"An elegant, insightful, and extremely effective textbook on development economics. It combines astute theoretical reasoning with a firm grip on empirical circumstances, including institutional possibilities and limitations. There is real originality here without sacrificing usefulness and accessibility."—Amartya Sen, Winner of the 1998 Nobel Prize for Economics, Harvard University
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The study of development in low-income countries is attracting more attention around the world than ever before. Yet until now there has been no comprehensive text that incorporates the huge strides made in the subject over the past decade. "Development Economics" does precisely that in a clear, rigorous, and elegant fashion.
Debraj Ray, one of the most accomplished theorists in development economics today, presents in this book a synthesis of recent and older literature in the field and raises important questions that will help to set the agenda for future research. He covers such vital subjects as theories of economic growth, economic inequality, poverty and undernutrition, population growth, trade policy, and the markets for land, labor, and credit. A common point of view underlies the treatment of these subjects: that much of the development process can be understood by studying factors that impede the efficient and equitable functioning of markets. Diverse topics such as the new growth theory, moral hazard in land contracts, information-based theories of credit markets, and the macroeconomic implications of economic inequality come under this common methodological umbrella.
The book takes the position that there is no single cause for economic progress, but that a combination of factors—among them the improvement of physical and human capital, the reduction of inequality, and institutions that enable the background flow of information essential to market performance—consistently favor development. Ray supports his arguments throughout with examples from around the world. The book assumes a knowledge of only introductory economics and explains sophisticated concepts in simple, direct language, keeping the use of mathematics to a minimum.
"Development Economics" will be the definitive textbook in this subject for years to come. It will prove useful to researchers by showing intriguing connections among a wide variety of subjects that are rarely discussed together in the same book. And it will be an important resource for policy-makers, who increasingly find themselves dealing with complex issues of growth, inequality, poverty, and social welfare.
Debraj Ray is Professor of Economics at Boston University.
Preface Chapter 1: Introduction Chapter 2: Economic Development: Overview 2.1. Introduction 2.2. Income and growth 2.2.2. Historical experience 2.2.1. Measurement issues 2.3. Income distribution in developing countries 2.4. The many faces of underdevelopment 2.4.1. Human development 2.4.2. An index of human development 2.4.3. Per capita income and human development 2.5. Some structural features 2.5.1. Demographic characteristics 2.5.2. Occupational and production structure 2.5.3. Rapid rural--urban migration 2.5.4. International trade 2.6. Summary Exercises Chapter 3: Economic Growth 3.1. Introduction 3.2. Modern economic growth: Basic features 3.3. Theories of economic growth 3.3.1. The Harrod--Domar model 3.3.2. Beyond Harrod--Domar: Other considerations 3.3.3. The Solow model 3.4. Technical progress 3.5. Convergence? 3.5.1. Introduction 3.5.2. Unconditional convergence 3.5.3. Level convergence: Evidence or lack thereof 3.5.4. Unconditional convergence: A summation 3.5.5. Conditional convergence 3.5.6. Reexamining the data 3.6. Summary Appendix 3.A.1. The Harrod--Domar equations 3.A.2. Production functions and per capita magnitudes Exercises Chapter 4: The New Growth Theories 4.1. Introduction 4.2. Human capital and growth 4.3. Another look at conditional convergence 4.4. Technical progress again 4.4.1. Introduction 4.4.2. Technological progress and human decisions 4.4.3. A model of deliberate technical progress 4.4.4. Externalities, technical progress, and growth 4.4.5. Total factor productivity 4.5. Total factor productivity and the East Asian miracle 4.6. Summary Appendix: Human capital and growth Exercises Chapter 5: History, Expectations, and Development 5.1. Introduction 5.2. Complementarities 5.2.1. Introduction: QWERTY 5.2.2. Coordination failure 5.2.3. Linkages and policy 5.2.4. History versus expectations 5.3. Increasing returns 5.3.1. Introduction 5.3.2. Increasing returns and entry into markets 5.3.3. Increasing returns and market size: Interaction 5.4. Competition, multiplicity, and international trade 5.5. Other roles for history 5.5.1. Social norms 5.5.2. The status quo 5.6. Summary Exercises Chapter 6: Economic Inequality 6.1. Introduction 6.2. What is economic inequality? 6.2.1. The context 6.2.2. Economic inequality: Preliminary observations 6.3. Measuring economic inequality 6.3.1. Introduction 6.3.2. Four criteria for inequality measurement 6.3.3. The Lorenz curve 6.3.4. Complete measures of inequality 6.4. Summary Exercises Chapter 7: Inequality and Development: Interconnections 7.1. Introduction 7.2. Inequality, income, and growth 7.2.1. The Inverted-U hypothesis 7.2.2. Testing the inverted-U hypothesis 7.2.3. Income and inequality: Uneven and compensatory changes 7.2.4. Inequality, savings, income, and growth 7.2.5. Inequality, political redistribution, and growth 7.2.6. Inequality and growth: Evidence 7.2.7. Inequality and demand composition 7.2.8. Inequality, capital markets, and development 7.2.9. Inequality and development: Human capital 7.3. Summary Appendix: Multiple steady states with imperfect capital markets Chapter 8: Poverty and Undernutrition 8.1. Introduction 8.2. Poverty: First principles 8.2.1. Conceptual issues 8.2.2. Poverty measures 8.3. Poverty: Empirical observations 8.3.1. Demographic features 8.3.2. Rural and urban poverty 8.3.3. Assets 8.3.4. Nutrition 8.4. The functional impact of poverty 8.4.1. Poverty, credit, and insurance 8.4.2. Poverty, nutrition, and labor markets 8.4.3. Poverty and the household 8.5. Summary Appendix: More on poverty measures Exercises Chapter 9: Population Growth and Economic Development 9.1. Introduction 9.2. Population: Some basic concepts 9.2.1. Birth and death rates 9.2.2. Age distributions 9.3. From economic development to population growth 9.3.1. The demographic transition 9.3.2. Historical trends in developed and developing countries 9.3.3. The adjustment of birth rates 9.3.4. Is fertility too high? 9.4. From population growth to economic development 9.4.1. Some negative effects 9.4.2. Some positive effects 9.5. Summary Exercises Chapter 10: Rural and Urban 10.1. Overview 10.1.1. The structural viewpoint 10.1.2. Formal and informal urban sectors 10.1.3. Agriculture 10.1.4. The ICRISAT villages 10.2. Rural--urban interaction 10.2.1. Two fundamental resource flows 10.2.2. The Lewis model 10.3. Rural--urban migration 10.3.1. Introduction 10.3.2. The basic model 10.3.3. Floors on formal wages and the Harris--Todaro equilibrium 10.3.4. Government policy 10.3.5. Comments and extensions 10.4. Summary Exercises Chapter 11: Markets in Agriculture: An Introduction 11.1. Introduction 11.2. Some examples 11.3. Land, labor, capital, and credit 11.3.1. Land and labor 11.3.2. Capital and credit Chapter 12: Land 12.1. Introduction 12.2. Ownership and tenancy 12.3. Land rental contracts 12.3.1. Contractual forms 12.3.2. Contracts and incentives 12.3.3. Risk, tenancy, and sharecropping 12.3.4. Tenancy forms: Other considerations 12.3.5. Land contracts, eviction, and use rights 12.4. Land ownership 12.4.1. A brief history of land inequality 12.4.2. Land size and productivity: Concepts 12.4.3. Land size and productivity: Empirical evidence 12.4.4. Land sales 12.4.5. Land reform 12.5. Summary Appendix 1: Principal--agent theory and its applications 12.A.1. Risk, moral hazard, and the agency problem 12.A.2. Tenancy contracts revisited Appendix 2: Screening and sharecropping Exercises Chapter 13: Labor 13.1. Introduction 13.2. Labor categories 13.3. A familiar model 13.4. Poverty, nutrition, and labor markets 13.4.1. The basic model 13.4.2. Nutrition, time, and casual labor markets 13.4.3. A model of nutritional status 13.5. Permanent labor markets 13.5.1. Types of permanent labor 13.5.2. Why study permanent labor? 13.5.3. Permanent labor: Nonmonitored tasks 13.5.4. Permanent labor: casual tasks 13.6. Summary Exercises Chapter 14: Credit 14.1. Introduction 14.1.1. The limits to credit and insurance 14.1.2. Sources of demand for credit and insurance 14.2. Rural credit markets 14.2.1. Who provides rural credit? 14.2.2. Some characteristics of rural credit markets 14.3. Theories of informal credit markets 14.3.1. Lender's monopoly 14.3.2. The lender's risk hypothesis 14.3.3. Default and fixed-capital loans 14.3.4. Default and collateral 14.3.5. Default and credit rationing 14.3.6. Informational asymmetries and credit rationing 14.3.7. Default and enforcement 14.4. Interlinked transactions 14.4.1. Hidden interest 14.4.2. Interlinkages and information 14.4.3. Interlinkages and enforcement 14.4.4. Interlinkages and creation of efficient surplus 14.5. Alternative credit policies 14.5.1. Vertical formal--informal links 14.5.2. Microfinance 14.6. Summary Exercises Chapter 15: Insurance 15.1. Basic concepts 15.2. The perfect insurance model 15.2.1. Theory 15.2.2. Testing the theory 15.3. Limits to insurance: Information 15.3.1. Limited information about the final outcome 15.3.2. Limited information about what led to the outcome 15.4. Limits to insurance: Enforcement 15.4.1. Enforcement-based limits to perfect insurance 15.4.2. Enforcement and imperfect insurance 15.5. Summary Chapter 16: International Trade 16.1. World trading patterns 16.2. Comparative advantage 16.3. Sources of comparative advantage 16.3.1. Technology 16.3.2. Factor endowments 16.3.3. Preferences 16.3.4. Economies of scale 16.4. Summary Exercises Chapter 17: Trade Policy 17.1. Gains from trade? 17.1.1. Overall gains and distributive effects 17.1.2. Overall losses from trade? 17.2. Trade policy: Import substitution 17.2.1. Basic concepts 17.2.2. More detail 17.3. Export promotion 17.3.1. Basic concepts 17.3.2. Effect on the exchange rate 17.3.3. The instruments of export promotion: More detail 17.4. The move away from import substitution 17.4.1. Introduction 17.4.2. The eighties crisis 17.4.3. Structural adjustment 17.5. Summary Appendix: The International Monetary Fund and the World Bank Chapter 18: Multilateral Approaches to Trade Policy 18.1. Introduction 18.2. Restricted trade 18.2.1. Second-best arguments for protection 18.2.2. Protectionist tendencies 18.2.3. Explaining protectionist tendencies 18.3. Issues in trade liberalization 18.3.1. Introduction 18.3.2. Regional agreements: Basic theory 18.3.3. Regional agreements among dissimilar countries 18.3.4. Regional agreements among similar countries 18.3.5. Multilateralism and regionalism 18.4. Summary Appendix 1: Elementary Game Theory A1.1. Introduction A1.2. Basic concepts A1.3. Nash equilibrium A1.4. Games over time Appendix 2: Elementary Statistical Methods A2.1. Introduction A2.2. Summary statistics A2.3. Regression References Index
"An elegant, insightful, and extremely effective textbook on development economics. It combines astute theoretical reasoning with a firm grip on empirical circumstances, including institutional possibilities and limitations. There is real originality here without sacrificing usefulness and accessibility."--Amartya Sen, Winner of the 1998 Nobel Prize for Economics, Harvard University
An elegant, insightful, and extremely effective textbook on development economics. It combines astute theoretical reasoning with a firm grip on empirical circumstances, including institutional possibilities and limitations. There is real originality here without sacrificing usefulness and accessibility. -- Amartya Sen, Winner of the 1998 Nobel Prize for Economics, Harvard University
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