Development Economics

by Ray, Debraj

• ISBN13: 9780691017068
• ISBN10: 0691017069
• Format: Hardcover
• Copyright: 1998-01-12
• Publisher: Ingram Publisher Services, Inc.

Summary

The study of development in low-income countries is attracting more attention around the world than ever before. Yet until now there has been no comprehensive text that incorporates the huge strides made in the subject over the past decade.Development Economicsdoes precisely that in a clear, rigorous, and elegant fashion. Debraj Ray, one of the most accomplished theorists in development economics today, presents in this book a synthesis of recent and older literature in the field and raises important questions that will help to set the agenda for future research. He covers such vital subjects as theories of economic growth, economic inequality, poverty and undernutrition, population growth, trade policy, and the markets for land, labor, and credit. A common point of view underlies the treatment of these subjects: that much of the development process can be understood by studying factors that impede the efficient and equitable functioning of markets. Diverse topics such as the new growth theory, moral hazard in land contracts, information-based theories of credit markets, and the macroeconomic implications of economic inequality come under this common methodological umbrella. The book takes the position that there is no single cause for economic progress, but that a combination of factors--among them the improvement of physical and human capital, the reduction of inequality, and institutions that enable the background flow of information essential to market performance--consistently favor development. Ray supports his arguments throughout with examples from around the world. The book assumes a knowledge of only introductory economics and explains sophisticated concepts in simple, direct language, keeping the use of mathematics to a minimum. Development Economicswill be the definitive textbook in this subject for years to come. It will prove useful to researchers by showing intriguing connections among a wide variety of subjects that are rarely discussed together in the same book. And it will be an important resource for policy-makers, who increasingly find themselves dealing with complex issues of growth, inequality, poverty, and social welfare.

Table of Contents

Preface	XV
Chapter 1: Introduction	3	(4)
Chapter 2: Economic Development: Overview	7	(40)
2.1 Introduction	7	(3)
2.2 Income and growth	10	(11)
2.2.1 Measurement issues	10	(6)
2.2.2 Historical experience	16	(5)
2.3 Income distribution in developing countries	21	(4)
2.4 The many faces of underdevelopment	25	(8)
2.4.1 Human development	25	(2)
2.4.2 An index of human development	27	(2)
2.4.3 Per capita income and human development	29	(4)
2.5. Some structural features	33	(9)
2.5.1. Demographic characteristics	34	(1)
2.5.2. Occupational and production structure	34	(2)
2.5.3. Rapid rural-urban migration	36	(2)
2.5.4. International trade	38	(4)
2.6. Summary	42	(2)
Exercises	44	(3)
Chapter 3: Economic Growth	47	(52)
3.1. Introduction	47	(1)
3.2. Modern economic growth: Basic features	48	(3)
3.3. Theories of economic growth	51	(20)
3.3.1. The Harrod-Domar model	51	(7)
3.3.2. Beyond Harrod-Domar: Other considerations	58	(6)
3.3.3. The Solow model	64	(7)
3.4. Technical progress	71	(3)
3.5. Convergence?	74	(14)
3.5.1. Introduction	74	(1)
3.5.2. Unconditional convergence	74	(1)
3.5.3. Unconditional convergence: Evidence or lack thereof	75	(5)
3.5.4. Unconditional convergence: A summary	80	(2)
3.5.5. Conditional convergence	82	(2)
3.5.6. Reexamining the data	84	(4)
3.6. Summary	88	(2)
Appendix	90	(4)
3.A.1. The Harrod-Domar equations	90	(1)
3.A.2. Production functions and per capita magnitudes	91	(3)
Exercises	94	(5)
Chapter 4: The New Growth Theories	99	(32)
4.1. Introduction	99	(1)
4.2. Human capital and growth	100	(5)
4.3. Another look at conditional convergence	105	(2)
4.4. Technical progress again	107	(12)
4.4.1. Introduction	107	(1)
4.4.2. Technological progress and human decisions	108	(1)
4.4.3. A model of deliberate technical progress	109	(3)
4.4.4. Externalities, technical progress, and growth	112	(5)
4.4.5. Total factor productivity	117	(2)
4.5. Total factor productivity and the East Asian miracle	119	(4)
4.6. Summary	123	(2)
Appendix: Human capital and growth	125	(1)
Exercises	126	(5)
Chapter 5: History, Expectations, and Development	131	(38)
5.1. Introduction	131	(1)
5.2. Complementarities	132	(15)
5.2.1. Introduction: QWERTY	132	(4)
5.2.2. Coordination failure	136	(2)
5.2.3. Linkages and policy	138	(5)
5.2.4. History versus expectations	143	(4)
5.3. Increasing returns	147	(5)
5.3.1. Introduction	147	(1)
5.3.2. Increasing returns and entry into markets	148	(2)
5.3.3. Increasing returns and market size: Interaction	150	(2)
5.4. Competition, multiplicity, and international trade	152	(3)
5.5. Other roles for history	155	(4)
5.5.1. Social norms	155	(1)
5.5.2. The status quo	156	(3)
5.6. Summary	159	(2)
Exercises	161	(8)
Chapter 6: Economic Inequality	169	(28)
6.1. Introduction	169	(1)
6.2. What is economic inequality?	170	(3)
6.2.1. The context	170	(1)
6.2.2. Economic inequality: Preliminary observations	171	(2)
6.3. Measuring economic inequality	173	(19)
6.3.1. Introduction	173	(1)
6.3.2. Four criteria for inequality measurement	174	(4)
6.3.3. The Lorenz curve	178	(6)
6.3.4. Complete measures of inequality	184	(8)
6.4. Summary	192	(1)
Exercises	193	(4)
Chapter 7: Inequality and Development: Interconnections	197	(52)
7.1. Introduction	197	(2)
7.2. Inequality, income, and growth	199	(39)
7.2.1. The inverted-U hypothesis	199	(2)
7.2.2. Testing the inverted-U hypothesis	201	(8)
7.2.3. Income and inequality: Uneven and compensatory changes	209	(2)
7.2.4. Inequality, savings, income, and growth	211	(7)
7.2.5. Inequality, political redistribution, and growth	218	(2)
7.2.6. Inequality and growth: Evidence	220	(3)
7.2.7. Inequality and demand composition	223	(3)
7.2.8. Inequality, capital markets, and development	226	(11)
7.2.9. Inequality and development: Human capital	237	(1)
7.3. Summary	238	(3)
Appendix: Multiple steady states with imperfect capital markets	241	(3)
Exercises	244	(5)
Chapter 8: Poverty and Undernutrition	249	(46)
8.1. Introduction	249	(1)
8.2. Poverty: First principles	250	(6)
8.2.1. Conceptual issues	250	(3)
8.2.2. Poverty measures	253	(3)
8.3. Poverty: Empirical observations	256	(11)
8.3.1. Demographic features	257	(2)
8.3.2. Rural and urban poverty	259	(1)
8.3.3. Assets	259	(2)
8.3.4. Nutrition	261	(6)
8.4. The functional impact of poverty	267	(21)
8.4.1. Poverty, credit, and insurance	268	(4)
8.4.2. Poverty, nutrition, and labor markets	272	(7)
8.4.3. Poverty and the household	279	(9)
8.5. Summary	288	(2)
Appendix: More on poverty measures	290	(2)
Exercises	292	(3)
Chapter 9: Population Growth and Economic Development	295	(50)
9.1. Introduction	295	(2)
9.2. Population: Some basic concepts	297	(5)
9.2.1. Birth and death rates	297	(3)
9.2.2. Age distributions	300	(2)
9.3. From economic development to population growth	302	(24)
9.3.1. The demographic transition	302	(1)
9.3.2. Historical trends in developed and developing countries	303	(4)
9.3.3. The adjustment of birth rates	307	(11)
9.3.4. Is fertility too high?	318	(8)
9.4. From population growth to economic development	326	(12)
9.4.1. Some negative effects	326	(6)
9.4.2. Some positive effects	332	(6)
9.5. Summary	338	(2)
Exercises	340	(5)
Chapter 10: Rural and Urban	345	(58)
10.1. Overview	345	(8)
10.1.1. The structural viewpoint	345	(1)
10.1.2. Formal and informal urban sectors	346	(2)
10.1.3. Agriculture	348	(1)
10.1.4. The ICRISAT villages	349	(4)
10.2. Rural-urban interaction	353	(19)
10.2.1. Two fundamental resource flows	353	(1)
10.2.2. The Lewis model	353	(19)
10.3. Rural-urban migration	372	(23)
10.3.1. Introduction	372	(1)
10.3.2. The basic model	373	(1)
10.3.3. Floors on formal wages and the Harris-Todaro equilibrium	374	(5)
10.3.4. Government policy	379	(7)
10.3.5. Comments and extensions	386	(9)
10.4. Summary	395	(3)
Exercises	398	(5)
Chapter 11: Markets in Agriculture: An Introduction	403	(12)
11.1. Introduction	403	(1)
11.2. Some examples	404	(5)
11.3. Land, labor, capital, and credit	409	(6)
11.3.1. Land and labor	409	(3)
11.3.2. Capital and credit	412	(3)
Chapter 12: Land	415	(68)
12.1. Introduction	415	(1)
12.2. Ownership and tenancy	416	(4)
12.3. Land rental contracts	420	(25)
12.3.1. Contractual forms	420	(3)
12.3.2. Contracts and incentives	423	(8)
12.3.3. Risk, tenancy, and sharecropping	431	(5)
12.3.4. Forms of tenancy: Other considerations	436	(5)
12.3.5. Land contracts, eviction, and use rights	441	(4)
12.4. Land ownership	445	(17)
12.4.1. A brief history of land inequality	445	(1)
12.4.2. Land size and productivity: Concepts	446	(7)
12.4.3. Land size and productivity: Empirical evidence	453	(3)
12.4.4. Land sales	456	(1)
12.4.5. Land reform	457	(5)
12.5. Summary	462	(1)
Appendix 1: Principal-agent theory and applications	463	(11)
12.A.1. Risk, moral hazard, and the agency problem	463	(3)
12.A.2. Tenancy contracts revisited	466	(8)
Appendix 2: Screening and sharecropping	474	(4)
Exercises	478	(5)
Chapter 13: Labor	483	(46)
13.1. Introduction	483	(1)
13.2. Labor categories	484	(2)
13.3. A familiar model	486	(3)
13.4. Poverty, nutrition, and labor markets	489	(15)
13.4.1. The basic model	489	(10)
13.4.2. Nutrition, time, and casual labor markets	499	(1)
13.4.3. A model of nutritional status	500	(4)
13.5. Permanent labor markets	504	(18)
13.5.1. Types of permanent labor	504	(1)
13.5.2. Why study permanent labor?	505	(2)
13.5.3. Permanent labor: Nonmonitored tasks	507	(8)
13.5.4. Permanent labor: Casual tasks	515	(7)
13.6. Summary	522	(2)
Exercises	524	(5)
Chapter 14: Credit	529	(62)
14.1. Introduction	529	(3)
14.1.1. The limits to credit and insurance	529	(2)
14.1.2. Sources of demand for credit	531	(1)
14.2. Rural credit markets	532	(11)
14.2.1. Who provides rural credit?	532	(8)
14.2.2. Some characteristics of rural credit markets	540	(3)
14.3. Theories of informal credit markets	543	(18)
14.3.1. Lender's monopoly	543	(1)
14.3.2. The lender's risk hypothesis	544	(1)
14.3.3. Default and fixed-capital loans	545	(1)
14.3.4. Default and collateral	546	(2)
14.3.5. Default and credit rationing	548	(5)
14.3.6. Informational asymmetries and credit rationing	553	(2)
14.3.7. Default and enforcement	555	(6)
14.4. Interlinked transactions	561	(11)
14.4.1. Hidden interest	563	(1)
14.4.2. Interlinkages and information	564	(1)
14.4.3. Interlinkages and enforcement	564	(1)
14.4.4. Interlinkages and creation of efficient surplus	565	(7)
14.5. Alternative credit policies	572	(12)
14.5.1. Vertical formal-informal links	573	(5)
14.5.2. Microfinance	578	(6)
14.6. Summary	584	(2)
Exercises	586	(5)
Chapter 15: Insurance	591	(30)
15.1. Basic concepts	591	(5)
15.2. The perfect insurance model	596	(4)
15.2.1. Theory	596	(1)
15.2.2. Testing the theory	597	(3)
15.3. Limits to insurance: Information	600	(5)
15.3.1. Limited information about the final outcome	601	(1)
15.3.2. Limited information about what led to the outcome	602	(3)
15.4. Limits to insurance: Enforcement	605	(10)
15.4.1. Enforcement-based limits to perfect insurance	606	(2)
15.4.2. Enforcement and imperfect insurance	608	(7)
15.5. Summary	615	(2)
Exercises	617	(4)
Chapter 16: International Trade	621	(26)
16.1. World trading patterns	621	(6)
16.2. Comparative advantage	627	(3)
16.3. Sources of comparative advantage	630	(13)
16.3.1. Technology	630	(1)
16.3.2. Factor endowments	631	(5)
16.3.3. Preferences	636	(2)
16.3.4. Economies of scale	638	(5)
16.4. Summary	643	(1)
Exercises	644	(3)
Chapter 17: Trade Policy	647	(64)
17.1. Gains from trade?	647	(9)
17.1.1. Overall gains and distributive effects	647	(3)
17.1.2. Overall losses from trade?	650	(6)
17.2. Trade policy: Import substitution	656	(20)
17.2.1. Basic concepts	657	(3)
17.2.2. More detail	660	(16)
17.3. Export promotion	676	(8)
17.3.1. Basic concepts	677	(1)
17.3.2. Effect on the exchange rate	678	(1)
17.3.3. The instruments of export promotion: More detail	679	(5)
17.4. The move away from import substitution	684	(15)
17.4.1. Introduction	684	(1)
17.4.2. The eighties crisis	685	(5)
17.4.3. Structural adjustment	690	(9)
17.5. Summary	699	(2)
Appendix: The International Monetary Fund and the World Bank	701	(4)
Exercises	705	(6)
Chapter 18: Multilateral Approaches to Trade Policy	711	(46)
18.1. Introduction	711	(3)
18.2. Restricted trade	714	(11)
18.2.1. Second-best arguments for protection	714	(1)
18.2.2. Protectionist tendencies	715	(2)
18.2.3. Explaining protectionist tendencies	717	(8)
18.3. Issues in trade liberalization	725	(28)
18.3.1. Introduction	725	(2)
18.3.2. Regional agreements: Basic theory	727	(3)
18.3.3. Regional agreements among dissimilar countries	730	(5)
18.3.4. Regional agreements among similar countries	735	(11)
18.3.5. Multilateralism and regionalism	746	(7)
18.4. Summary	753	(2)
Exercises	755	(2)
Appendix 1: Elementary Game Theory	757	(20)
A1.1. Introduction	757	(1)
A1.2. Basic concepts	757	(2)
A1.3. Nash equilibrium	759	(8)
A1.4. Games over time	767	(10)
Appendix 2: Elementary Statistical Methods	777	(28)
A2.1. Introduction	777	(1)
A2.2. Summary statistics	778	(5)
A2.3. Regression	783	(22)
References	805	(24)
Author Index	829	(6)
Subject Index	835