Elisabeth Wood
Department of Politics
New York University
G53.2536: The Political Economy of Development
In this course we review and assess current issues and debates in the political economy of development, including the determinants of economic growth, the role of institutions in the definition of development trajectories, and the consequences of path dependency and uneven development. During the course of the semester participants will analyze a range of approaches to the understanding of development, drawing on diverse methodologies. While there are no economics prerequisites for the course, we will develop and use economic concepts as needed.
Pre-requisite: Introduction to Comparative Politics (G53.1500) is recommended, as is some background in economics.
Class Meeting: Tuesday 6:00 - 8:00
Office Hours
Office Hours: Wednesday 3:00 - 5:00 (sign up on office door) and by appointment, Rm. 415, Politics Department, 715 Broadway, 998-8534
Email address: ew2@is.nyu.edu.
Course requirements
1. Writing Requirement (60%). Participants can choose between a research paper, a research proposal, or a take-home final exam. The topic of the research paper or proposal must be approved in advance. The purpose of the paper (30 pages) is to explore a topic in the political economy of development of particular interest to the participant. Participants are encouraged to define their topics early, to submit a first draft, and to consult with the instructor over initial outlines, research strategies, and bibliographies. The research proposal (12 pages) must conform to typical foundation guidelines; the student must consult with his or her thesis committee as well as the instructors.
2. Exercises (15%). There will be a series of exercises to reinforce themes of the reading and discussion.
4. Class participation (25%). Participants are expected to be prepared to discuss each weeks readings, and to make a brief presentation of their research project.
Books available for purchase at NYU Book Center
Debray Ray. Development Economics. Princeton 1998
Dani Rodrik, Has Globalization Gone Too Far? Institute for International Economics, 1997.
Course Readings: Other readings will be made available. In the reading list below some pages of the assigned reading will be marked with an asterisk (*) meaning that the section is quite technically demanding and may be omitted if it proves overly challenging. The appendices to the chapters in Ray, and the appendices to the book are not assigned, but will prove valuable as reader friendly introductions to game theory and econometrics.
Course Outline
1. September 8. Introduction and Overview. The economics and politics of growth and development: a survey of basic facts and contrasting ideas.
2. September 15. Comparative Analysis and Development. Measurement and meaning of growth and development, income and well-being, population, inequality and human development.
Ray, Chapters 1 and 2.
Amartya Sen, 1988. "The Concept of Development," in Hollis Chenery and T. N. Srinivasan, eds., Handbook of Development Economics, Volume I, pps. 9-26. Elsevier Science Publishers.
Amartya Sen, 1993. "Economics of Life and Death," Science May, pp. 40-47.
Recommended:
H. W. Arndt, 1987. Chapters 3 and 4 from Economic Development: The History of an Idea, pps. 49-115.
Nicholas Hicks, 1979. "Growth vs. Basic Needs: Is There a Trade-Off?" World Development 7: 985-994.
Michael R. Carter, 1995. "Intellectual Openings and Policy Closures: Disequilibria in Contemporary Development Economics," manuscript, August 30.
Pranab Bardhan, 1988. "Alternative Approaches to Development Economics," Handbook of Development Economics, Volume I.
Robert Repetto, 1992. "Incorporating Natural Resources into National Accounts," Environment 34 (6): 12-45.
United Nations Development Programme, 1992. "Concept and Measurement of Development," and "Technical Notes," in Human Development Report 1992, pp. 12-25 and 91-97. OR Chapter 5 from Human Development Report 1994.
Gary S. Fields, 1988. "Income Distribution and Economic Growth," from Gustav Ranis and T. Paul Schultz, eds., The State of Development Economics. Progress and Perspectives, pps 459-485. Basil Blackwell.
Kakwani, N. 1993. "Performance in living standards: An international comparison." Journal of Development Economics 41: 307-336.
3. September 22. Growth Theory I: Accumulation and Growth
"Mechanics of growth": Production. Investment. The general structure of growth models. The concept of equilibrium growth. Steady-state equilibrium and adjustment dynamics. Exogenous growth. Total factor productivity. Endogenous growth. "Engines of growth": alternative explanations of non-decreasing returns. Physical and human capital. Varieties of knowledge and their role in growth. Empirical consequences of growth models: convergences
Ray, Chapter 3 (* 3.5.6)
Sen, Amartya. 1970. "Introduction." In Amartya Sen, ed. Growth Economics, pgs. 9-40. London: Penguin Books.
Recommended:
Ehrlich, Isaac. 1990. "The Problem of Development: Introduction." Journal of Political Economy 98: S1-S12.
Jess Benhabib and Mark Spiegel, 1997. "Cross-Country Growth Regressions," C.V. Starr Center for Applied Economics, NYU, Research Report 97-20
Lucas, Robert E. Jr. 1993. "Making a Miracle." Econometrica 61: 251-272.
Leontief, "Theoretical Note," AER 1958
4. September 29. Growth Models II: Innovation and Growth Going behind the proximate determinants of growth; human resources, knowledge, and technical progress.
Ray, Chapter 4.
Recommended:
N.F.R. Crafts. 1997. "Endogenous growth: lessons for and from economic history." In David M. Kreps and Kenneth F. Wallis (eds.), Advances in economics and econometrics: theory and applications. Seventh World Congress. Volume II: pages 38-78. Cambridge: Cambridge University Press.
Hammond, Peter J., and Andrés Rodriguez-Clare. 1993. "On Endogenizing Long-Run Growth." In Torben M. Andersen and Karl O. Moene (eds.), Endogenous Growth. Pages 1-36. Oxford: Blackwell.
Paul M. Romer, 1986. "Increasing Returns and Long-Run Growth," Journal of Political Economy 94: 1002-1037.
Romer, Paul. 1992. "Increasing returns and new developments in the theory of growth." In W.A. Barnett, ed. Equilibrium Theory and Applications. New York: Cambridge University Press. Pages 83-110.
Jovanovic, Boyan. 1997. "Learning and growth." In David M. Kreps and Kenneth F. Wallis (eds.), Advances in economics and econometrics: theory and applications. Seventh World Congress. Volume II: pages 318-339. Cambridge: Cambridge University Press.
5. October 6. Growth Theory III: Innovation and the Convergence Problem. Why history matters: increasing returns to scale, complementarities, path dependency, lock in effects, why I'm typing this on a QWERTY keyboard, norms and development.
Long-term patterns of development. Do levels of development converge? Inter- and intra-national inequality. Traps, spurts, and collapses. Do late-comers follow the same path? Is growth of particular countries inter-dependent? What accounts for the observed rates of growth?
Ray Chapters 5
Recommended:
Berry, Albert, Francois Bourguignon, and Christian Morrison. 1991. "Global Economic Inequality and Its Trends Since 1950." In Lars Osberg, ed. Economic Inequality and Poverty. International Perspectives. Armonk, NY: M.E. Sharpe. Pages 60-91.
Quah, Danny. 1993. "Galton's Fallacy and Tests of the Convergence Hypothesis." In Torben M. Andersen and Karl O. Moene (eds.), Endogenous Growth. Pages 37-54. Oxford: Blackwell.
Roland Benabou, 1996. "Inequality and Growth," NBER Macro-Economics Annual.
See also recent papers by Alberto Alesina, Dani Rodrik, Torsten Persson, Guido Tabellini, and Alberto Perotti on inequality and economic growth.
6. October 13. Property Rights, Incentives and Institutions
Assymetric information, principal agent relationships and market failures. The property rights paradigm. Transaction costs. Distinctive capabilities of alternative institutions. Is there only one way of getting the property rights right? The transformation of property rights and institutional change.
Douglass O. North, 1994, "Economic Performance Through Time (Nobel Lecture)," American Economic Review 85(3): 359-368.
A.A. Alchian and H. Demsetz, 1973. "The Property Right Paradigm," Journal of Economic History 33: 16-27.
William G. Ouchi, 1980. "Markets, Bureaucracies and Clans," Administrative Science Quarterly 25: 129-141.
Joseph Stiglitz, 1989. "Markets, Market Failures, and Development," American Economic Review: Papers and Proceedings. (May): 197-203.
Each participant must read one of the following:
Terry L. Anderson and P. J. Hill, 1975. "The Evolution of Property Rights: a Study of the American West," Journal of Law and Economics 18: 163-179.
Jean Ensminger and Andrew Rutten, 1991. "The political economy of changing property rights: Dismantling a pastoral commons, American Ethnologist 18: 683-99.
Morton J. Horwitz, 1979. "The Transformation of the Conception of Property," Chapter 2 of The Transformation of American Law 1780-1860. Harvard. [selections]
Thrainn Eggertsson, 1996. "No experiments, monumental disasters: Why it took a thousand years to develop a specialized fishing industry in Iceland," Journal of Economic Behavior and Organization 30: 1-23.
Carl J. Bauer, 1997. "Slippery Property Rights: Multiple Water Uses and the Neoliberal Model in Chile," Natural Resources Journal (Summer).
Recommended:
Joseph Stiglitz, 1994. Whither Socialism?. MIT
Jon Elster, 1991. Chapters 1 and 2 of The Cement of Society, pp. 1-49.
Douglass C. North, 1981. Structure and Change in Economic History. Norton.
Jack Knight, 1992. Institutions and Social Conflict, Cambridge.
Harold Demsetz, 1967. "Toward a theory of property rights," American Economic Review 57:347-59.
David Feeny, 1988. "The Development of Property Rights in Land," in Robert H. Bates, ed., Toward a Political Economy of Development: A Rational Choice Perspective, 272-199. California New World Publishers.
Chalmers Johnson, "Political Institutions and Economic Performance," from Frederick Deyo, ed., The Political Economy of the New Asian Industrialist, pp. 136-164
Gerald Scully, 1988. "The Institutional Framework and Economic Development," Journal of Political Economy 96, pp. 652-662.
7. October 20. The Institutional Determinants of Accumulation and Growth: Capitalism Institutional determinants of economic performance among nations. Relationship between institutions and the "mechanics of growth". Path dependence and the timing of development. Is there one development process? Comparative advantage, terms of trade. The varied role of states in the development process. The classical surplus labor model. Social class structures that impede economic growth. Long-term accumulation and growth. Dependency. Development strategies. Convergence on institutions as the key to the development process in the Marxian, classical and neo-classical approaches?
Karl Marx, Preface to the Critique of Political Economy (selection).
Robert Brenner, 1986. "The social bases of economic development," from John Roemer, ed., Analytical Marxism, pgs. 23-53. Cambridge.
W. Arthur Lewis, 1954. "Economic Development with Unlimited Supplies of Labour," The Manchester School 22: 139-167.
Paul Baran, 1952. "On the Political Economy of Backwardness," reprinted in Kenneth P. Jameson and Charles K. Wilber, eds., The Political Economy of Development and Underdevelopment, pp. 93-104. McGraw Hill, sixth edition, 1996.
Alexander Gerschenkron, 1965. Chapter 1 of Economic Backwardness in Historical Perspective, pp. 5-30. Belknap Press of Harvard.
Recommended:
Maurice Dobb, 1981. "Capitalism," Chapter 1 of Studies in the Development of Capitalism, pp. 1-32.
C. Peter Timmer, 1988. "The Agricultural Transformation," in Hollis Chenery and T.N. Srinivasan, eds., Handbook of Development Economics, Volume I, pp. 275-331. Elseveier Science.
Joseph Stiglitz, 1989. "Rational Peasants, Efficient Institutions and a Theory of Rural Organization," in Pranab Bardhan, ed., The Economic Theory of Agrarian Institutions, pp. 18-29. Clarendon.
Schumpeter, Chapters 1 and 2 of The Theory of Economic Development
Tariq Banuri and Edward Amadeo, 1991, "Worlds within the Third World: Labour Market Institutions in Asia and Latin America," in Tariq Banuri, ed., Economic Liberalization: No Panacea, pp. 172-227. Clarendon.
9. October 27. The role of the state State-market relations in capitalist economies. Governments vs. markets or governments and markets? Embedded autonomy and state-society relations. Developmental and predatory states. Social democracy and solidaristic wage bargaining. Government failures.
Peter B. Evans, 1994. "Predatory, Developmental and Other Apparatuses: A Comparative Political Economy Perspective on the Third World State," in A. Douglas Kincaid and Alejandro Portes, eds., Comparative National Development: Society and Economy in the New World Order, pp. 84-111. University of North Carolina.
Karl Ove Moene and Michael Wallerstein, 1995. "How Social Democracy Worked: Labor-Market Institutions", Politics and Society 23(2): 185-211.
Krueger, Ann O. 1990. "Government Failures in Development." Journal of Economic Perspectives 4: 9-25.
Westphal, Larry E. 1990. "Industrial Policy in an Export-Propelled Economy: Lessons from South Korea's Experience." Journal of Economic Perspectives 4: 41-60.
Recommended:
Adam Przeworski, 1990. The State and the Economy under Capitalism. (Harwood Academic Publishers)
Jean Drèze and Amartya Sen,1995. India Economic Development and Social Opportunity. Oxford.
Peter Evans, 1996. "Introduction: Development Strategies across the Public-Private Divide," and "Government Action, Social Capital and Development: Reviewing the Evidence on Synergy," World Development 24(6) 1033-37 and 1119-1132.
Peter Evans, 1995. Embedded Autonomy. States and Industrial Transformation. Princeton.
Amartya Sen, Nicholas Stern and Joseph Stiglitz, 1991. "Development Strategies: The Roles of the State and the Private Sector," Proceedings of the World Bank Annual Conference on Development Economics, pp. 421-435. The World Bank.
Stephan Haggard, 1990. Pathways from the Periphery. Cornell.
Peter Evans and Dieter Rueschemeyer, 1985. "The State and Economic Transformation: Toward an Analysis of the Conditions Underlying Effective Intervention," in Peter Evans, Dieter Rueschemeyer, and Theda Skocpol, eds., Bringing the State Back In, pp. 44-77. Cambridge.
NB: for those interested in the debate on the development trajectories of East Asia and Latin America,
the following are recommended:
John M. Page, 1994. "The East Asian Miracle: An Introduction," World Development 22(4): 615-625.
Dani Rodrik, 1994. "King Kong Meets Godzilla: The World Bank and the 'East Asian Miracle,' in Albert Fishlow, et al., eds. Miracle or Design: Lessons from the East Asian Experience, pp. 13-54. Overseas Development Council.
Robert Wade, 1992. "East Asia's Economic Success: Conflicting Perspectives, Partial Insights, Shaky Evidence," World Politics 44: 270-320.
Paul Krugman, 1994. "The Myth of Asia 's Miracle," Foreign Affairs 78(6):62-78.
10. November 3. Inequality and development. Measurement of inequality, inequality of what among whom? inequality and growth, is inequality good for growth?
Ray, Chapters 6 (*6.3.4) and 7
11. November 10. Poverty and Population Growth
Impact of development on family structure. The demographic transition: Endogenous labor supply, population growth, and family structure. Women 's participation in labor markets and the consequences for the household.
Nancy Folbre, 1996. "Engendering economics: New Perspectives on Women, Work and Demographic Change," Annual World Bank Conference on Development Economics 1995.
Ray, Chapter 8 and 9.
Recommended:
Lourdes Beneria and Martha Roldan, 1987. The Crossroads of Class and Gender: Industrial Homework, Subcontracting and Household Dynamics in Mexico City. Chicago.
Nancy Folbre, 1986. "Cleaning House: New Perspectives on the Household and Economic Development," Journal of Development Economics 22: 5-40.
Gillian Hart, 1992. "Imagined Unities: Constructions of 'The Household' in Economic Theory," in Sutti Ortiz and Susan Lees, eds., Understanding Economic Process, pp. 111-129. University Press of America.
Verena Stolcke, 1988. Coffee Planters, Workers and Wives: Class Conflict and Gender Relations on Sao Paolo Coffee Plantations.
Diane Lauren Wolf, 1992. Factory Daughters: Gender, Household Dynamics, and Rural Industrialization in Java. California.
11. November 17. The Microeconomics of Economic Backwardness: Institutions and Incentives. Land, labor and capital in the informal sector; asymmetric information and informal enforcement of contracts.
Ray, Chapter 11 and 12.1-12.2, (read the boxes on pp 444-445 and 458-462) 12.5, 13.1-13.3, 14.1-14.2 read the box on pp 559-560), 14.5.2, 14.6, 15.1 (read the box on p. 613) 15.5.
12. November 17. Trade, Comparative Advantage and Trade Policy
Comparative advantage and the development process. The new theory of international trade and the old arguments for free trade. Determinants of direct investment flows: are low wages a magnet? Does openness contribute to development? Tariffs and import substitution. Should competitiveness be an objective of development policy?
Ray, Chapters 16 and 17 (including the appendix)
Recommended:
Gerald M. Meier, 1963. "Introductory," from International Trade and Development. Harper and Row.
Paul Krugman, "Is Free Trade Passé?" Economic Perspectives 1(2): 131-144.
Sebastian Edwards, 1993. "Openness, Trade Liberalization and Growth in Developing Countries," Journal of Economic Literature, (September) pp. 1358-1393 [selections]
Henry J. Bruton, 1998. "A Reconsideration of Import Substitution," in Journal of Economic Literature (June), XXXVI: 903-936.
Timothy Koechlin, 1992. "The determinants of the location of USA direct foreign investment," International Review of Applied Economics 6(2): 203-216;
Paul Krugman, 1994. "Productivity and Competitiveness," Appendix to Chapter 10 of Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations. W.W. Norton.
Paul Krugman, 1995. "Dutch Tulips and Emerging Markets," Foreign Affairs 74(4): 28-44.
A. Singh, "Openness and the Market Friendly approach to development..." World Development 22(12) 1994: 1811-1824
Barbara Stallings, 1990. "The Role of Foreign Capital in Economic Development," in Gary Gereffi and Donald L. Wyman, eds., Manufacturing Miracles: Paths of Industrialization in Latin America and East Asia, pp. 55-89. Princeton.
13. December 1. Globalization and social policy
The politics of trade liberalization
Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature.
Ray, Chapter 18
Adam Przeworski, 1992. "The Neoliberal Fallacy," Journal of Democracy (July): 45-59.
Recommended:
Peter Gourevitch, "International Trade, Domestic Coalitions, and Liberty: Comparative Responses to the Crisis of 1873-1896," Journal of Interdisciplinary History VIII: 2 (Autumn 1977): 281-313.
Karl Polanyi. The Great Transformation.
David Gordon, 1988. "The Global Economy," New Left Review 168: 24-64.
Geoffrey Garrett, 1995. "Capital mobility, trade, and the domestic politics of economic policy," International Organization 49(4): 657-87.
Adrian Wood, 1994. North-South Trade, Employment, and Inequality: Changing Fortunes in a Skill-Driven World. Oxford.
World Bank, 1995. World Development Report: Workers in an Integrating World, pp. 1-125. Oxford University Press for the World Bank.
Stephen Frenkel and Jeffrey Harrod, 1995. Industrialization and Labor Relations: Contemporary Research in Seven Countries. Cornell
Bob Sutcliffe, "Immigration and the World Economy," in Gerald Epstein, Julie Graham, and Jessica Membhard, eds., Creating a New World Economy, pp. 84-107. Temple.
J. Williamson, 1990. "What Washington means by policy reform," in J. Williamson, ed. Latin American adjustment: how much has happened? Institute for International Economics.
Colclough, Christopher. 1991. "Structuralism versus Neo-liberalism: An Introduction." In Colclough and James Mamor, eds. States or Markets? Neo-liberalism and the Development Policy Debate. Oxford UP: 2-25.
Sebastian Edwards, 1997. "The disturbing performance of Latin American Economies," Inter-American Dialogue typescript (January). See also his "Latin America 's underperformance," Foreign Affairs, v. 26, n2 (March-April):93-104.
Lance Taylor, 1993. "The Rocky Road to Reform: Trade, Industrial, Financial, and Agricultural Strategies," World Development 21(4): 577-590.
Francois Bourguignon, et. al., 1991. "Poverty and Income Distribution During Adjustment: Issues and Evidence from the OECD Project," World Development 19(11): 1485-1508.
Jeffrey Herbst, 1990. "The Structural Adjustment of Politics in Africa," World Development 18(7): 949-958.
Michael W. Foley, 1995. "Debt, Democracy, and Neoliberalism in Latin America: Losses and Gains of the 'Lost Decade '" in Manochehr Dorraj, ed., The Changing Political Economy of the Third World, pp. 17-44. Lynne Riener.
Stephen Haggard and Steven B. Webb, 1993. "What Do We Know about the Political Economy of Economic Policy Reform?" World Bank Research Observer 8(2): 143-268.
14. December 8. Social safety nets
Dani Rodrik, 1997. Has Globalization Gone Too Far? Institute for International Economics.