• Understanding the economic aspects of the development process
• Understanding what can be done to reduce poverty and encourage economic growth.
• Engaging the fundamental question of development studies:
  • Why are some regions/countries poor and not others?

• … Everything!

• So why have a field of development economics?

  • The assumption that there must be something different about poor places. What is it?

• Economic development entails far-reaching changes in the structure of economies, technologies, societies, and political systems.

• Development economics is the study of economies that do not fit many of the basic assumptions underpinning economic analysis in high-income countries

  • Including well-functioning markets, perfect information, and low transaction costs.

• When these assumptions break down, so do the most basic welfare and policy conclusions of economics…

• Concrete outcomes related to poverty, malnutrition, inequality, and health
• Basic physical needs like nutrition, shelter, and clothing
• Development of the mind (and of course people’s earnings potential), through education
• The environment, conservation, and sustainable resource use
• Human rights, gender and ethnic equity
• Government corruption
• Creation of infrastructure: transport, communications, market

• In rich countries: development and growth are seen as similar

  • E.g., think about urban development projects

• A lot of things correlate with income

  • Life expectancy is higher in the US than Malawi

• But most development economists would say development is different from growth

  • … though it’s hard to have development without growth

• Rich countries: seen as separate

  • Grow the pie, then figure out how it gets divvied up

• Poor countries: Equity and efficiency cannot usually be separated

• Banks are unwilling to loan money to small farmers
• Poor people cannot get insurance to protect themselves against crop loss or sickness
• Poverty and malnutrition prevent kids from growing up to become productive adults
• Access to markets for the stuff people produce, the inputs they use, and the goods they demand is different for the poor and rich
• The ability to get a job depends on who you are, not on how productive you are
• No more student loans?

• Some on track, others not (esp. child mortality, gender equity in school enrollment)
• Effects of recent crisis worrisome (Example from Mexico)
• Per-capita income growth “increases the range of human choice” (W. Arthur Lewis, 1995, The Theory of Economic Growth)

• Programs that aim to reduce poverty and break cycle of poverty through human capital development.
• The government (or a charity) transfers small sum of money to poor persons
  • If CCT, people must meet certain criteria (e.g enroll children into school, doctor visit, receive vaccination, etc.

• Should countries spend scarce resources on SCTs?
• …or should they spend them on productive programs?
  • New crop technologies, input subsidies, crop price supports, extension
• The big question UNICEF and governments face

• Contagion and Income Multiplier Effects

1. Compelling research problem
2. Good theory
3. Careful review of what others have done
4. Clear, testable hypotheses
   • Here, that transfers create significant spillovers
5. Good Data
6. Convincing empirical approach

Please break up into small groups (3-4):

1. Introduce yourselves (name, hometown, major, year, most delicious food you ate during 春节)
2. Any ideas on why some regions/countries are poor and others rich?
3. Do you think China is a developing country?