Introduction to Development Fall Semester, 2008 Tuesdays, 8am, Rome 200 Profs. Macours, Thomas link to class protected area Link to SAIS library reserves (E-Res) where all readings except some book excerpts are posted. Check E-Res for the latest version of the syllabus before doing reading for the week. You can email Prof. Macours or Prof. Thomas for the password; it will also be given out on the first day of class. You can find the readings by looking up either of the professor's names, then selecting "Introduction to Development." There is also a discussion board available to post messages at the class E-Res site. Note that some book readings may be available only on print reserve at the library, and they will be in demand just before the class for which they have been assigned -- plan ahead. Use this link to register to purchase the Harvard Business School cases. Once you have registered, you should be directed to a page where you can purchase the five HBS cases required for the course. If you experience technical difficulties, please contact Harvard's Technical Support at 800-810-8858. If they cannot resolve your problem, please let your professors know. The case for Week 8, ANDA: Transforming El Salvador’s Water Supply, can be purchased from the Kennedy School web site here. Study Questions:
Week 1: Introduction to Development - The role of the state in development has changed dramatically from the 1950s to the present. What are the major shifts that have occurred in the thinking of development policymakers, and why did these occur?
- It is common to say that development is much more than economic growth, defined as increases in per capita GDP. What are those other dimensions? Can you have development in these other dimensions without economic growth?
- How realistic are the Millennium Development Goals? What are the obstacles to achieving them? Are there any downsides to setting these ambitious goals?
- What was the "Washington Consensus"? How does it relate to the economic theory you have learned about the efficiency of market exchange?
Week 2: Growth Theory Week 3: Case: Chinese Economic Growth - How did the conditions facing China in 1978 compare to those faced by the Soviet Union in 1985?
- What was the logic underlying Chinese growth strategy? Why did reforms such as dual prices and the household responsibility system work in the agriculture sector but similar reforms did not work for state-owned firms?
- How important was growth in exports to China’s economic performance? How important was FDI?
- Was China’s growth strategy also a good development strategy?
- How does China’s growth after 1978 compare to India’s growth after 1985, when both are considered in the framework of the neoclassical and/or the endogenous growth models?
Week 4: Social Aspects of Development - What is social capital? It could have been labeled "social relations"; does the economic metaphor help or hurt our understanding?
- In what ways does the state deplete social capital? Can the state create social capital, and if so, how? Consider examples both from Scott and Jacobs.
- How would one go about measuring social capital? Is it something that can be put into formal economic models?
- Is social capital necessarily a good thing, such that having more is always better?
Week 5: The Microeconomics of Development Note: Focus on the intuition of each of the readings. Do not worry too much about the equations and the formal models. (For Banerjee and Dufl only read up to p 45). Does economic growth always result in poverty reduction? Can redistributive policies result in economic growth? Is there a trade-off between economic growth and poverty reduction in the short-run? Is there such a trade-off in the long-run? How does the micro-economic approach to understanding development differ from the growth theory models? How does the body of micro-economic evidence as reviewed by several of the readings contribute to the understanding of development? What are the important market failures in the credit market? The insurance market? The land market? The market for human capital? What does this imply for policy? What is the economic rational of a conditional cash payment for schooling, health and nutrition, such as the PROGRESA (now Opportunidades) program in Mexico? What approach did Schultz (2004) use to evaluate the impact of the program? What do Kremer and Miguel (2004) mean with *the illusion of sustainability*? What can we learn from the empirical evidence provided in their paper?
Week 6: Case: Trade, Growth, Poverty and Inequality Did import substitution strategy work in Brazil? Why or why not? What does the Brazil case tell you about the arguments in favor and against import substitution strategies? How has trade liberalization affected poverty in Brazil? What are the possible channels through which trade liberalization can affect poverty reduction? Is there conclusive evidence on any of these channels? How has trade liberalization affected inequality in Brazil? What are the possible channels through which trade liberalization can affect inequality in developing countries? Is there conclusive evidence on any of these channels? The case study refers to the *Brazil cost* of doing business that reduces the competitiveness of Brazilian products on international markets, apart from the nature of the trade regime Brazil faces. What are these costs, and why do they exist? - Which trade strategy should Brazil pursue? Explain why, and specifically indicate for which objective(s) this would be the most optimal strategy. In discussing the strategy discuss both policies that directly affect trade flows and possible complementary policies.
Week 7: The Civil Service What are the challenges facing civil servants in Malawi? Is the New Zealand model a good idea for Vietnam? Why, or why not? More broadly, what approaches have donors used to reform the civil service in low-income countries? Why have donor approaches to civil service reform often been unsuccessful? What is an example of a “second best” solution to address civil service performance problems?
Week 8: Public Goods Provision - Privatization is one of the options for reform of water service delivery in El Salvador. What are the economic arguments in favor and against this approach? What would be the likely effects on efficiency and equity? What are the trade-offs involved? What type of empirical evidence is provided in the readings that support the relevance of the different arguments? What, if any, lessons can be drawn for El Salvador, from this empirical evidence?
- Reform within the centralized system is one of the options for reform of water service delivery in El Salvador. What are the economic arguments in favor and against this approach? What would be the likely effects on efficiency and equity? What are the trade-offs involved? What type of empirical evidence is provided in the readings that support the relevance of the different arguments? What, if any, lessons can be drawn for El Salvador, from this empirical evidence?
- Decentralization is one of the options for reform of water service delivery in El Salvador. What are the economic arguments in favor and against this approach? What would be the likely effects on efficiency and equity? What are the trade-offs involved? What type of empirical evidence is provided in the readings that support the relevance of the different arguments? What, if any, lessons can be drawn for El Salvador, from this empirical evidence?
- What are the political and social arguments in favor or against the privatization approach to water service delivery reform in El Salvador? What government capacity at the central and local levels is needed to make the privatization option for water service delivery reform successful? What considerations might be important for social policy that the implementing agency is not likely to take into consideration? Are the conditions for this option to work met in El Salvador? Why?
- What are the political and social arguments in favor or against reforming the centralized system for water service delivery reform in El Salvador? What government capacity at the central and local levels is needed to make the centralized option for water service delivery reform successful? What considerations might be important for social policy that the implementing agency is not likely to take into consideration? Are the conditions for this option to work met in El Salvador? Why?
- What are the political and social arguments in favor or against decentralization for water service delivery reform in El Salvador? What government capacity at the central and local levels is needed to make the decentralization option for water service delivery reform successful? What considerations might be important for social policy that the implementing agency is not likely to take into consideration? Are the conditions for this option to work met in El Salvador? Why?
Week 9: Case: The IFIs and Malaysia Did the currency and capital controls work? Were the controls appropriate behavior by a government committed to openness in world markets? Did the Malaysian experience hold lessons for other developing countries facing financial crisis? Asian financial crisis: Was the crisis caused by weak fundamentals or investor panic? What was the role of the international financial institutions? Did the international financial institutions exacerbate the crisis or did they help to contain the crisis as much as possible? Looking to the future, did the programs prescribed by the international financial institutions put into place mechanisms and policies for avoiding future crises? Outside of the IFIs, what additional steps have been taken regionally to avoid future crises? How would you evaluate their effectiveness?
Week 10: Official Development Assistance and Community-Driven Development - Apply White's typology of participation to analyze the type of recipient participation in the World Bank forestry project (as described by Sarin).
- One of the possible objectives of a participatory project is the empowerment of the participants. According to White, "Outsiders can facilitate empowerment but cannot bring it." Do you agree? Why or why not?
- Community driven development for the purpose of empowering participants is often posed as an alternative to top-down donor designed aid projects. How are they different? How are they the same?
- What is elite capture and under what circumstances should a donor be concerned about risks of elite capture?
- What kinds of projects are most appropriate for a CDD approach? In what contexts is the approach most likely to succeed?
Week 11: Beating the Oil Curse? the Chad-Cameroon Pipeline - What is the "resource curse"? What steps should or could be take to mitigate the associated risks?
- Thinking back to 2000, would you have approved the Chad-Cameroon Petroleum Development and Pipeline Project? What were the risks of helping Chad exploit its oil? What were the possible benefits?
- What was the World Bank's risk mitigation strategy? Was it effective? How could it have been improved?
- Using the Chad case as an example, should donors approach "weak" and "failed states" differently than states not in this category?
Week 12: Questions of Data and Evidence - For what purposes is data needed in policy planning?
- What are the strengths and weaknesses of different approaches to evaluation? Under what circumstances might you want to use one approach rather than another?
- Why do low-income countries have poor data?
- Do low-income countries and donors have the same data needs? Why or why not?
Week 13: Putting it All Together - In the readings for this week, can you identify a) a straw man argument, b) an argument about causality, c) an ad hominem attack, d) an example of misleading vividness or other examples of logical fallacies from last week?
- What do Sachs and Easterly agree upon?
- Are the disagreements between Sachs and Easterly disagreements about how development happens? Or about aid effectiveness? How do their policy recommendations differ?
- In the Sachs/Easterly debate, what contentions relate to a) economics, b) politics, c) social aspects of development?
Link to 2006 Final Link to 2007 Final | 
