V31.0323: Economic Development (001) – Spring 2011 Tuesday and Thursday (9:30pm–10:45pm) Name: Maharukh Bhiladwalla Office: 19 West 4th Street, Room 703 E-mail: mb3326@nyu.edu Phone: (212) 998 3815 Drop-in Office Hours: M 2-3pm, W 1:30 - 2:30 pm and by appointment Course Web Site: Blackboard (access via http://classes.nyu.edu/ ) COURSE OBJECTIVE In this course we will use economic theory to explore the core issue of development – why some countries are trapped in poverty while others managed to take off on the path of economic growth and prosperity. The course will begin by studying the characteristics of developing countries and then proceed to examine issues fundamental to economic development from a macro and a micro perspective. Macroeconomic growth models abstract from country-specific factors and institutions internal to the growth experiences and prospects of any single economy. These models are generalizations that examine how growth of aggregate savings, capital (physical and human) accumulation, demographic factors and technology, interact to determine growth paths of nations. Macroeconomic growth models attempt to explain cross-country differences in income levels and existing income distributions within a developing country. The microeconomic development literature focuses on factor markets (land, labor, credit and insurance) in developing countries. Microeconomic and game theory will be used to analyze the roles that asymmetric information, incentives and behavior of individual market participants have played in growth of mechanisms and institutions that are not just economically inefficient but also tend to perpetuate the vicious circle of poverty. While this course will teach you how to use the tools of rigorous economic theory to analyze extremely practical issues that impact the lives of millions in developing countries it will also familiarize you with empirical literature that enables us to sort out which theories are most relevant. As a one semester course it cannot be comprehensive. Issues not analyzed this semester are as relevant to the study of economic development and growth as those analyzed here. PRE-REQUISITES: Ability to apply and use basic economics learnt at the level of an intermediate micro and macro course, and analytical ease with algebra and graphs will be assumed. Some knowledge of statistics and basic regression analysis will also be helpful. COURSE READINGS Required Text: Ray, Debraj, Development Economics, Princeton University Press. Weil, David, Economic Growth, Pearson, 2nd edition. Easterly, William. The Elusive Quest For Growth, MIT Press. Additional Readings: Additional readings (journal articles) are also required. Articles/links will be posted on Blackboard. 1 GRADING There will be 1 midterm exam and one semi-cumulative final exam. Exam Day Weight Midterm 1 March 10 30% Final Exam Finals Week 50% Homework sets (total of 5) Due dates on Blackboard 20 % EXAM POLICIES All exams will be in-class. The final exam will follow the NYU schedule. There will be no make-up exams unless there is a sufficiently dire emergency, in which case please contact me at the earliest you can. In case of absence from an exam you will need to provide documentation (medical note for example). Please do NOT make flight reservations on the assumption that you will be able to reschedule. There are NO MAKE-UP exams for a planned absence. You are responsible for anything covered in class, or assigned as reading for all exams. There is NO EXTRA CREDIT WORK for this course. You will need a calculator on the exams. Large screen graphing calculators are NOT ALLOWED. Please obtain a regular calculator with only the basic functions for the exam. HOMEWORK POLICIES While you can discuss the problems with other students, you are expected to write up the answers individually. I will drop the lowest score among your problem sets. Homework assignments should be submitted at the beginning of the class on the day they are due. If you have to miss class on a day an assignment is due, make prior arrangements with another student to turn your completed homework in (no assignments will be accepted by email). Problem sets left in the professor’s or the grader’s mailbox or slipped under their doors will not be accepted. Late assignments will only be accepted if you have informed me by e-mail, and prior to the due date. Your note must explain the reason for the lateness (e.g., illness, death in family, unforeseeable work emergency) and be accompanied by documentation. The late assignment will need to be handed in by the new deadline I set for you. Solutions will be posted on Blackboard. CLASS POLICIES Copies of the material discussed in class (power points or word documents) will be posted on the Blackboard web site under ‘course material’. When posted prior to class you are expected to download it and bring it to class – it will make it easier to follow class. The posted material is not a complete record of what goes on in class but should assist you in taking notes. The only way to get a complete record of what goes on in class is to be in class. If you miss a class, make sure to learn the relevant material before the next class, since almost all the material builds on earlier classes. Regular attendance and class participation will affect your grade at the margin. You must have access to the class Blackboard site. All announcements and class related documents (additional readings, class handouts, change of any due dates, answers to assignments etc.) will be posted here. Some class 2 announcements will also be distributed via e-mail. Thus, it is important that you actively use your NYU e-mail account, or have appropriate forwarding set up. The economics department does not grant incompletes except in cases of genuine emergencies, which must be documented and approved by the department’s director of undergraduate studies. The appeal and documentation must be provided before the exam not after. Please turn off all cell-phones for the duration of the class. If you have a conflict with my regularly scheduled office hours, please contact me to arrange for a mutually convenient time for us to meet whenever you need to clarify or discuss anything course related. Academic Integrity As members of the NYU community, we are all expected to adhere to high standards of intellectual and academic integrity. Please review the academic code here: http://gsp.nyu.edu/page/ls.academicintegrity For this particular course, there are some specific behaviors* required to meet these standards of academic integrity, outlined below. Violations of these standards will automatically result in failure in the course and will be referred to the discipline committee for further action. *Homework Assignments: While I encourage students to work on the homework in groups, the final write-up of assignments must be done individually, with no sharing of written answers. COURSE SCHEDULE Articles with * I will discuss in class as part of required reading material. You are responsible for reading and analyzing articles with no *. Introduction and Overview (2 classes) Ray: Chapters 1, 2, Weil: Chapter 2 Easterly; Chapter 1(pages 8-13) *“What Makes a Miracle”, Pranab Bardhan, January/February 2008. “Measuring What Matters” Economist, September 17 2009. “India's surprising economic miracle” Economist Sep 30th 2010 “China and India: Contest of the century” Economist August 2010 “IMF Lifts Africa Growth View”, WSJ October 2010 “Commodities Alone are not enough” Economist September 2010 Growth Models (6 classes) Ray: Chapter 3 and 4 Weil: Chapter 3, 4, 6, 7, 8 *“Is it Over” (Asian Growth Miracle). The Economist, Aug 31 2009 “Is the era of cheap Chinese Labor over?” Economist July 2010 Complementarities and Increasing Returns(1 class) Ray: Chapter 5 Easterly: Chapter 8, 9 “Indian Firms Shift Focus to the Poor”, Wall Street Journal, October 20 3009. Inequality (2 classes) Ray: Chapter 6, 7 Weil: Chapter 13 Poverty (1 class) Ray: Chapter 8 3 Human Development Reports (http://hdr.undp.org/en/reports/global/hdr1997/ (http://hdr.undp.org/en/reports/global/hdr2003/) *“Measuring Poverty” Angus Deaton, Research Program in Development Studies, Princeton University, Revised July 2004. “The Economic Lives of the Poor” Abhijit V. Banerjee and Esther Duflo, October 2006 “The Millennium Development Goals: Global targets, local ingenuity” Economist September 2010 Review for Midterm Midterm Exam Review of Empirical Tools Ray: Appendix 2 (read if you need a refresher on regression analysis) Class notes Human Capital – Education and Health (3 classes) Weil: Chapter 6 Easterly: Chapter 4 *“Child Labor” Christopher Udry, 2004 *“Addressing Absence”, Abhijit Banerjee and Esther Duflo, May 2005. “How the Millennium Development Goals are Unfair to Africa” Easterly, W., World Development, Vol. 37. “Have Millenium Development Goals been effective” Economist, September 2010 “Child malnutrition in India” Economist Sept 2010 “Malaria Deaths in India” October 2010 Refresher On Risk And Uncertainty In Economic Decision-Making Ray: Pages 388-392 Class notes Land and Labor Markets (3 classes) Ray: Chapter 11, 12, 13.4 “Rural Job Guarantees – Faring Well”, Economist, November 5 2009. Credit and Insurance Markets (3 classes) Ray: Chapter 14 *“Microfinance Promise” Jonathan Morduch, Journal of Economic Literature, December 1999. “Financial Innovation and the Poor”, Economist, September 25 2009. “Microfinance in Bangladesh” Economist, October 15 2009. “Microlending in India Continues Macro Growth” Wall Street Journal, October 26 2009. “India’s Major Crises in Microlending” WSJ October 2010 Role of Government and Corruption (2 classes) Weil: Chapter 12 Easterly Chapter 11, 12 *“Corruption and Development: A Review of Issues” Pranab Bardhan, Journal of Economic Literature, Journal of Economic Literature, September 1997. “Design and Reform of Institutions in LDCs and Transition Economies” William Easterly. “India’s disappointing Government: Much less than promised” Economist Sept 2010 “Kenya’s Constitutional Reforms” Economist July 2010 Final Review Final Exam 4