{"id":10169,"date":"2014-05-19T05:00:24","date_gmt":"2014-05-19T09:00:24","guid":{"rendered":"http:\/\/marcfbellemare.com\/wordpress\/?p=10169"},"modified":"2014-05-18T10:54:54","modified_gmt":"2014-05-18T14:54:54","slug":"development-economics-defined","status":"publish","type":"post","link":"https:\/\/marcfbellemare.com\/wordpress\/10169","title":{"rendered":"Development Economics Defined?"},"content":{"rendered":"

[T]oday, \u201cdevelopment economics\u201d …\u00a0has several key features: (1) It very consciously takes place in developing countries. These researchers are out collecting surveys or doing studies \u201cin the field.\u201d Perhaps the best way to define a development economist today is as someone whose presentation includes a picture of the village they worked in to collect data. (2) It is intensely concerned with identification of causal effects. Thus this field aspires to do randomized control trials (RCTs) to identify the causal effect of some X (e.g., de-worming treatments) on some Y (e.g., school attendance), as in Kremer and Miguel (2004). Failing that, some kind of natural experiment that features quasi-random treatment effects is examined. (3) It tends to be a-theoretical. The RCTs are showing reduced-form empirical effects of some kind of treatment on some kind of outcome. The de-worming paper of Kremer and Miguel is purely empirical, for example. This isn\u2019t generally true, as there are papers that explicitly are testing some theory, but the dominant portion of the literature is purely empirical.<\/p>\n

Through some historical inertia in the profession, we call this research \u201cdevelopment economics.\u201d But I think that this type of research is more properly called \u201cpoverty economics,\u201d the study of individuals living in particularly poor, under-developed countries. …\u00a0The RCTs are evaluations of interventions that aim to improve health, or nutrition, or educational attainment. By going out into these developing countries, these researchers are acutely aware of the constraints facing poor people, and are studying ways to alleviate those constraints.<\/p>\n

This is all valuable research. It is perhaps more admirable in its motivations than other sub-fields of economics (*cough* finance *cough*). But it is not about \u201cdevelopment.\u201d<\/p>\n

Economic development is about the transition of whole economies from low-productivity, poor places into high-productivity industrial economies. This transition encompasses several aspects: a move out of agriculture and into manufacturing or services, urbanization, declining fertility rates, integration with global markets. Current research in development economics \u2013 the RCTs and their like \u2013 does not study the transition. \u201cWhat will make these people better off today?\u201d is a different question than \u201cWhat will make this economy develop?\u201d<\/p><\/blockquote>\n

That’s Dietrich Vollrath, from the University of Houston, in a post<\/a> titled “Defining Development Economics.” A few observations:<\/p>\n

    \n
  1. It is true that, much like labor economists, development economists are now deeply concerned with the identification of causal effects. The reason for this is actually quite simple, and I think Michael Kremer said\u00a0it<\/a> best:\u00a0“Development [has gone]\u00a0through a lot of fads. We need to have evidence on what works.” Knowing what works\u00a0is especially\u00a0important in development policy, given just how little funds are allocated to international development by most governments.<\/li>\n
  2. One of the fads development went through was the kind of development macro Vollrath talks about when he discusses the transition from poor, agrarian economies to rich, manufacturing or services economies. In fact, the field was born when economists like Paul Rosenstein-Rodan (1943) and Ragnar Nurkse (1953) decided to take a look at the macro problems faced by developing countries and gave birth to the “big push<\/a>” theory. Development macro flourished from then until the mid- to late 1990s, with the death of the Washington Consensus. Sadly, it looks as though very little of the development policies that came from those decades amounted to much economic development.<\/li>\n
  3. As above, so below: Much like a great deal of macro now focuses on the micro-foundations of the macroeconomy, development economists began focusing on the micro-foundations of underdevelopment sometime in the early to mid-1980s. A lot of that work was theoretical back then because of a paucity of good developing-country data and due to limitations of computing power. Nowadays, developing-country data is much easier to come by, and computing power is not really an issue. Thus, the relative cost of doing empirical research in development economics has decreased substantially relative to that of doing theoretical research. Moreover, there are decreasing returns to theory; that is, most (if not all) of the important market failures leading to underdevelopment have been explored by theorists, as have many of the phenomena unique to developing countries.<\/li>\n
  4. Yes, much of the empirical development economics that has come out of or been influenced by the Cambridge, MA crowd has been a-theoretical. But the tide is turning, and an increasing number of development economists are now embracing structural work that combines serious theoretical modeling with better identification of causal impacts. For example, see this working paper<\/a> by Banerjee et al., or this very nice paper<\/a> by Dube and Vargas (2013), in which the authors investigate the mechanisms through which the causal effects they find evidence of operate.<\/li>\n
  5. Economic\u00a0underdevelopment is the result of multiple market failures. If we don’t understand how to overcome each of those market failures at the micro level, it is extremely unlikely that we will ever be able to end up with economy-wide growth.<\/li>\n<\/ol>\n

    (ht: Markus Eberhardt<\/a>.)<\/p>\n","protected":false},"excerpt":{"rendered":"

    [T]oday, \u201cdevelopment economics\u201d …\u00a0has several key features: (1) It very consciously takes place in developing countries. These researchers are out collecting surveys or doing studies<\/p>\n

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