Development Economics

Instructor:
Dr. Evita Pangaribowo, MIDEC (evitahp@ugm.ac.id)
Office: Dept. Of Environmntal Geography, Faculty of Geography, Gadjah Mada University
D-Building, 2nd Floor.

Course Objective
This is a Master’s level course in economic development and policy with a particular focus in
developing world. Emphasis will be on the economic analysis of three major issues: problems of
growth, poverty and environmental sustainability. The students will learn actual development
phenomena including: 1. the issues of convergence and divergence (why some poor countries have
been successful in catching up developed world), 2. the association of economic growth and
environmental degradation and resources exhaustion, 3. the implication of growth and environmental
degradation on poverty. Major policy issues will be discussed with illustrations from past and current
experiences in selected developing countries. As an integral part of the course, an attempt will be
made to introduce students to use data to conduct development analyses such as growth diagnostics,
poverty assessments, and environmental impact assessments collect and interpret data on developing
economies. For each of session, we will read important published papers in the area of growth,
poverty and environmental sustainability and also review some very recent research and papers.

Learning Outcomes
The students will gain knowledge of the basic theories in development economics as well as be able
to critically analyze and evaluate development policies of developing countries.

Assessment
Mid-Semester Examination 50%, Individual assignment: 2x20 = 40%, Group assignment 10%,

Course Outline:
1. Policy issues in development
2. Measuring Growth and Development
3. Structural Change and Development
4. Geography, Institution, and Development (1st assignment due)
5. Poverty assessment: methods, policies and programs
6. Inequality and vulnerability assessment
7. Growth, Inequality and Poverty Linkages (Group assignment due)

Midterm exam (2nd assignment due)

8. Human development and social protection programs

9. Microfinance institutions
10. Development strategies and macro-policies
(2nd assignment due)
11. Environment and development policy
12. Policy debate on foreign aid
13. Crises and policy responses
14. Wrap Up Session

Background Texts
Ray, Debraj (1998). Development Economics. Princeton University Press
Acemoglu, Daron and James A. Robinson (2012), Why Nations Fail: Origin of Poverty, Prosperity and
Poverty, New York: Crown Publisher.
Sen, A (1999). Development as Freedom.
Deaton, A (2013). The Great Escape.

Readings

1. Overview: Policy issues in development

United Nations (2015). The Millennium Development Goals Report 2015,
https://sustainabledevelopment.un.org/content/documents/1903UNDP_MDG_Report_2015.pdf
Clemens, Kenny, Moss (2007): The Trouble with the MDGs: Confronting Expectations of Aid and
Development Success, World Development, Vol. 35 (5), 735-751.
Sustainable Development Goals: https://sustainabledevelopment.un.org/?menu=1300
United Nations, 2015. Global Sustainable Development Report :
https://sustainabledevelopment.un.org/content/documents/1758GSDR%202015%20Advance%20U
nedited%20Version.pdf

2. Measuring Growth and Development

Barro, R., and Sala-i-Martin, X., 2004. Economic Growth, Chapter 1.
Mankiw, N., Romer, D., and Weil, D. N., 1992. A Contribution to Empirics of Economic Growth,
Quarterly Journal of Economics, 107(2): 407-438
Haq, M., 1995. Reflections on Human Development, Oxford University Press: New York.
Human Development Report 2015, Work for Development.
Development as Freedom, Ch. 2
Development Economics Ch. 2-4
Great Escape Ch. 2

3. Structural Change and Development

Krugman, P., 1994. The fall and rise of development economics, Proceeding of the World Bank
Annual Conference on Development Economics.
Michaels, G., Rauch, F., and Redding, S., 2012. Urbanization and structural transformation, Quarterly
Journal of Economics, 12: 535–586.
Becker, C., Morrison, A., 1999. Urbanization in transforming economies, in Henderson and Thisse
(eds), Handbook of Regional and Urban Economics, Vol. 3, Amsterdam, 1673-1790.
Development Economics Ch. 5

4. Geography, Institution, and Development

Henderson, J. V., Storeygard, A., and Weil, D. N., 2011. A Bright Idea for Measuring Economic
Growth, American Economics Review, 101(3): 194-199.
Easterly (2002): The elusive quest for growth: Economists’ adventures and misadventures in the
Tropics.
Acemoglu, D., Johnson, S., and Robinson, J., 2002. Reversal of Fortune: Geography and Institutions in
the Making of the Modern World Income Distribution, Quarterly Journal of Economics, 1231-1294.
Why Nation Fail Ch. 2-4.

5. Poverty Assessments: methods, policies, and program

Haughton, J. and Khandker, S., 2009. Handbook of Poverty and Inequality, The World Bank,
Washington DC
Ravallion, M., and Chen, S., 2007. China's (uneven) progress against poverty. Journal of Development
Economics, 82(1): 1-42.
Alkire, S., and Foster, J., 2011. Counting and Multidimensional Poverty Measurement, Journal of
Public Economics, 95:476-487.
Banerjee, A., and Duflo, E., 2010. Poor Economics: A Radical Rethinking of the Way to Fight Global
Poverty.
Great Escape Ch 7

6. Inequality and vulnerability assessment

Ahluwalia, M. S., 1976. Inequality, Poverty, and Development, Journal of Development Economics,
3(4): 307-342.
Dasgupta, P., Sen, A., and Strarrett, D., 1973. Notes on the Measurement of Inequality, Economic
Theory, 6(2): 180-87.
McKenzie, D. J., 2005. Measuring Inequality with Asset Indicators, Journal of Population Economics,
18:229-260.
Ligon, E., and Schecter, L., 2003. Measuring Vulnerability, Economic Journal, 113(486): C95-C102.
Naude, W., Santos-Paulino, A. U., and McGillivray, M., 2009. Measuring Vulnerability: an overview
and introduction, Oxford Development Studies, 37(3): 183-191.
Great Escape Ch. 7
Development Economics Ch. 8

7. Growth, Inequality and Poverty Linkages

Ravallion, M., and Chen, S., 2003. Measuring Pro-Poor Growth, Economics Letter, 78: 93-99.
Inequality Matters, Report of the World Social Situation 2013
Rising Divide, the World Bank 2015.
Development Economics Ch. 8

8. Human development and social protection programs

Strauss, J., and Thomas, D., 1998. Health, Nutrition and Economic Development, Journal of Economic
Literature, 36: 766-817.
Deaton, A., 2003. Health, Inequality and Economic Development, Journal of Economic Literature,
41(1):113-158.
Ariel Fiszbein and Norbert Schady. 2009. Conditional Cash Transfers: Reducing present and future
poverty. The World Bank.
Parker, S., L. Rubalcava and G. Teruel. 2008. Evaluating conditional schooling and health programs, in
T.P. Schultz and J. Strauss (eds.), Handbook of Development Economics Volume 4,
Amsterdam: North Holland Press.
Schultz, T.P. 2004. School Subsidies for the Poor: Evaluating the Mexican Progresa Poverty Program,
Journal of Development Economics, 74(1):199-250.
Behrman, J., S. Parker and P. Todd. 2011. Do Conditional Cash Transfers for Schooling Generate
Lasting Benefits? A Five Year Followup of PROGRESA/Opportunidades, Journal of Human
de Janvry, A., Finan, F., Sadoulet, E., and Vakis, R., 2006. Can conditional cash transfer programs
serve as safety nets in keeping children at school and from working when exposed to
shocks?, Journal of Development Economics, 79(2):349-373.
Development Economics Ch. 9
Great Escape Ch. 3 and 4.

9. Microfinance institutions
Conning, J., and Udry, C., 2007. Rural Financial Markets in Developing Countries, in K. Arrow and M.
D. Intriligator (Eds.), Handbook of Agricultural Economics Volume 3, North Holland,
Amsterdam.
Banerjee, A., Chandrasekhar, A. G., Duflo, E., and Jackson, M. O., 2013. The Diffusion of
Microfinance, Science, 341:6144.
Patten, R. H., Rosengard, J. K., Johnston, Jr., D. E., 2001. Microfinance Success amidst
Macroeconomic Failure: the experience of Bank Rakyat Indonesia during the East Asian
Crisis, World Development, 29: 1057-1069.
Development Economics Ch. 14.

10. Development strategies and macro-policies

Chapter 12. International Finance and Development: Exchange Rates and Foreign Capital Flows
Deaton, A (2013). The Great Escape., Ch 5 and 6.
Moller, L. C. M., and Wacker, K. M., 2017. Explaining Ethiopia’s Growth Acceleration – the role of
infrastructure and macroeconomic policy, World Development, 96: 198-215.

11. Environment and development policy

Boyce, J. K., 1994. Inequality as a Cause of Environmental Degradation, Ecological Economics, 11(3):
169-178.
Stern, D. I., Common, M. S., and Barbier, E. B., 1996. Economic Growth and Environmental
Degradation: the environmental Kuznets Curve and Sustainable Development, World
Development, 24(7): 1151-1160.
World Bank (2010). World Development Report: Development and Climate Change.

12. Policy debate on foreign aid

McKinnon, R. I., 1964. Foreign Exchange Constraints in Economic Development and Efficient Aid
Allocation, Economic Journal, 74(294): 388-409.
Boone, P., 1996. Politics and the Effectiveness of Foreign Aid, European Economic Review, 40(2):
289-329.
Alesina, A., and Dollar, D., 2000. Who Gives Foreign Aid to Whom and Why? Journal of Economic
Growth, 5(1): 33-63.
Easterly, W., 2003. Can Foreign Aid Buy Growth? Journal of Economic Perspectives, 17(3): 23-48.
Arndt, C., Jones, S., and Tarp, F., 2015. Assessing Foreign Aid’s Long-Run Contribution to Growth and
Development, World Development, 69:6-18.

13. Crises and policy responses

Holzmann, R., 2001. Risk and Vulnerability: the forward looking role of social protection in a
globalizing world, The World Bank.
Dhanani, S., and Islam, I., 2002. Poverty, Vulnerability and Social Protection in a Period of Crisis: the
case of Indonesia, World Development, 30(7): 1211-1231.
Gentilini, G., and Omamo, S. W., 2011. Social Protection 2.0: Exploring issues, evidence and debates
in a globalizing world, Food Policy, 36(3): 329-340.
Barrientos, A., 2011. Social Transfers and Growth: What Do We Know? What Do We Need to Find
Out? World Development, 40(1): 11-20.
Assignments:

1st Assignment: Referring to Michaels et al. (2012) in their paper “Urbanization and Structural
Transformation”, what lessons to learn that might be relevant for the development process?

2nd Assignment: Essay (10 pages – introduction, literature review, your standpoint of the issues,
conclusion)

Topic:

1. Development is a multidimensional concept. How the dimensions of development

correspond to SDGs?
2. Anti-poverty interventions. How you would explain the determinants of poverty? What are
the corresponding policy instruments?
3. What effective social safety nets will be needed to protect men, women and children from
chronic poverty
4. Define the relationship between formal and informal sector and how these two sectors are
related with structural transformation!
5. How institutions can or cannot work to support development?

Group Assignment: Critical Review (papers TBA)