ECON 513 Economic Development II

Department of Economics University of Alberta Fall 2018

Professor: B. Ural Marchand Class meetings: Tuesdays and Thursdays 2:00 PM - 3:20 PM Location: T 1 83 Oﬃce Hours: By appointment Email: [email protected] Oﬃce: 7-12 Tory Building, Phone: 780-492-7628

1 Course Description

This course provides a graduate-level overview of microeconomic issues in economic development. The topics covered in class include income distribution, poverty, household behaviour, education, labor markets and migration, globalization, political representation and institutions. The objective of this course is to develop an understanding of economic development from an international perspective with a focus on empirical research.

Prerequisites: Graduate level microeconomic theory and graduate level econometrics are prerequisites for this course. If you do not meet these requirements, please obtain permission from me before enrolling in the course.

2 Textbooks

There is no required textbook for this course. However, there are assigned readings from the books listed below. Deaton’s book is available online, and the other recommended books are available at the University of Alberta Bookstore. Other online resources will be posted on the Moodle eClass throughout the semester.

1 • De Janvry, A. and Sadoulet, E. (2016). Development Economics: Theory and Practice. Routledge, New York. • Bardhan, Pranab and Christopher Udry (1999). Development Microeconomics, Oxford University Press, New York. • Deaton, Angus (1997). The Analysis of Household Surveys: A Microeconometric Ap- proach to Development Policy, The Johns Hopkins University Press, Baltimore and Lon- don. Online copy: http://documents.worldbank.org/curated/en/1997/07/694690/

3 Evaluation and Important Dates

• All students enrolled in this class are expected to write two midterm exams on the scheduled dates. Please see the class schedule for the exam dates and mark your calendars. • The class requires you to write one research paper of maximum 20 pages in length, including the title page and references. The details of the paper assignment will be distributed in class. If you will write the same paper for another class, you must discuss this with me first to determine whether it will be eligible for credit in this class. • You will make one in-class presentation of your paper to the class within the two-week period indicated below. The presentation should be 15 minutes long and outline the research question, empirical method and your results. Following your presentation, 5 minutes will be allocated to class discussion. • Every week, you will write a one-page summary of one of the papers in the reading list. Each summary should show that you read the entire paper, and include the main research question, a discussion of the empirical approach, and the main results. These summaries are due in class before we are scheduled to begin the discussion of the relevant paper and will be graded as check plus (10), check (6), check minus (3), not submitted (0). The paper summaries component of the final grade will be ten times the simple average of the m+arks received throughout the semester. • I will use a combination of absolute measures and grade distribution to determine the final grade in the class.

Class Schedule Exams or Assignments Share in Final Grade Dates Paper summaries 10% Every Thursday Midterm Exam 25% October 30, 2018 Presentation 10% TBA Paper 25% December 6, 2018 Final Exam 30% TBA 100%

2 4 Policies

Late Assignments and Missed Midterms: There will be no make-up midterm exam or extra credit essays. If you are not able to take your midterm exam because of a legitimate reason, the weight of the midterm exam will be transferred to other class work. If you miss the exam because of a medical reason, please submit the Medical Declaration Form to the Faculty. The penalty for late assignments is 10 points for each day. The penalty for late paper summaries is 2 points for each day.

Course Outlines: Policy about course outlines can be found in the Evaluation Procedures and Grading System section of the University Calendar.

Academic Accommodation: If you require academic accommodation due to a disability, please see me at the beginning of the semester to discuss your needs. Students registered with the Specialized Support and Disability Services are required to provide me a Letter of Introduction by the end of the third week of the semester. For more information, please check the web site at http://www.ualberta.ca/ssds.

Recording: Audio or video recording, digital or otherwise, of lectures, labs, seminars or any other teaching environment by students is allowed only with the prior written consent of the instructor or as part of an approved accommodation plan. Student or instructor content, digital or otherwise, created and/or used within the context of the course is to be used solely for personal study, and is not to be used or distributed for any other purpose without prior written consent from the content author(s).

Academic Integrity: The University of Alberta is committed to the highest standards of academic integrity and honesty. Students are expected to be familiar with these standards regarding academic honesty and to uphold the policies of the University in this respect. Students are particularly urged to familiarize themselves with the provisions of the Code of Student Behaviour (online at www.ualberta.ca/secretariat/appeals.htm) and avoid any behaviour which could potentially result in suspicions of cheating, plagiarism, misrepresentation of facts and/or participation in an oﬀence. Academic dishonesty is a serious oﬀence and can result in suspension or expulsion from the University. (GFC 29 SEP 2003). Policy about course outlines can be found in the Evaluation Procedures and Grading System section of the University Calendar.

Learning Environment: The Faculty of Arts is committed to ensuring that all students, faculty and staﬀ are able to work and study in an environment that is safe and free from discrimination and harassment. It does not tolerate behaviour that undermines that environment.

3 Student Resources: Resources that students may want to access, available at Student Re- sources

5 Reading List

The articles are listed below. All of the journal articles on this list can be found online through University of Alberta Libraries. A link to Econlit database and the contact information of our Liaison Librarian are available here: http://guides.library.ualberta.ca/economics.

Overview of Economic Development • De Janvry, A. and Sadoulet, E. (2016). Development Economics: Theory and Prac- tice.Chapters 1 -3. • Mankiw, N., Romer, D. and Weil, D. (1992). “A Contribution to the Empirics of Eco- nomic Growth”, The Quarterly Journal of Economics, (107)2: 407-437. • Pritchett, Lant (1997). “Divergence, Big Time”, Journal of Economic Perspectives, (11)3: 3-17.

Empirical Methods • De Janvry, A. and Sadoulet, E. (2016). Development Economics: Theory and Practice. Chapter 4.

Poverty and Inequality • Antman, Francisca and David McKenzie (2007). “Poverty Traps and Nonlinear Income Dynamics with Measurement Error and Individual Heterogeneity,” Journal of Develop- ment Studies, 43(6): 1057-1083. • Besley, T. and Coate S. (1992). “Workfare versus Welfare: Incentive Arguments for Work Requirements in Poverty-Alleviation Programs,” American Economic Review, 82(1): 249- 261. • Banerjee, Abhijit and Esther Duﬂo. 2007. “The Economic Lives of the Poor,” Journal of Economic Perspectives. 21(1): 141-167. • De Janvry, A. and Sadoulet, E. (2016). Development Economics: Theory and Prac- tice.Chapters 5-6. • Dollar, David and Kraay, Aart (2002). “Growth is Good for the Poor,” Journal of Eco- nomic Growth, 7(3): 195-225.

Background and Further Reading:

4 • Atkinson, Anthony B. (1970). “On the Measurement of Inequality,” Journal of Economic Theory, 2: 137-152. • Besley, Timothy and Robin Burgess. (2003). “Halving Global Poverty,” Journal of Eco- nomic Perspectives, 17(3): 3-22. • Bardhan, Pranab and Christopher Udry (1999). Development Microeconomics, Chapter 11. • Bardhan, Pranab (1997). “Eﬃciency, Equity and Poverty Alleviation: Policy Issues in Less Developed Countries,” Economic Journal, 106(438): 1344-1356. • Deaton, Angus (1997). The Analysis of Household Surveys: A Microeconomic Approach to Development Policy, Chapter 3. • Ferreira, F. and Ravallion, Martin (2008). “Global Poverty and Inequality: A Review of Evidence,” World Bank Policy Research Working Paper, No. 4623. • Ravallion, Martin (2008). “Evaluating Anti-Poverty Programs,” Handbook of Develop- ment Economics, Volume 4, 3788-3817.

Household Behaviour • Bardhan, Pranab and Christopher Udry (1999), Development Microeconomics, Chapters 1, 2, 3. • Browning, M & Bourguignon, F & Chiappori, Pa & Lechene, V, (1994). “Income And Outcomes - A Structural Model Of Intrahousehold Allocation,” Journal of Political Econ- omy, 102(6): 1067-96. • Benjamin, Dwayne (1992). “Household Composition, Labor Markets, and Labor Demand: Testing for Separation in Agricultural Household Models,” Econometrica,60(2): 287-322. • Duflo, Esther (2003). “Grandmothers and Granddaughters: Old Age Pension and Intra- Household Allocation in South Africa,” World Bank Economic Review, 17(1): 1-25. • Thomas, D. (1991). “Intra-Household Resource Allocation: An Inferential Approach,” Journal of Human Resources, 25(4): 635-664. • Qian, Nancy. 2008. “Missing Women and the Price of Tea in China: The Effect of Sex- Specific Earnings on Sex Imbalance,” Quarterly Journal of Economics, 123(3): 1251-1285.

Background and Further Reading: • Browning, M. and P. A. Chiappori (1998), “Eﬃcient Intra-Household Allocations: A General Characterization and Empirical Tests,” Econometrica, 66 (6): 1241-1278. • Bardhan, Pranab and Christopher Udry (1999), Development Microeconomics, Chapter 2. • Deaton, Angus (1997). The Analysis of Household Surveys: A Microeconomic Approach to Development Policy. Chapter 4. • Strauss John and Duncan Thomas (1995). “Human Resources: Empirical Modeling of Household and Family Decisions,” Handbook of Development Economics, Volume III.

5 • Thomas, Duncan (1994). “Like Father, Like Son; Like Mother, Like Daughter: Parental Resources and Child Height,” Journal of Human Resources, 29(4): 950-988. • Udry, Christopher (1996). “Gender, Agricultural Productivity and Theory of the House- hold,” Journal of Political Economy. 104 (1).

Labor Markets and Migration • De Janvry, A. and Sadoulet, E. (2016). Development Economics: Theory and Prac- tice.Chapter 12. • Bardhan, Pranab and Christopher Udry (1999), Development Microeconomics, Chapter 4. • Edmonds, Eric and Nina Pavcnik (2006). “Trade Liberalization and the Allocation of Labor between Households and Markets in a Poor Country,” Journal of International Economics, 69: 272-95. • Gibson, John, David McKenzie and Steven Stillman (2011). “The Impacts of Migration on Remaining Household Members: Omnibus Results from a Migration Lottery Program,” The Review of Economics and Statistics, 93(4): 1297-1317. • McKenzie, David and Hillel Rapoport (2010). “Self-Selection Patterns in Mexico-U.S. Migration: The Role of Migration Networks.” The Review of Economics and Statistics, 92(4): 811-21. • Osmani (1990). “Wage Determination in Rural Labor Markets: The Theory of Implicit Cooperation,” Journal of Development Economics, 34.

Background and Further Reading:

• Basu, Kaushik. and Pham Van. (1998). “The Economics of Child Labor,” American Economic Review, (88), 412-427. • Dasgupta, P. and Ray, D. (1986). “Inequality as a Determinant of Malnutrition and Unemployment: Theory,” Economic Journal, 96:1011-1034. • Bardhan, Pranab and Christopher Udry (1999), Development Microeconomics, Chapter 4. • Harrison, Ann and Leamer, Edward (1997). “Labor Markets in Developing Countries: An Agenda for Research,” Journal of Labor Economics, 15(3): S1-S19. • Krueger, Alan and Lindhal, M. (2001). Education for Growth: Why and for Whom?. Journal of Economic Literature, 39(4): 1101-1136. • Ravallion, Martin and Quentin Wodon (2000). “Does Child Labor Displace School- ing? Evidence on Behavioral Response to an Enrollment Subsidy,” Economic Journal, 110(462): 158-175.

6 Education • De Janvry, A. and Sadoulet, E. (2016). Development Economics: Theory and Prac- tice.Chapter 17. • Duﬂo, Esther (2001). “Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment,” The American Economic Review, 91(4): 795-813. • Schultz, T. Paul (2004). “School Subsidies for the Poor: Evaluating the Mexican Progresa Poverty Program,” Journal of Development Economics, 74(1); 199-250. • Miguel, Edward and Michael Kremer (2004). “Worms: Identifying Impacts on Education and Health in the Presence of Treatment Externalities,” Econometrica, 72(1): 159-217.

Background and Further Reading:

• Card, David. 1999. “The Causal Eﬀect of Education on Earnings.” Handbook of Labor Economics, Vol. 3, Ch. 30. • Glewwe, Paul (2002). “Schools and Skills in Developing Countries: Education Policies and Socioeconomic Outcomes,” Journal of Economic Literature, 40(2): 436-482. • Foster, Andrew D. and Mark R. Rosenzweig. (1996). “Technical Change and Human Capital Returns and Investments: Evidence from the Green Revolution,” The American Economic Review, 86(4): 931-953. • Rosenzweig, Mark R (2010). “Microeconomic Approaches to Development: Schooling, Learning, and Growth,” Journal of Economic Perspectives, 24(3): 81-96.

Global Integration and Development • Autor, David, David Dorn and Gordon H. Hanson (2013). “The China Syndrome: Local Labor Market Effects of Import Competition in the United States,” American Economic Review, 103(6): 2121-68. • De Janvry, A. and Sadoulet, E. (2016). Development Economics: Theory and Prac- tice.Chapter 7. • Dollar, David and Aart Kraay (2004). “Trade, Growth and Poverty,” Economic Journal, 114 (493): F22-F49. • Frankel, Jeffrey and David Romer (1999). “Does Trade Cause Growth?” American Eco- nomic Review, 89(3): 374-99. • Goldberg, Pinelopi and Nina Pavcnik (2007). “Distributional Effects of Trade Liberaliza- tion in Developing Countries,” Journal of Economic Literature, 45(1): 39-82. • Han, Jun, Runjuan Liu, Beyza Ural Marchand and Junsen Zhang “Market Competition, Imperfect Pass-Through and Household Welfare in Urban China,, Journal of International Economics, 100, 2016, 220-232.

7 • Krishna, Pravin and Devashish Mitra (1998). “Trade Liberalization, Market Discipline and Productivity Growth: New Evidence from India,” Journal of Development Eco- nomics, 56, 447-462. • Sachs, Jeffrey and Andrew Warner (1995). “Economic Reform and the Process of Global Integration,” Brookings Papers on Economic Activity, 1: 1- 118. • Ural Marchand, Beyza (2012). “Tariff Pass-Through and the Distributional Effects of Trade Liberalization,” Journal of Development Economics, 99(2), 2012, 265-281.

Background and Further Reading: • Autor, David, David Dorn and Gordon H. Hanson (2013). “Untangling Trade and Tech- nology: Evidence from Local Labor Markets,” NBER Working Papers, No: 18938. • Bardhan, Pranab and Christopher Udry (1999), Development Microeconomics, Chapter 14. • De Janvry, A. and Sadoulet, E. (2016). Development Economics: Theory and Prac- tice.Chapter 7. • Harrison, Ann (1994). “Productivity, Imperfect Competition and Trade Reform: Theory and Evidence,” Journal of International Economics, 36, 53-73. • Melitz, Marc (2003). “The Impact of Trade on Intra-Industry Reallocations and Aggre- gate Industry Productivity”, Econometrica, 71(6), 1695-1725. • Pavcnik, Nina (2002). “Trade Liberalization, Exit, and Productivity Improvement: Evi- dence from Chilean Plants,” Review of Economic Studies, 69(1), 245-76. • Winters, Alan, McCulloch, Neil and McKay, Andrew (2004). “Trade Liberalization and Poverty: The Evidence So Far.” Journal of Economic Literature, 42(1): 72-115.

Institutions • Acemoglu, Daren, S. Johnson and J. Robinson (2001). “The Colonial Origins of Com- parative Development: An Empirical Investigation,” American Economic Review, 91(5): 1369-1401. • Acemoglu, Daron, Simon Jhonson and James Robinson (2005). “The Rise of Europe: At- lantic Trade, Institutional Change and Economic Growth,” American Economic Review, 95(3): 546-579. • Besley, Timothy (1996). “Property Rights and Investment Incentives: Theory and Evi- dence from Ghana,” Journal of Political Economy, 103(5): 903-921. • Banerjee, Abhijit and Lakshimi Iyer (2005). “Empowerment and Eﬃciency: Tenancy Reform in West Bengal,” Journal of Political Economy, 110(2): 239-280. • De Janvry, A. and Sadoulet, E. (2016). Development Economics: Theory and Prac- tice.Chapter 20. • Munshi, Kaivan and Mark Rosenzweig (2003). “Traditional Institutions Meet the Mod- ern World: Caste, Gender and Schooling Choice in a Globalizing Economy,” American

8 Economic Review, 96(4): 12251252. • Nunn, Nathan and Nancy Qian (2011). “The Potato’s Contribution to Population and Urbanization: Evidence from a Historical Experiment,” The Quarterly Journal of Eco- nomics, 126(2): 593-650.

Background and Further Reading:

• Easterly, William and Ross Levine (1997). “Africas Growth Tragedy: Policies and Ethnic Divisions,” Quarterly Journal of Economics, 112(4): 1203-1250. • Levchenko, Andrei (2007). “Institutional Quality and International Trade,” Review of Economic Studies, 74(3): 791-819. • Pande, Rohini and Udry, Chris (2005). “Institutions and Development: A View from Below,” Yale University Economic Growth Center Discussion Paper No. 928.

Credit, Savings and Insurance (time permitting) • Besley, Thomas and Stephen Coate (1995). “Group Lending, Repayment Incentives and Social Collateral,” Journal of Development Economics, 46(1): 1-18. • Burgess, Robin and Rohini Pande (2005). “Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment,” American Economic Review, 95(3): 780-795. • Deaton, Angus and Paxon Christina (2000). “Growth and Savings among Individuals and Households,” Review of Economics and Statistics, 82(2): 212-225. • Jensen, Robert (2000). “Agricultural Volatility and Investments in Children,” American Economic Review, 90(2): 399-405. • Jayachandran, Seema (2006). “Selling Labor Low: Wage Responses to Productivity Shocks in Developing Countries,” Journal of Political Economy, 114(3): 538-575. • Udry, Chris (1994). “Risk and Insurance in Rural Credit Market: An Empirical Investi- gation in Northern Nigeria,” Review of Economic Studies, 61(3): 495-526. • Udry, Chris (1990). “Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy,” World Bank Economic Review, 4(3): 251- 269. • Morduch, Jonathan (1999). “The Microﬁnance Promise,” Journal of Economic Litera- ture, 37(4): 1569-1614.

Political Economy (time permitting) • Banerjee, Abhijit, Dilip Mookherjee, Kaivan Munshi and Debraj Ray (2001). “Inequal- ity, Control Rights and Rent Seeking: Sugar Cooperatives in Maharashtra,” Journal of Political Economy, 109(1): 138-190. • Banerjee, Abhijit and Rohini Somanathan (2007). “The Political Economy of Public Goods: Some Evidence from India,” Journal of Development Economics,” 82(2): 287- 314.

9 • De Janvry, A. and Sadoulet, E. (2016). Development Economics: Theory and Prac- tice.Chapter 21. • Duﬂo, Esther and Raghabendra Chattapadhyaya (2004). “Women as Policy Makers, Evidence from Randomized Policy Experiment in India,” Econometrica, 72(5), 1409-1443. • Pande, Rohini (2003). “Can Mandated Political Representation Increase Policy Inﬂuence for Disadvantages Minorities? Theory and Evidence from India,” American Economic Review, 93(4): 1132-1151. • Khwaja, Asim and Atif Mian (2005). “Do Lenders Favor Politically Connected Firms? Rent Provision in an Emerging Financial Market,” Quarterly Journal of Economics, 120(4): 1371-1411.