EC 307: Development Economics
London School of Economics
LT Syllabus 2021
Lectures in LT will cover three broad topics. The first part will analyse the role of state and how government can be made accountable to its citizens. This will involve us looking at the political economy of development which has been a major area of research over the last ten years. Here we will examine the role of regulation, governance and accountability and the origins of conflict. The second part of the course will examine the microeconomics of growth where we will look at key policies that drive growth. These will include access to finance, infrastructure, trade and firms and markets. This part of the course captures the shift in focus within development economics from consumption to production. The third part of the course will look at the externalities from growth. Here we will examine access to energy and development, environment and development and climate change. This part of the course captures the recent surge in research on environmental and energy economics as applied to developing countries.
Methods and readings
The course combines theory and empirics and has a strong applied focus. It thus requires a strong background in micro theory and applied econometrics. There is no textbook for the course, rather the material is drawn from academic papers (typically two per lecture). Students are expected to understand and be able to explain the intuition behind the results of the selected papers but a full understanding of all the technical details is not required. The textbook that provides the background for some of the topics is Debraj Ray (1998)’s “Development Economics”.
There will be three components. (i) A pre-recorded lecture covering the topic where slides and the recording will be distributed (this will give you the overview of the topic and two papers covered). (ii) A live exam preparation lecture delivered twice (14.00-15.00 on Tuesdays and 11.00-12.00 on Wednesdays) where we will start with example exam questions and then work backward through the lecture slides to deepen your understanding of that material. (iii) A set of live classes run by the fantastic Michelle Rao which will focus on the two academic papers covered in the lecture and an assignment to guide your reading. The assignment must be completed before each class and submitted online via Moodle. Class discussions will be based around the assignment and students will be randomly chosen to provide answers to different parts of each exercise. Students are allowed to work in groups but each student must provide an individual written assignment. Students are also allowed to revise the assignment after class to incorporate what they have learnt, and the revised assignment will be marked as explained below as long as the original was handed in before class. At the end of the term, one of your revised assignments will be chosen at random, marked, and count towards your class grade. For practice, we will also choose one assignment in week 5 and mark it. As this is to provide feedback, the grade will not count. I will also be holding office hours 12.00-13.00 on Zoom on Wednesdays during LT. Please note that to be properly prepared for the exam it is important that everyone attends in person the live components of the course – the exam preparation lectures and the classes. You are required to read all starred articles and exam questions will be based on these. The assignments are key to learning how to read the articles and understand the material therein. Exam questions share the same format as the assignments.
Part I: The Role of the State
LECTURE 1: The Role of the State
This introductory lecture discusses different views of the role of state from the perspective of regulation.
*Djankov, Simeon, Rafael La Porta, Florencio Lopez-De-Silanes and Andrei Shleifer (2002). “The Regulation of Entry”. Quarterly Journal of Economics, 117 (1), p. 1.
*Besley, Timothy and Robin Burgess (2004).”Can Labor Regulation Hinder Economic Performance? Evidence From India”. Quarterly Journal of Economics, 119 (1), p. 91.
Aghion, Philippe, Robin Burgess, Stephen Redding and Fabrizio Zilibotti (2008). “The Unequal Effects of Liberalization: Evidence from Dismantling the License Raj in India”. American Economic Review, 98 (4), p. 1397.
Bates, Robert H. (1981). Markets and states in tropical Africa: the political basis of agricultural policies, California University Press (Chapters 1, 2 and the concluding chapter)
LECTURE 2: Governance and Accountability
This lecture reviews different mechanisms through which government can be made more accountable to citizens.
*Burgess, Robin, Remi Jedwab, Edward Miguel, Ameet Morjaria and Gerard Padro-i-Miquel (2015) “The Value of Democracy: Evidence from Road Building in Kenya”, American Economic Review, 105(6): 1817-51.
*Besley, Timothy and Robin Burgess (2002). “The Political Economy of Government Responsiveness: Theory and Evidence from India”. Quarterly Journal of Economics, 117 (4), p. 1415.
Duflo, E. and Raghabendra Chattopadhyay (2004). “Women as Policy Makers: Evidence from a Randomized Policy Experiment in India”. Econometrica, 72 (5), p. 1409.
Easterly, William and Ross Levine (2007) “Africa’s Growth Tragedy: Policies and Ethnic Divisions” Quarterly Journal of Economics, 112 (4), pp. 1203-1250.
Roland Hodler and Paul Rachsky (2014) “Regional Favoritism” Quarterly Journal of Economics 129 (2): 995-1033.
LECTURE 3: Conflict and Development
Civil conflict is surprisingly prevalent in developing countries. In this lecture we enquire into what might drive individuals to participate in conflict.
*Miguel, Edward, Shanker Satyanath and Ernest Sergenti (2004).”Economic Shocks and Civil Conflict: An Instrumental Variables Approach”, Journal of Political Economy, Vol. 112, No. 4, pp. 725-753.
*Oeindrilla, Dube and Juan Vargas (2013). “Commodity Price Shocks and Civil Conflict: Evidence from Colombia”, Review of Economic Studies, 80 (4): 1384-1421.
Yanigazawa-Drott, David (2014). “Propaganda and Conflict: Theory and Evidence from the Rwandan Genocide”, Quarterly Journal of Economics, 2014, 129(4), pp.1947-1994.
Harrari, Mariflavia and Eliana la Ferrara (2018). “Conflict, Climate and Cells: A Dissaggregated Analysis” Review of Economics and Statistics, 100 (4), 594-608, 2018.
Collier, Paul and Anke Hoeffler. (2004). “Greed and Grievance in Civil War” Oxford Economic Papers 56, 563-596.
Miguel, Edward and Chris Blattman (2010). “Civil War” Journal of Economic Literature, 48(1), p. 3-57
Part II: The Microeconomics of Growth
LECTURE 4: Access to Finance
This lecture examines whether gaining access to finance affects development outcomes. *Burgess, Robin and Rohini Pande (2005). “Do Rural Banks Matter? Evidence from the Indian Social Banking Experiment.” American Economic Review, 95 (3), 780-795.
*Banerjee, Abhijit, Esther Duflo, Rachel Glennester and Cynthia Kinnan (2015). “The Miracle of Microfinance? Evidence from a Randomized Evaluation.” American Economic Journal: Applied Economics, 7(1): 22-53.
Morduch, Jonathan (1999). “The Microfinance Promise”, Journal of Economic Literature, 37(4), 1569-1614. Zingales, Luigi and Raghuram Rajan (1998). “Financial Dependence and Growth,” American Economic Review, 88: 559-586.
Ray, Debraj (1998). Development Economics, Princeton University Press (Chapter 14
LECTURE 5: Infrastructure and Development
*Jensen, Robert (2007) “The Digital Provide: Information (Technology), Market Performance, and Welfare in the South Indian Fisheries Sector”. Quarterly Journal of Economics, 122 (3), p. 879.
*Donaldson, Dave (2018) “Railroads of the Raj: Estimating the Impact of Transportation Infrastructure”, American Economic Review 108(4-5):899- 934.
Faber, Ben (2014) “Trade Integration, Market Size, and Industrialization: Evidence from China’s National Trunk Highway System” Review of Economic Studies 81 (3): 1046–1070.
Duflo, Esther, Pande, Rohini (2007). “Dams”, Quarterly Journal of Economics, 122 (2), p. 601.
Burgess, Robin, Donaldson, Dave (2010) “Can Openness Mitigate the Effects of Weather Shocks? Evidence from India’s Famine Era.”, American Economic Review 100, p. 449-453
LECTURE 6: Trade and Development
In this lecture we examine what the gains from trade are in developing countries.
*Atkin, David, Amit Khandelwal and Adam Osman (2017). “Exporting and Firm Performance: Evidence from a Randomized Experiment” Quarterly Journal of Economics 132 (2): 551–615. *Redding, Stephen and Daniel Sturm (2008). “The Costs of Remoteness: Evidence from German Division and Reunification” American Economic Review, 98(5), 1766-1797.
Verhoogen, Eric A. (2008). “Trade, Quality Upgrading, and Wage Inequality in the Mexican Manufacturing Sector”. Quarterly Journal of Economics, 123 (2), p. 489.
Bernard, Andrew B., J. Bradford Jensen, Stephen J. Redding and Peter K. Schott (2007). “Firms in International Trade”. Journal of Economic Perspectives, 21 (3), p.105.
Goldberg, Pinelopi Koujianou and Nina Pavcnik (2007). “Distributional Effects of Globalization in Developing Countries”, Journal of Economic Literature, 45 (1), p. 39.
LECTURE 7: Firms and Markets
This lecture examines how firm entry and growth can contribute to economic development.
*Atkin, David, Benjamin Faber and Marco Gonzalez-Navarro (2018) “Retail Globalization and Household Welfare: Evidence from Mexico” Journal of Political Economy 126(1): 1–73.
*Bloom, Nicholas, Benn Eifert, Aprajit Mahajan, David McKenzie and John Roberts (2013). “Does Management Matter? Evidence from India”, Quarterly Journal of Economics, 128 (1), pp. 1-51.
Atkin, David, with Azam Chaudhry, Shamyla Chaudhry, Amit Khandelwal and Eric Verhoogen (2017) “Organizational Barriers to Technology Adoption: Evidence from Soccer-Ball Producers in Pakistan” Quarterly Journal of Economics: 132 (3).
Hsieh, Chang-Tai and Peter Klenow (2009). “Misallocation and Manufacturing TFP in China and India”. Quarterly Journal of Economics, 124 (4), p. 1403.
McMillan, John and Woodruff, Christopher (1999) “Interfirm Relationships and Informal Credit in Vietnam” Quarterly Journal of Economics, 114 (4), p.1285
Bloom, Nicholas, and John Van Reenen (2010). “Why do Management Practices Differ across Firms and Countries?”, Journal of Economic Perspectives, 24(1), pp. 203-224.
Part III: Externalities from Growth
LECTURE 8: Energy and Development
In this lecture we will examine how access to energy affects development outcomes.
*Dinkelman, Taryn (2011). “The Effects of Rural Electrification on Employment: New Evidence from South Africa”, American Economic Review 101(7): 3078-3108.
*Burgess, Robin, Michael Greenstone, Nicholas Ryan and Anant Sudarshan (2020). “Demand for Electricity on the Global Electrification Frontier” mimeo LSE, Chicago, Yale.
Lee, Kenneth, Edward Miguel and Catherine Wolfram (2019) “Experimental Evidence on the Economics of Rural Electrification” forthcoming Journal of Political Economy
Allcott, Hunt, Allan Collard-Wexler and Stephen D O’Connel (2016). “How Do Electricity Shortages Affect Industry? Evidence from India” American Economic Review, 106 (3): 587-624.
Burgess, Robin, Michael Greenstone, Nicholas Ryan and Anant Sudarshan (2020). “The Consequences of Treating Electricity as a Right” forthcoming Journal of Economic Perspectives.
Lee, Kenneth, Edward Miguel and Catherine Wolfram (2019) “Does Household Electrification Supercharge Economic Development?” NBER WP 26528
McRae, Shaun (2014). “Infrastructure Quality and the Subsidy Trap” American Economic Review, 105 (1), pp: 35-66.
Lipscomb, M., M. A. Mobarak, and T. Barham (2013). “Development effects of electrification: Evidence from the topographic placement of hydropower plants in Brazil” American Economic Journal: Applied Economics 5 (2), 200–231.
LECTURE 9: Environment and Development
In this lecture we examine the links between environment and development. Both better management of natural resources and controlling pollution have become major concerns in recent years.
*Burgess, Robin, Matthew Hansen, Benjamin Olken, Peter Potapov and Stefanie Sieber (2012) “The Political Economy of Deforestation in the Tropics” Quarterly Journal of Economics 127 (4), pp. 1707-1754.
*Balboni, Clare, Robin Burgess and Ben Olken (2020) “The Origins and Control of Forest Fires in the Tropics” mimeo MIT and LSE.
Duflo, Esther, Michael Greenstone, Rohini Pande and Nicholas Ryan (2013). “Truth-telling by Third-Party Auditors and the Response of Polluting Firms: Experimental Evidence from India” Quarterly Journal of Economics, 128 (4): 1499-1545.
Davis, Lucas (2008). “The effect of driving restrictions on air quality in Mexico City” Journal of Political Economy, 116(1), 38-81.
Balboni, Clare, Robin Burgess and Ben Olken (2020) “The Origins and Control of Forest Fires in the Tropics” mimeo MIT and LSE. Stiglitz, J. E. (1989). “Markets, market failures, and development” American Economic Review, 197-203.
LECTURE 10: Climate Change and Development
This lecture looks at how human populations are likely to be affected by climate change and how adaptation may play a role in protecting them from rising temperatures.
*Burgess, Robin, Olivier Deschenes, Dave Donaldson and Michael Greenstone (2017). “Weather, Climate Change and Death in India”, mimeo Chicago, LSE and MIT.
*Greenstone, Michael, Alan Barreca, Karen Clay, Olivier Deschenes, and Joseph Shapiro (2016). “Adapting to Climate Change: The Remarkable Decline in the U.S. Temperature-Mortality Relationship Over the 20th Century” Journal of Political Economy 124(1).
Olken, Ben, Melissa Dell and and Benjamin Jones (2012) “Temperature Shocks and Economic Growth: Evidence from the Last Half Century” American Economic Journal: Macroeconomics, 4 (3), pp. 66-95.
Felkner, John, Kamilya Tazhibayeva, and Robert Townsend. 2009. “Impact of Climate Change on Rice Production in Thailand” American Economic Review, 99(2): 205-10.
Hornbeck, Richard (2012). “The Enduring Impact of the American Dust Bowl: Short- and Long-Run Adjustments to Environmental Catastrophe” American Economic Review, 102 (4): 1477-1507.