Development Economics Lecture Flashcards

Vocabulary flashcards covering key development economics terms, historical paradigms, policy evaluation methods, inequality indicators, and human capital metrics.

Development Economics

A branch of economics that seeks to understand the economic aspects of the development process in low-income countries.

Social Cash Transfer Scheme (SCTS)

A social assistance initiative targeting the ultra-poor (such as households living on less than 10 cents per day in Malawi) to give them financial freedom to save, spend, and invest, generating local spillover benefits.

Harrod-Domar Model

A 1950s growth model asserting that “investment is the key driver of economic growth.”

Prebisch-Singer Hypothesis

The observation that the terms of trade between primary commodities and manufactured goods erode over time because demand for manufactured goods grows faster than demand for primary goods as income increases.

Backward Linkages

Growth mechanisms that transmit expansionary effects from an input-demanding economic activity to its suppliers, such as from textile production to cotton mills.

Forward Linkages

Growth mechanisms that stimulate downstream activities ahead of a producing firm in the production chain, such as output driving the growth of energy or processing industries.

Lewis Dual-Sector Model

A structural transformation model centered on worker mobility from a traditional agricultural sector to a modern industrial sector.

Kuznets Inverted-U Hypothesis

A hypothesis proposing that as an economy develops, income inequality first increases and then decreases over time.

PROGRESA

An anti-poverty program launched in Mexico in 1997 that utilized large-scale randomized control trials (RCTs) and became the worldwide model for Conditional Cash Transfer (CCT) programs.

Conditional Cash Transfer (CCT)

A program that provides cash directly to poor families, usually given to women, contingent upon fulfilling specific mandates in health, nutrition, and school enrollment.

Productive Safety Net Program (PSNP)

An Ethiopian social protection program that targets food-insecure households and provides aid in exchange for labor on public infrastructure projects.

Treatment Spillover

An experimental effect where the impact of a program intervention spreads beyond the targeted treatment group into the non-treated control group or broader local economy.

Cost-Benefit Analysis (CBA)

A quantitative methodology used to choose among development projects by summing up all anticipated costs and benefits and evaluating viability based on a positive difference.

Copenhagen Consensus (2004)

An initiative that mainstreamed Cost-Benefit Analysis internationally by evaluating and ranking global development interventions according to their cost-efficiency or 'bang for their buck'.

Input-Output (IO) Analysis

A framework created by Wassily Leontief that uses a multiplier matrix to calculate how much output every sector in an economy must produce to satisfy final demand and intermediate sector requirements.

Gross National Product (GNP)

An economic measure equal to GDP plus net income earned by domestic citizens abroad, including worker remittances sent back to their home country.

Purchasing Power Parity (PPP)

An exchange rate adjustment technique that determines the relative value of currencies by calculating the cost of an identical mixed basket of goods and services across different countries.

Poverty Gap

The quantitative difference between an individual's income level and the established per capita poverty line.

Poverty Trap (Multiple Equilibria Model)

A phase diagram model where an economy features a low equilibrium $A^L$ and a high equilibrium $A^H$ separated by an unstable threshold $A^*$, demonstrating the need for a 'Big Push' investment to reach self-sustaining growth.

Gini Coefficient

A mathematical index measuring income inequality across a population, ranging from $0$ (perfect equality) to $1$ (perfect inequality).

Stocks (Education)

The total cumulative amount of schooling embodied within a given population at a specific point in time.

Flows (Education)

The net change in educational stock resulting from current school enrollment and completion patterns.

Grade Survival Rates (GSRs)

Estimates that measure the proportion of enrolled children who successfully complete a designated grade level.

Social Returns to Schooling

The total economic and social benefits generated by education, combining higher individual private earnings with societal positive externalities like lower crime and improved health.

Stunting

A condition defined by the World Health Organization as a child under age $5$ having a height-to-age ratio more than $2$ standard deviations below the global reference median.

Underweight

A condition defined by the World Health Organization as having a weight-to-age ratio more than $2$ standard deviations below the global reference median.

Health-Adjusted Life Expectancy (HALE)

A comprehensive health index calculated by the WHO that reduces standard life expectancy by the total number of years spent living with disabilities weighted by severity and duration.

Epidemiologic Transition

A historical shift in population disease patterns from infectious diseases, pestilence, and famine toward chronic, degenerative, and human-made conditions.

Malawi

Very poor, annual income of 389, daily income 3 dollars

How can Malawi improve?

Focus on smallholder production (81% of population)

What does Development Economics represent?

Income growth, welfare economics, agricultural economics, economic demography, labor economics, and public economics

Economic Decelopment

Looks at far reaching changes in economics, political systems, culture, and technology.

Development Policies 1950s/1960s

Began right after World War 2, for post-war Europe and Asia

What worked in Europe/Asia didn’t transfer over to developing countries (b/c they were focusing on income growth)

Major Structural Transformation

Germany and Japan

Recover from World War 2 quickly because they were already westernized

Rostow

Stages of Growth

Kuznets

Linear stages of development

Harrod-Domar Model

“Generate savings to suport higher growth rates” (Japan)

W. Arthur Lewis

Created the structural transformation (dual-sector model) for “worker mobility“

Ranis and Fei

“Industrial growth depends on agricultural growth”

Schultz

If you’re going to move labor out of agriculture, you must adopt new ways of farming (agricultural technologies) to keep up food production

Asian Tigers

Taiwan, Singapore, Hong Kong, and South Korea successfully implemented outward oriented policies

Hirshman

“Imbalances between demand and supply stimulate economic growth”
- he created linkages

Linkages

To promote investments in industries with linkages to other firms, to create a multiplier effect on economic growth

John Meller

Wrote The New Economic Growth

John Meller Findings

He documented the importance. of consumption linkages between rural hosueholds and urban industries. “Rising agricultural incomes create demand for goods from the industrial sector”

1960s

The UN declared it the decade of development

UN in 1960s

Hoped to achieve an annual growth rate of 5%

UN in 1960s outcome

LDC populations increased
Growth rates: 4.6%
Per-Capita Growth GDP: 2% increase

The End of the Decade of Development

The gap between rich. andpoor countries actually widened

Chenery

Wrote Redistribution of Growth. “Unequal assets lead to unequal distribution of benefits”

Robert McNamara

1972, he said a shift needs to take place away from economic growth to poverty alleviation. andinequality

Atmir Sen

Provided an extension to Robert McNamara, argued that human development included health, nutrition, education, and freedom. (Debate concerning freedom)

National Planning Offices

Inspired by Soviet Union 5 year plans (Egypt evicted the Soviets)

1970s

New debate about the role of government involvement in markets vs market-led development

1960s/1970s

Saw more government invovlement in markets

1960s/1970s Government Involvement

Fixing prices, controlling trade, development of state enterprises, and trading bodies (Japan post-WW2) However most LDC’s the very poor remained heavily dependant on agriculture

1980s

The Soviet Union collapsed, China, and a reaction developed against too much state involvement. Ronald Reagan and Margaret Thatcher led the charge against state involvement and controls

Countries in the 1980s

Outward-oriented policy countries were more successfully developing than those pursuing inward-oriented policies

1979s and 1980s

soaring oil prices,
“Structural Adjustment” programs involved reducing government involvement in the state in order to recieve IMF and World Bank funds

Stiglitz

“Markets and rarely efficient”

The Big Push

Devised by some economists. Fathered by Rosenstein Roden

The Big Push Approach

Launched the Millennium Villages, an experimental development project (Jeffrey Sachs, 10 years)

Randomized Control Trial (RCT) Stages

Treatment, target population, treatment/control group, administer treatment, gather results, and compare outcomes

PROGESA

1997, Mexico: Cash to the poor
2.6 million families in 50,000 rural communities identified

Baseline Surveys

Found pretreatment information, ensured no significant differences between the treatment and control group (which validates the RCT)i

Architect of PROGRESA

Santiago Levy

RCTs are used to evaluate

Social Cash Transfer Programs

Social Cash Transfers are

Popular in Africa because Africans are labor-poor and exist in extreme poverty

Reasons for African SCTs

• AIDS is more prevalent

• Lots of smallholder farms and informal economies

• Public institutions are weak

• Governments have little money to invest

International Donors

Important to fund social programs in Sub-Saharan Africa

International Donor Issues

Donors have funding conflicts, like to see short term impacts, and governments have consensus problems

Ethiopia

Productive Safety Net Program

Kenya, South Africa

Yielded some positive results in education from programs

Giving Credit (RCT)

High-risk people found self sufficiency, food consumption improved, and increased depression/stress (from being in debt)

What did people spend their credit on?

New tech, crop production, and fertilizier

Female Rice Farmers in Mali

RCT, rice output increased by 31%

Psychological Poverty Trap

Without money, people didn't’t think about their futures (Mozambique)

Mozambique

Lottery, 70% discount on the cost of seed/fertilizer, changed their outlook on life as far as 235 days.

1990s

There was a gap between “applied development research and the practice of development.” RCT's are always needed