Development Economics
INTRODUCTION
Aim of the course: Integrate an economic analysis in the discussion on the development processes of
a country and to focus on human aspects of economic development
3 major parts:
- Awareness
- Improve knowledge
- Reflection
Structure of the course:
- Part 1: Principles and concepts
1. Introducing economic development
➔ define development
2. Comparative economic development
➔ basic indicators, characteristics, convergence, causes
3. Classical theories of economic growth and development
➔ linear stage models, structural change models, international dependence
revolution, neoclassical counterrevolution
4. Contemporary models of development and underdevelopment
➔ coordination failure, multiple equilibria, big push, Kremer O- ring, self-
discovery, growth diagnosis
- Part 2: Domestic problems and policies
5. Poverty, inequality and development
➔ measuring poverty, inequality, links between poverty, inequality and growth,
absolute poverty, high-poverty groups, policy options
6. Population growth and economic development
➔ population growth, demographic transition, Malthusian and household
models, consequences of high fertility, policy approaches
7. Urbanization and rural-urban migration
➔ urbanisation, role of cities, urban giantism, informal sector, migration, Todaro
model, strategies
CHAPTER 1: INTRODUCING ECONOMIC DEVELOPMENT: A GLOBAL
PERSPECTIVE
1.1 The study of economic development
4 stylized living standards strata:
- Try to make sense of the differences in living conditions
- Country level averages are very informative
- However, the level of analysis (and concern) is ultimately the individual, not the country or
region
- Developped four strata are stylized (not intended to represent real families)
- Broad stylized characteristics can help us visualize what living standards differences mean in
daily life
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,Typical conditions: the poorest of the strata
- Close to one billion people live at the lowest stratum
- A majority of them live below the $1.90 per day extreme poverty line
- Often live in remote rural areas
- Majority of food is grown by the people who consume it
- Shelter and furnishings often made by those who use them
- Few passable roads particularly in the rainy season
- Younger children attend school irregularly; school may be difficult to access
- Many have never seen a high school
- No hospitals, no electricity connection
- No improved water supplies; water collected in reused commercial buckets from sources that
are often contaminated; a kilometer or more walk from home
- Walk in battered flip-flop sandals (if not bare feet)
- Children may be malnourished, suffering from conditions including protein deficiency
- Food tends to be the same every meal, often lacking in vital nutrients
- Food cooked over an open fire in your mud house
- Smoke escapes from a hole in the roof, likely causing breathing problems
- When it rains the roof may leak
- Floor may be just mats over mud, on which the family sleeps
Typical conditions: second-lowest of the strata:
- Close to 3 billion people live in second-lowest strata
- Typical person not officially classified as extremely poor
- From perspective of a rich country seem very poor indeed
- Typical family may live on about twice the per person poverty line à 3.80$ per day
- Almost as likely to live in an urban area (or peri-urban area)
- Employment probably informal, companies not registered, no worker protections
- Or, work in own small family enterprises
- Get around with well-used but functioning bicycles
- Water from a tap, typically outdoors; may walk or bike 50+ meters to get there
- Water often still unsafe (without boiling or adding chlorine)
- Majority do not cook over open fires; use kerosene or other improved energy source
- Family usually has improved floor; often improved walls and roof
- Likely suffer from one or more components of multidimensional poverty
Typical family: second-highest of the strata:
- More than two billion people in the second-highest stratum
- Could have $15 per person per day
- (More than three-quarters of people in the world lives on less than
- $15 a day)
- Family considered solidly middle income by global standards
- Such families typically live in urban areas
- Jobs still usually not very stable and often informal
- Cooking on manufactured burners using kerosene, or electric plates
- Have a television in their house
- Get around with a motorbike
- Children likely to survive early childhood
- Probably attend some post-primary school, though often not complete it
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, - Most adults and many teenagers have a mobile phone
- Water typically delivered through a tap to their house
- A majority lack what people in the highest of the strata consider
- full indoor plumbing
- Their city likely exhibits high inequality; sharp contrasts in living conditions
Typical family: highest of the strata:
- Close to a billion people live at the highest stratum
- Most other people in the world would consider them rich
- They are some distance above the World Bank high income line
- A family in this strata might live on $75 per person per day
- Many may feel their status is precarious; but most still work in formal jobs, generally with
some protections
- Live in a comfortable suburban house with a yard, or a large apartment
- Full indoor plumbing taken for granted
- Many comfortable features, including often a separate bedroom for each child
- Central air conditioning, central heating, as prompted by climate
Often people born on one stratum spend their lives on it. Albeit typically making some progress within
it. Sometimes, transformative progress is highly visible and takes form in the course of a single
person’s life
1.3 How countries are classified by their average level
of development
World Bank classifies countries according to range of average national
income.
1.4 Economics and development studies
Development economics: Study of how economies are transformed, how do they change? (by
example: from stagnation to growth, from low-income to high-income, ..)
- Largely empirical research although formal models may be used
- Research in political economy - institutional, behavioural and experimental economics
- Links to subfields including labour, public, urban, agricultural, environmental and institutional
economics
- Dynamic field
- Different approaches
The study addresses economic, social, political and institutional mechanisms and could be public and
private.
There is a need for Economic, cultural and political requirements for effective structural and
institutional transformations.
There is an Geographical focus → Asia, sub-Saharan Africa, Middle East and North Africa, Latin
America and the Caribbean, sometimes also transition economies in East and Southern Europe
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, 1.5 The meaning of development (vanaf hier starten de lampjes)
Amartya Sen’s Capability Approach
Income, utility,… are not everything. That’s why we need to see the importance of the capability of
functioning, it’s broader than income, utility.
A person’s capability to function is what really matters
➔ What a person is, or can be, and does or can do
➔ What matters for wellbeing is what use someone can and does make of commodities
➔ It is not about what you have, it’s about what you do with what you have.
Functionings as an achievement and relates to well-being as a psychological state of being.
What a person does (or can do) with the commodities of given characteristics that they come to
possess or control. Functionings are“Beings and Doings”. Freedom of choice – control of one’s life
Some important “Beings” and “Doings” in capability to function:
- Being able to live long
- Being well-nourished
- Being healthy
- Being literate
- Being well-clothed
- Being mobile
- Being able to take part in the life of the community
- Being happy – as a state of being - may be valued as a functioning
Sen: Five sources of difference between (measured) real incomes and actual advantages.
Conversion of commodity-characteristics into personal achievements of functioning will depend on:
1. Personal heterogeneities: disability, illness, age, gender
2. Environmental diversities: heating, clothing requirements, impact of pollution
3. Variations in social climate: prevalence of crime and violence, social capital
4. Distribution within the family
5. Differences in relational perspectives: some goods are essential because of local customs and
conventions
For example: bread
❖ Product characteristics: taste
❖ Nutrition characteristics: proteins
❖ Helps to meet conventions of social exchange – breaking the bread
Better nutrion → better health → functional enjoyment and social functioning
But the benefits depend on the person and circumstances: activity level, metabolism, weight,
nutrion knowledge, infections, …
Capabilities as freedoms enjoyed, in terms of functionings, given his personal features and command
over commodities.
Well-being in terms of being well and having freedoms of choice.
Explains why development economics focuses on human factors of development eg. education,
health. Countries may have a high income but high inequality, poor health and educational
standards… thus growth without development (Some countries grow in economic terms but not in
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