Essentials of Development Economics

Essentials of Development Economics

J. Edward Taylor
Travis J. Lybbert
Copyright Date: 2015
Edition: 2
Pages: 440
https://www.jstor.org/stable/10.1525/j.ctt13x1gg1
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  • Book Info
    Essentials of Development Economics
    Book Description:

    Written to provide students with the critical tools used in today's development economics research and practice,Essentials of Development Economicsrepresents an alternative approach to traditional textbooks on the subject. Compact and less expensive than other textbooks for undergraduate development economics courses,Essentials of Development Economicsoffers a broad overview of key topics and methods in the field. Its fourteen easy-to-read chapters introduce cutting-edge research and present best practices and state-of-the-art methods. Each chapter concludes with an embedded QR code that connects readers to ancillary audiovisual materials and supplemental readings on a website curated by the authors. By mastering the material in this book, students will have the conceptual grounding needed to move on to higher-level development economics courses.

    eISBN: 978-0-520-95905-7
    Subjects: Business, Sociology

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-v)
  3. List of Sidebars
    (pp. vi-viii)
  4. List of Figures and Tables
    (pp. ix-xii)
  5. Preface
    (pp. xiii-xviii)
    J. Edward Taylor and Travis J. Lybbert
  6. 1 What Development Economics Is All About
    (pp. 1-22)

    Suppose you were blindfolded and airlifted abroad. After you arrive in a small town and remove the blindfold, your job is to determine the income level of the place based only on sixty seconds of observation. What would you look for? If you have traveled or lived in a developing country, you might have a head start on this assignment: Is it hot and humid? What are people wearing? Eating? How are people getting around? What do the streets and buildings look like? Do the animals look pampered? Do you see trash or trash cans? And the smells! Most people,...

  7. 2 What Works and What Doesn’t?
    (pp. 23-65)

    Beginning with Adam Smith, economists have long tried to understand why some people and countries are rich while others are desperately poor—typically in the hopes of alleviating poverty. Historically, this work was mostly heavy on theory and light on data. Much of the work introduced in chapter 1, for example, was focused on abstract growth and trade models. By contrast, in recent decades development economists have become decidedly more empirical and more reliant on data to understand what works in practice and what doesn’t—typically with a strong microeconomic focus. Today, experiments of different forms are a basic tool...

  8. 3 Income
    (pp. 66-89)

    Economic development entails many different sorts of outcomes: income growth, poverty, inequality, human welfare. These outcomes are obviously interrelated. Understanding these interrelationships is a central theme in development economics. As we shall see, these economic outcomes can shape one another in complex and important ways. Before we learn how to study these interactions and outcomes and before we consider ways to influence them with policies and projects, we need to know how to measure them. In this chapter, we focus on measuring income. That might sound boring and straightforward, but read on—you may be surprised by how interesting, challenging,...

  9. 4 Poverty
    (pp. 90-109)

    If you really want to understand something, you must begin by measuring it. For poverty, this is true not only because we must have reliable measures of it before we can compare poverty in different places or track changes in it from one year to the next, but also because deciding how to measure poverty challenges us to understand its key dimensions and complexities. In this chapter, we describe how development economists measure poverty and some prickly dilemmas we encounter along the way. We explore how poverty changes over time and why this dynamic perspective on poverty matters to poor...

  10. 5 Inequality
    (pp. 110-131)

    As humans, we often feel an irresistible impulse to compare ourselves to others. Sometimes these comparisons are vain and superficial, but they can often be much more consequential. Disparities in income can have real economic consequences by shaping the opportunities and well-being of individuals and affecting more broadly the way markets and governments function. As we have already seen, efficiency and equity objectives are often difficult to achieve separately because they are interrelated in important ways in developing countries. In this chapter, we focus on how economists measure inequality and how different forms of inequality matter in development economics, including...

  11. 6 Human Development
    (pp. 132-166)

    If this book had ended with the previous chapter, we might be accused of seeing income as an end, instead of a means to an end. This would be misleading. There is a rich, decadeslong record of work in development economics that distinguishes between income and the deeper dimensions of human development that ultimately matter most. Nobel laureate Amartya Sen has led this charge to consider “development as freedom.” As he has forcefully argued, income may be a potent predictor of individuals’ quality of life, but we misunderstand key aspects of economic development if we focus exclusively on income. Sen...

  12. 7 Growth
    (pp. 167-193)

    If we could trace the history of modern economic thought to a single question, it would almost certainly be the one implied by Adam Smith in the title of his magnum opus,An Inquiry into the Nature and Causes of the Wealth of Nations. The Industrial Revolution brought profound changes to production systems and lifestyles that have created evergrowing disparities between rich and poor countries. Obviously, since these countries were essentially the same not so many centuries ago, this gap is explained by rich countries growing faster than poor countries over many, many years. But how did they do it?...

  13. 8 Institutions
    (pp. 194-213)

    Our lives are largely governed and heavily influenced by things we don’t often see or appreciate. As you learned in elementary school, the persistent contractions of the involuntary muscles of your vital organs keep you alive. All of your favorite electronic devices require mountains of complex code to function. As you live your life—working, playing, studying, engaging in markets, and interacting with others—there is a largely hidden set of norms and rules of engagement that help you function. In this chapter, we explore the influence of these “institutions” on economic development. Their influence on developing countries and your...

  14. 9 Agriculture
    (pp. 214-243)

    In 1979, development economist Theodore W. Schultz won the Nobel Prize. The opening lines of his Nobel Prize lecture provide the perfect springboard for this chapter: “Most of the people in the world are poor, so if we knew the economics of being poor, we would know much of the economics that really matters. Most of the world’s poor people earn their living from agriculture, so if we knew the economics of agriculture, we would know much of the economics of being poor.”¹ The 1960s and 1970s brought unprecedented agricultural productivity gains thanks largely to investments in international aid. In...

  15. 10 Structural Transformation
    (pp. 244-270)

    Poverty and wealth dynamics are fundamental to development economics. In prior chapters, we described how a household’s wealth today can shape its wealth trajectory into the future. The same can be true for villages or even countries. The dominant driver of these large-scale dynamics is the transformation of an economy from agriculture to manufacturing and services. Today’s developed countries underwent this transformation in the past century or so. Developing countries are undergoing this transformation before our eyes—some at an incredible pace. As a result, for the first time in human history more people now live in cities than on...

  16. 11 Information and Markets
    (pp. 271-300)

    International development debates, just like domestic policy debates in most countries, often reveal how much we trust markets, on the one hand, and governments, on the other, to improve society. Framing these debates as either–or may be good political strategy, but it is often a false dichotomy that is ultimately not very helpful. To function efficiently, markets rely on a host of institutions, many of which require some form of government intervention to offset basic market failures. Conditions in developing countries frequently magnify these market failures. Development economists must appreciate how markets function in practice in poor countries and...

  17. 12 Credit and Insurance
    (pp. 301-333)

    By definition, economic development is a process that takes time. Things that take time are risky because we don’t know what the future has in store for us. At the global or regional level, we know something about these risks, which include weather shocks and climate change, financial and commodity market volatility, and sociopolitical instability. At the household level, time and risk have very personal effects. They determine a household’s livelihood options, its level of food security, and its ability to invest in its own future. We have seen in prior chapters how time and risk can directly shape development...

  18. 13 International Trade and Globalization
    (pp. 334-377)

    The efficiency gains a country can reap from specializing and trading with other countries can be huge. It is no wonder, then, that the most spectacular episodes of economic growth in recent decades have happened as countries traded more and more internationally. Yet, it is often politically difficult to open one’s borders to international trade. Separating efficiency from equity is especially hard when it comes to trade because the distribution of gains and losses straddles international borders: some groups in some countries appear to gain in the short run while other groups in other countries appear to lose. This chapter...

  19. 14 Choose Your Own Epilogue
    (pp. 378-388)

    In chapter 1 we wrote that the goal of this book is to cover “the fundamental things that distinguish rich and poor countries and the methods we use to analyze critical development economic issues.” Identifying the essentials is not an easy thing; one of the biggest challenges in writingEssentials of Development Economicswas deciding what to put in the book and what to leave out. At every step of the way, we had to ask ourselves what theessentialsof development economics are, as opposed to topics—however important—whose study requires fluency with the essentials. Along the way,...

  20. Notes
    (pp. 389-402)
  21. Index
    (pp. 403-422)