. If you prefer to talk with me, please set up a time for meeting. Discrimination based on race, color, religion, creed, sex, national origin, age, disability, veteran status, or sexual orientation is a violation of state and federal law and/or University of Chicago policy and will not be tolerated. Harassment of any person (either in the form of quid pro quo or creation of a hostile environment) based on race, color, religion, creed, sex, national origin, age, disability, veteran status, or sexual orientation also is a violation of state and federal law and/or University of Chicago policy and will not be tolerated. Retaliation against any person who complains about discrimination is also prohibited. Please feel free to alert the professor about your preferred pronouns. It is also okay to change your preferred pronouns through- out the quarter. The professors preferred pronouns are she/her/hers. This is a trying time for all of us. If you ever feel like you are getting overwhelmed with everything, please let me know and we will find a way to accommodate your needs.

6/10 Political Economy of Development in Developing Countries Schedule and weekly learning goals

The schedule is tentative and subject to change.

I . Concept of Development

Week 01, 01/11 - 01/15: Introduction to the Class & What is Development

Class 1, 01/12: Introduction Lecture I: • In this class we are going to familiarize ourselves with the question: “What do we talk about about when we talk about growth, development and political economy?" Also, the eternal question: "What is political economy of development?!?"

– Before the class please watch and read:

Professor Timothy Besley’s inaugural lecture as Sir William Arthur Lewis Chair in Development Economics. ∗ This talk introduces the listener to the main stream researchers and research questions in the area of political economy of development: Political Economy and Development: A Progress Report

Professor Morten Jerven is a professor in development studies, Norwegian University of Life Sciences. In ∗ this podcast, Jerven provides the listener with a concise summary of the critiques against the mainstream development economy. Morten Jerven on African Economic Growth

Class 2, 01/14: The Concept of Development: Economic Development •

This class and the next one are going to introduce us to the idea of development, both in the study of economics and politics. The main questions for readings are:

(a) How has our understanding of development changed over time?

(b) How would you describe the relationship between economics and politics with respect to the idea of development?

Economic Development: The readings in this section is designed to introduce you to the seminal works in the study • of economic development. While reading them, I’d like you to answer the following questions and prepare the discuss your answers it during the class discussion: "What is development?", "How does each one of these papers define development?", and "Why do you think the researchers’ perception of development change over time?"

Lecture notes for the class will be based on the following three:

– Schumpeter, J. A. (1934). The theory of Economic Development. Ch. 2 (Scan & Deliver. )

– Rostow, W. W. (1959). The Stages of Economic Growth. The Economic History Review, 12(1), 1-16.

– Sen, A. (1988). The concept of development. Handbook of development economics, 1, 9-26.

Discussion Readings for the class.

– Nussbaum, M. C. (2011). Creating capabilities. Harvard University Press., Ch. 2 & 3 (Scan & Deliver. )

– Banerjee, A. V., & Duflo, E. (2019). Good economics for Hard Times. Public Affairs, Ch.5 (Scan & Deliver)

– Cassidy, J. (2020). Steady State: Can We Have Prosperity without Economic Growth?. The New Yorker.

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Week 02, 01/18 - 01/22: The Concept of Development: Political Development

Class 1, 01/19: The first lecture of every week will be a synchronous lecture (will be recorded so asynchronous option • is always available). The readings assigned for the lecture-classes are the ones that are considered the seminal works in the related literature.1

– Pye, L. W. (1965). The concept of political development. The Annals of the American Academy of Political and Social Science, 358(1), 1-13.

– Przeworski, A., & Limongi, F. (1997). Modernization: Theories and facts. World politics, 49(2), 155-183.

Class 2, 01/21: The readings for this week’s discussion are: • – Banerjee, A. V., & Duflo, E. (2011). Poor economics: A radical rethinking of the way to fight global poverty. Public Affairs, Ch 10.

– Stepan, A., & Linz, J. J. (2011). Comparative perspectives on inequality and the quality of democracy in the United States.Perspectives on Politics, 9(4), 841-856.

Week 03, 01/25 - 01/29: Historical Legacies of Development

Class 1, 01/26 In this class, we will read works on the historical legacies of economic and political development. • – Nunn, N. (2009). The importance of history for economic development. Annu. Rev. Econ., 1(1), 65-92.

– Stasavage, D. (2020). The Decline and Rise of Democracy: A Global History from Antiquity to Today (Vol. 96). Princeton University Press. Ch. 1, 2, 3 & 4 (Scan & Deliver. )

Class 2, 01/28 • – Cansunar, Asli. (2019). The Rich, the Poor, and the Other: Distributional Consequences of Philanthropic Provi- sioning of Public Goods.

– Simpson, Hannah K.(2019) Justice for sale: Political crisis, fiscal exigency, and legal development.

II . Political and Economic Geography

Week 04, 02/01 - 02/05: State Capacity

Class 1, 02/02: The following are the readings that serve as a background for the lecture. • – Levi, M. (1988). Of rule and revenue. Univ of California Press. Ch. 1, 2 & 3. (Scan & Deliver. )

– Cingolani, L. (2013). The State of State Capacity: a review of concepts, evidence and measures.

– Haggard, S., MacIntyre, A., & Tiede, L. (2008). The rule of law and economic development. Annu. Rev. Polit. Sci., 11, 205-234.

– Geloso, V. J., & Salter, A. W. (2020). State capacity and economic development: Causal mechanism or correlative filter?. Journal of Economic Behavior & Organization, 170, 372-385.

Class 2, 02/04 • 1It is important to note here that the canonical works are predominantly white and predominantly male. In the previous years, I received the feedback, from your peers, that they would like to have the list of canonical works. On the other hand, a work becomes and remains canonical as it is discussed in classrooms and find itself in the syllabus. Please let me know what you think about this.

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– Burgess, R., Jedwab, R., Miguel, E., Morjaria, A., & Padró-i Miquel, G. (2015). The value of democracy: evidence from road building in Kenya. American Economic Review, 105(6), 1817-51.

– Acemoglu, D., Garcia-Jimeno, C., & Robinson, J. A. (2015). State capacity and economic development: A network approach. American Economic Review, 105(8), 2364-2409.

Week 05, 02/08 - 02/12: Bureaucracy

Class 1, 02/09: Lecture • – Evans, Peter, & James E. Rauch. "Bureaucracy and growth: A cross-national analysis of the effects of" Weberian" state structures on economic growth." American sociological review (1999): 748-765.

– Murtazashvili, J.(2018). Red Tape: How Centralized Bureaucratic Legacies Undermine Liberal State Building

Class 2, 02/11 • – Gulzar, S., & Pasquale, B. J. (2017). Politicians, bureaucrats, and development: Evidence from India. American Political Science Review, 111(1), 162-183.

– Jiang, J. (2018). Making bureaucracy work: Patronage networks, performance incentives, and economic develop- ment in China. American Journal of Political Science, 62(4), 982-999.

Week 06, 02/15 - 02/19: Natural Resources, Endowments, and Development

Class 1 • – Wibbels, E., & Goldberg, E. (2007). Natural resources, development and democracy: The quest for mechanisms. Unpublished manuscript, Duke University, Durham, NC.

– Robinson, J. A., Torvik, R., & Verdier, T. (2006). Political foundations of the resource curse. Journal of development Economics, 79(2), 447-468.

Class 2 • – Paler, L. (2013). Keeping the public purse: An experiment in windfalls, taxes, and the incentives to restrain government. American Political Science Review, 706-725.

– Vogel, K. B. (2020). The Effect of Oil Windfalls on Corruption: Evidence from Brazil.

III . Further Topics in Political Economy of Devel- opment

Week 07, 02/22 - 02/26: Violent Conflict

Class 1, 02/23: • – Dincecco, M., & Wang, Y. (2018). Violent conflict and political development over the long run: China versus Europe. Annual Review of Political Science, 21, 341-358.

– Collier, P. (1999). On the economic consequences of civil war. Oxford economic papers, 51(1), 168-183.

Class 2, 02/25 •

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– Dube, O., & Vargas, J. F. (2013). Commodity price shocks and civil conflict: Evidence from Colombia. The review of economic studies, 80(4), 1384-1421.

– Hegre, H., Ostby, G., & Raleigh, C. (2009). Poverty and civil war events: A disaggregated study of Liberia. Journal of Conflict Resolution, 53(4), 598-623.

Week 08, 03/01 - 03/05: Development Aid & Its Consequences I

Class 1, 03/02 • – Krasner, S. D., & Risse, T. (2014). External actors, state-building, and service provision in areas of limited statehood: Introduction. Governance, 27(4), 545-567.

– Moyo, D. (2009). Dead aid: Why aid is not working and how there is a better way for Africa. Macmillan. Ch 1-4. (Scan & Deliver. )

Class 2, 03/04 • – Khwaja, A. I. (2009). Can good projects succeed in bad communities?. Journal of public Economics, 93(7-8), 899-916.

– Banerjee, Abhijit V., and Esther Duflo. (2008). Mandated empowerment: handing antipoverty policy back to the poor?. Annals of the new York Academy of sciences 1136, no. 1, 333-341.

– Balboa, Cristina M. "How successful transnational non-governmental organizations set themselves up for failure on the ground." World Development 54 (2014): 273-287.

Week 09, 03/08 - 03/12: Environment

Class 1, 03/09 • – Dell, M., Jones, B. F., & Olken, B. A. (2014). What do we learn from the weather? The new climate-economy literature. Journal of Economic Literature, 52(3), 740-98.

– Ostrom, E., Burger, J., Field, C. B., Norgaard, R. B., & Policansky, D. (1999). Revisiting the commons: local lessons, global challenges. science, 284(5412), 278-282.

Class 2, 03/11 • – Jacobs, J. E. (2002). Community participation, the environment, and democracy: Brazil in comparative perspective. Latin American Politics and Society, 44(4), 59-88.

– Agrawal, A., & Chhatre, A. (2007). State involvement and forest co-governance: evidence from the Indian Hi- malayas. Studies in Comparative International Development, 42(1-2), 67-86.

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