Development Economics

Theory and Practice

Alain de Janvry, Elisabeth Sadoulet

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000378559
• Edition: 2
• Topic: Business
• Subtopic: Business General
• Index: Business

This second edition of Development Economics: Theory and Practice continues to provide students and practitioners with the perspectives and tools they need to think analytically and critically about the current major economic development issues in the world.

Alain de Janvry and Elisabeth Sadoulet identify seven key dimensions of development—growth, poverty, vulnerability, inequality, basic needs, sustainability, and quality of life—and use them to structure the contents of the text. The book gives a historical perspective on the evolution of thought in development. It uses theory and empirical analysis to present readers with a full picture of how development works, how its successes and failures can be assessed, and how alternatives can be introduced. The authors demonstrate how diagnostics, design of programs and policies, and impact evaluation can be used to seek new solutions to the suffering and violence caused by development failures.

In the second edition, more attention has been given to ongoing developments, such as:

• pursuit of the Sustainable Development Goals

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• continuously rising global and national inequality

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• health as a domestic and international public good

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• cash transfers for social protection

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• carbon trading for sustainability

This text is fully engaged with the most cutting-edge research in the field and equips readers with analytical tools for impact evaluation of development programs and policies, illustrated with numerous examples. It is underpinned throughout by a wealth of student-friendly features, including case studies, quantitative problem sets, end-of-chapter questions, and extensive references. The companion website contains Excel and Stata exercises for students alongside materials for instructors.

This unique text is ideal for those taking courses in development economics, economic growth, and development policy, and will provide an excellent foundation for those wishing to pursue careers in development.

Chapter One

What Is Development? Indicators and Issues

Seven Dimensions of Development

Development is about the enhancement of human wellbeing. Because wellbeing is a highly multidimensional concept, defining development requires making a statement about the social needs and aspirations of the corresponding individual, group, class, or nation.

Few would disagree with the generic statement that “development” is preferable to “underdevelopment.” At the same time, there is considerable disagreement across individuals and nations as to what is meant by development and, once agreed on what it is, how it is to be achieved. Development is one thing for some and another for others. Some put achieving a rapid rate of economic growth as the main objective. This characterizes countries like postwar Japan and China, which pursued neo-mercantilist models with low-priced exports driving economic growth. In their debate on how to reduce poverty in India, Bhagwati and Panagariya (2013) argue that the main instrument is more rapid economic growth facilitated by further trade liberalization and an improved investment climate, notably in terms of labor laws and landownership. Others give a great deal of importance to maintaining low inequality. This is the case in the Nordic countries and Japan in the more recent period, heavily taxing high incomes to level out social inequalities through transfers. The World Bank’s (2005) World Development Report 2006 made the case that lowering inequality is a factor of not only reduced poverty but also, in the long run, accelerated economic growth. Others place a great deal of importance on securing access to basic needs for all, with comprehensive coverage of publicly provided health, education, and pension services. This perspective on the role of the state in delivering a universal minimum basic-needs coverage applies to much of continental Europe and Canada. Sen and Drèze (2013) argue that large public investments in health, education, and other dimensions of social welfare for the poor would not only be effective at reducing poverty in India, but would also mobilize a badly neglected source of growth.

We thus start the study of development with a paradox. We agree on the desirability of a state of affairs—development—but we have difficulty agreeing on exactly what it is. This is because development is multidimensional. While there may be situations where we achieve gains simultaneously in all the dimensions of development, in most cases there will be trade-offs, implying the need to establish social priorities. The dimensions of development and their relative importance are in the end a social and a personal choice; that is, an ideological and moral statement (with ideology defined, in The Free Dictionary, as “the body of ideas reflecting the social needs and aspirations of an individual, group, class, or culture; a set of doctrines or beliefs that form the basis of a political, economic, or other system”). So, when talking about development and making judgments about it, it is important to be clear as to what we mean. Without this, debates about development are more often than not about irreconcilable ideological differences regarding the definition of development, rather than useful propositions about how to achieve a particular development agenda.

A good starting point to look for dimensions of development on which there is broad agreement is the MDGs—a set of objectives defined by the UN in 2000 to be met in 2015 and formally endorsed by all 191 UN member states (World Bank, “Millennium Development Goals”). The MDGs are listed in Box 1.1. The goals and the associated indicators enable comparison of the state of development across countries and provide yardsticks to monitor progress over time. While they inevitably simplify the reality of development to just a few dimensions and may, consequently, bias the development priorities of governments that want to achieve recognizable measures of progress according to the MDGs, they help reveal broad international agreement on what constitutes some of the fundamental aspects of development. An example of bias is, for instance, reducing by half the incidence of extreme poverty (initially defined as people with consumption inferior to PPP$1/day) in Goal 1, which may be achieved at the cost of neglecting the poorest of the poor, who are more difficult to take out of poverty, even though they are the ones suffering most from it. Another potential bias is the emphasis, in Goal 2, on universal primary education, which may be achieved at the cost of reduced investment in higher education when the latter may be essential to support entrepreneurship, leadership, and higher economic growth.

Box 1.1 The Millennium Development Goals

Goal 1: Eradicate extreme poverty and hunger. Halve between 1990 and 2015 the proportion of people whose income is less than PPP$1.25 /day as well as the proportion of people who suffer from hunger.

Goal 2: Achieve universal primary education. Ensure that all boys and girls complete a full course of primary schooling.

Goal 3: Promote gender equality and empower women. Eliminate gender disparity in primary and secondary education.

Goal 4: Reduce child mortality. Reduce by two-thirds the under-five mortality rate between 1990 and 2015.

Goal 5: Improve maternal health. Reduce by three-quarters the maternal mortality ratio between 1990 and 2015 and achieve universal access to reproductive health by 2015.

Goal 6: Combat HIV/AIDS (human immunodeficiency virus/acquired immune deficiency syndrome), malaria, and other diseases. Halt by 2015 and begin to reverse the spread of HIV/AIDS and the incidence of malaria and other major diseases.

Goal 7: Ensure environmental sustainability. Integrate the principles of sustainable development into country policies and programs; halve by 2015 the proportion of people without sustainable access to safe drinking water and basic sanitation; achieve, by 2020, a significant improvement in the lives of at least 100 million slum dwellers.

Goal 8: Develop a global partnership for deve...