Syllabus
Development Economics
Instructor: Professor Adam Szeidl szeidla@ceu.edu
Office hours: Wed 3-4pm, by appointment.
4 credits Fall 2022
PhD in Economics, MA in Economics, MA in Economic Policy
1. COURSE DESCRIPTION
Overview. The field of development economics attempts to understand why some countries are poor while others are rich. This overarching question can be broken into many smaller questions, such as why in poor countries farmers fail to adopt superior technologies, why firms do not perform to their potential, why some markets are missing, why government services are inadequate, what these barriers imply for economic growth and welfare, and what policies can do to address these growth barriers. The study of these questions can be called the microeconomics of development, and this course is an
introduction to selected topics in this area, especially focusing on private sector development, i.e., the role of firms. Topics will include financial markets, technology adoption, management, networks and indirect effects, information and infrastructure.
Besides exploring the causes and consequences of lagging development in some domains, the course also offers an introduction to empirical methods that researchers use to make progress in this area. One goal of the course is to identify research topics.
Who should take this course? This course is intended for second year MA students in economics and economic policy, PhD students in economics, and advanced students in the department of public policy. Some familiarity with regression analysis is helpful, but the course has no formal prerequisites and understanding the material does not require
sophisticated technical skills. However, the course requires serious conceptual engagement and has a relatively high workload. Students who have taken Development Economics in 2022 Winter should not take this course because there is substantial overlap in the material.
2. LEARNING OUTCOMES
Key outcomes. By the end of this course, students will have: (1) Knowledge and
understanding of empirical methodologies to evaluate development policies. (2) Knowledge and understanding of barriers to development in several important domains, and possible
policies to remove these barriers. (3) The ability to critically discuss and evaluate specific development policies addressing frictions and barriers particular domains. (4) Sufficient understanding of open issues to formulate a thesis plan in this field.
Other outcomes. The course will also help develop skills in the following areas. (1) Critical thinking: students will have an improved ability to distinguish between evidence and
interpretation. (2) Quantitative reasoning: students will have an improved understanding of the difference between correlation and causation. (3) Interpersonal communication skills:
students will have an improved ability to conduct and to constructively participate in small- group presentations.
3. READING LIST
There is no required textbook. Recommended texts include
Banerjee, A., and E. Duflo (2011), Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty,
De Janvry, A. and E. Sadoulet (2015), Development Economics: Theory and Practice.
A useful text for empirical methodology is
Angrist, J. and J. Pischke (2008) Mostly Harmless Econometrics,
from which sections will be recommended as background material. The main readings for the course are research papers listed below and lecture notes that will be made available online.
4. TEACHING METHOD AND LEARNING ACTIVITIES
Classes will combine lecture-style presentations by the instructor, questions to students to encourage participation, student presentations, and seminar-style classroom discussions.
Classroom activities are complemented by one-on-one interactions during office hours.
The instructor for this course is Adam Szeidl. Adam will hold office hours Wednesdays 3- 4pm, in person or via zoom, by appointment.
5. ASSESSMENT
The course grade will be based on problem sets, student presentations, class participation and a final exam. Your grade will be determined as follows.
Problem sets: 30%
Presentations: 30%
Class participation: 20%
Final exam: 20%
There will be two problem sets. Problem sets will combine elementary theory, conceptual questions, and own empirical work. After week 5 some classes will have student
presentations, in which pairs of students will present a research paper. Class participation is partly based on students preparing a deck of 4 slides each week about a pre-assigned paper, and a random student presenting for 5 minutes. There will be a three-hour final exam.
6. TECHNICAL REQUIREMENTS
Some background in microeconomics and econometrics is helpful but not required.
Familiarity with econometric software such as Stata is helpful but not required.
7. TOPIC OUTLINE AND SCHEDULE
Please see the detailed schedule in section 9 below.
8. SHORT BIO OF THE INSTRUCTOR
Adam Szeidl is Professor of Economics at Central European University and a Research Fellow at the Centre for Economic Policy Research (CEPR). His research studies networks and firms, often in a development context. Adam's research papers have been published in leading economics journals including the American Economic Review, Econometrica, and the Quarterly Journal of Economics. Adam is a recipient of a European Research Council (ERC) grant. Before returning to Europe, Adam was Associate Professor with tenure, (2010- 12) and Assistant Professor (2004-10) of Economics at the University of California, Berkeley.
He received his PhD from Harvard University in 2004.
9. DETAILED READING LIST
Lecture 1: Course organization, introduction, causal effects, regressions
*Duflo Ted talk:
https://www.ted.com/talks/esther_duflo_social_experiments_to_fight_poverty?language=en
*Mostly Harmless Chapters 2 (experiments), 3.2 (regressions and causality) Lecture 2: Variation in firm performance, measuring management
*Bloom, Nicholas, John Van Reenen, Measuring and Explaining Management Practices Across Firms and Countries, Quarterly Journal of Economics, Volume 122, Issue 4, November 2007, Pages 1351–1408.
Mostly Harmless Chapter 5.1 (panel data, fixed effects)
Hsieh, Chang-Tai, and Peter J. Klenow. 2009. “Misallocation and Manufacturing TFP in China and India.” Quarterly Journal of Economics 124 (4): 1403–48.
Hsieh, Chang-Tai, Peter J. Klenow, 2014. The Life Cycle of Plants in India and Mexico, The Quarterly Journal of Economics, Volume 129, Issue 3, Pages 1035–1084.
Syverson, Chad. 2011. “What Determines Productivity?” Journal of Economic Literature 49 (2): 326– 65.
Lecture 3: Management: randomized evidence
*Bloom, Nicholas, Benn Eifert, Aprajit Mahajan, David McKenzie, and John Roberts. 2013.
“Does Management Matter? Evidence from India.” Quarterly Journal of Economics 128 (1):
1–51.
Lecture 4: Management: longer-term and cross-industry effects
Bloom, Nicholas, Aprajit Mahajan, David McKenzie, and John Roberts. 2020. "Do Management Interventions Last? Evidence from India." American Economic Journal: Applied Economics, 12 (2): 198-219.
*Bruhn, Miriam, Dean Karlan, and Antoinette Schoar. 2018. “The Impact of Consulting Services on Small and Medium Enterprises: Evidence from a Randomized Trial in Mexico.”
Journal of Political Economy 126 (2): 635–87 Lecture 5: Network and group effects
*Cai, Jing, and Adam Szeidl. 2018. “Interfirm Relationships and Business Performance.”
Quarterly Journal of Economics 133 (3): 1229–82
Fafchamps, Marcel, Simon Quinn, Networks and Manufacturing Firms in Africa: Results from a Randomized Field Experiment, The World Bank Economic Review, Volume 32, Issue 3, October 2018, Pages 656–675
Lecture 6: Training, and combining and fine-tuning approaches
Brooks, Wyatt, Kevin Donovan, and Terence R. Johnson. 2018. “Mentors or Teachers?
Microenterprise Training in Kenya.” American Economic Journal: Applied Economics 10 (4):
196–221.
*Iacovone, Leonardo, William Maloney, David McKenzie, 2021. Improving Management with Individual and Group-Based Consulting: Results from a Randomized Experiment in Colombia, The Review of Economic Studies, forthcoming.
*McKenzie, David, Small business training to improve management practices in developing countries: re-assessing the evidence for ‘training doesn’t work’, Oxford Review of Economic Policy, Volume 37, Issue 2, Summer 2021, Pages 276–301
Lecture 7: Technology diffusion
Duflo, Esther and Emmanuel Saez, "The Role of Information and Social Interactions in Retirement Plan Decisions: Evidence from a Randomized Experiment," The Quarterly Journal of Economics, 2003, 118 (3), 815-842.
Cai, Jing, Alain de Janvry, and Elisabeth Sadoulet, "Social Networks and the Decision to Insure," American Economic Journal: Applied Economics, 2015, 7 (2), 81-108.
Lecture 8: Organizational barriers to technology adoption
Atkin, David, Azam Chaudhry, Shamyla Chaudry, Amit K. Khandelwal, and Eric Verhoogen,
"Organizational Barriers to Technology Adoption: Evidence from Soccer-Ball Producers in Pakistan," The Quarterly Journal of Economics, 03 2017, 132 (3), 1101-1164.
Lecture 9: Learning barriers to technology adoption
Rema Hanna, Sendhil Mullainathan, Joshua Schwartzstein, Learning Through Noticing:
Theory and Evidence from a Field Experiment , The Quarterly Journal of Economics, Volume 129, Issue 3, August 2014, Pages 1311–1353
Lecture 10: Other learning-based and psychological barriers
Abhijit Banerjee, Arun G Chandrasekhar, Esther Duflo, Matthew O Jackson, Using Gossips to Spread Information: Theory and Evidence from Two Randomized Controlled Trials, The Review of Economic Studies, Volume 86, Issue 6, November 2019, Pages 2453–2490
Beaman, Lori, Ariel BenYishay, Jeremy Magruder, and Mushfiq Mobarak (2021), “Can Network Theory-based Targeting Increase Technology Adoption?” American Economic Review, 111(6): 1918-1943.
Duflo, Esther, Michael Kremer, and Jonathan Robinson (2011), “Nudging Farmers to Use Fertilizer: Theory and Experimental Evidence from Kenya,” American Economic Review, 101(6): 2350-2390
Lecture 11: Microfinance
Banerjee, Abhijit, Dean Karlan, and Jonathan Zinman. ”Six randomized evaluations of microcredit: Introduction and further steps.” American Economic Journal: Applied Economics 7.1 (2015): 1-21.
Banerjee, Abhijit, Esther Duflo, Rachel Glennerster, and Cynthia Kinnan. 2015. "The Miracle of Microfinance? Evidence from a Randomized Evaluation." American Economic Journal:
Applied Economics, 7 (1): 22-53.
Lecture 12: Return to capital in small firms
de Mel, Suresh, David McKenzie, and Christopher Woodruff. 2008. “Returns to Capital in Microenterprises: Evidence from a Field Experiment.” Quarterly Journal of Economics 123 (4): 1329–72.
Lecture 13: Return to capital in large firms
Abhijit V. Banerjee and Esther Duflo. (2010). “Giving credit where it is due.” Journal of Economic Perspectives, 24(3):61-80.
Banerjee, Abhijit and Esther Duo, "Do Firms Want to Borrow More? Testing Credit Constraints Using a Directed Lending Program," Review of Economic Studies, 2014, 81, 572- 607.
Lecture 14: Indirect effects of credit
Cai, Jing, and Adam Szeidl, "Indirect Effects of Financial Access" Working paper.
Lecture 15: Indirect effects of training and subsidies
+McKenzie, David and Susana Puerto, "Growing Markets through Business Training for Female Entrepreneurs: A Market-Level Randomized Experiment in Kenya," American Economic Journal: Applied Economics, April 2021, 13 (2), 297-332.
Rotemberg, Martin, "Equilibrium Effects of Firm Subsidies," American Economic Review, October 2019, 109 (10), 3475-3513.
Lecture 16: General equilibrium price and wage effects
+Marshall Burke, Lauren Falcao Bergquist, Edward Miguel, Sell Low and Buy High: Arbitrage and Local Price Effects in Kenyan Markets, The Quarterly Journal of Economics, Volume 134, Issue 2, May 2019, Pages 785–842
Fink, Gunther, B. Kelsey Jack, and Felix Masiye. (2020). “Seasonal Liquidity, Rural Labor Markets and Agricultural Production.” American Economic Review, 110(11): 3351-3392.
Lecture 17: General equilibrium aggregate effects
+Breza, Emily and Cynthia Kinnan, "Measuring the Equilibrium Impacts of Credit: Evidence
from the Indian Microfinance Crisis," The Quarterly Journal of Economics, 05 2021, 136 (3), 1447-1497.
Buera J. Francisco, Joseph P. Kaboski, and Yongseok Shin. (2020). “The Macroeconomics of Microfinance.” The Review of Economic Studies, 0, 1-36.
Lecture 18: Organizing the workforce: peer effects and pay inequality
Mas, Alexandre and Enrico Moretti (2008), “Peers at Work”, American Economic Review, 99(1): 112-145.
Breza, Emily, Supreet Kaur and Yogita Shamdasani (2018), “The Morale Effects of Pay Inequality”, Quarterly Journal of Economics, 133(2): 611-663.
Lecture 19: Conflict in the workplace
+Hjort, Jonas (2014), “Ethnic Divisions and Production in Firms,” Quarterly Journal of Economics, 129(4): 1899-1946.
Lowe, Matt (2021), “Types of Contact: A Field Experiment on Collaborative and Adversarial Caste Integration,” American Economic Review 111(6): 1807-1844.
Lecture 20: International trade
+Atkin, David, Amit K. Khandelwal, and Adam Osman, 2017. "Exporting and Firm Performance: Evidence from a Randomized Experiment," The Quarterly Journal of Economics, 132 (2), 551-615.
Bastos, Paulo, Joana Silva, and Eric Verhoogen. 2018. "Export Destinations and Input Prices." American Economic Review, 108 (2): 353-92.
Lecture 21: Market structure and competition
+Jensen, Robert. 2007. “The Digital Provide: Information (Technology), Market Performance, and Welfare in the South Indian Fisheries Sector.” Quarterly Journal of Economics 122 (3):
879–924.
Aker, J. 2010. Information from markets near and far: the impact of mobile phones on grain markets in Niger.” American Economic Journal: Applied Economics. (2), pp. 46-59.
Bergquist, Lauren Falcao, and Michael Dinerstein. 2020. "Competition and Entry in Agricultural Markets: Experimental Evidence from Kenya." American Economic Review, 110 (12): 3705-47.
Lecture 22: Market integration and firm performance
+Jensen, Robert, and Nolan H. Miller. 2018. "Market Integration, Demand, and the Growth of Firms: Evidence from a Natural Experiment in India." American Economic Review, 108 (12): 3583-3625.
Lecture 23: E-commerce
Bai, Jie, Maggie Chen, Jin Liu and Daniel Xu. (2020), “Search and Information Frictions on Global E-Commerce Platforms: Evidence from Aliexpress.” NBER Working paper No. 28100.
+Couture, Victor, Benjamin Faber, Yizhen Gu, and Lizhi Liu. (2021), “Connecting the Countryside via E-Commerce: Evidence from China.” American Economic Review: Insights, 3(1): 35-50
Sun, Zhengyun and Yizhou Jin. (2020). “Lifting Growth Barriers for New Firms: Evidence from an Entrepreneur Training Experiment with Two Million Online Businesses.” Working paper.
Hjort, Jonas and Jonas Poulsen. (2019), “The Arrival of Fast Internet and Employment in Africa.” American Economic Review, 17(3): 876-916
Lecture 24: Summary and Review
Other potential topics
Reputation
Bai, Jie (2021), “Melons as lemons: Asymmetric information, consumer learning and seller reputation,” Working paper, MIT.
Banerjee, Abhijit and Esther Duflo (2000), “Reputation effects and the limits of contracting:
A study of the Indian software industry,” Quarterly Journal of Economics, 115: 989-1017.
Macchiavello, Rocco and Ameet Morjaria (2015), “The Value of Relationships: Evidence from a Supply Shock to Kenyan Rose Exports,” American Economic Review, 105(9): 2911-45.
Macchiavello, Rocco and Ameet Morjaria (2020), “Competition and Relational Contracts in the Rwanda Coffee Chain,” Forthcoming, The Quarterly Journal of Economics.
Bold. T., Kaizzi, D. Svensson, J and D. Yanagizawa-Drott. 2017. “Lemon technologies and adoption: measurement, theory, and evidence from agricultural markets in Uganda.”
Quarterly Journal of Economics, 132 (3): pp. 1055-1100
Infrastructure
Donaldson, Dave (2018) "Railroads of the Raj: Estimating the Impact of Transportation Infrastructure", American Economic Review 108(4-5):899-934.
Faber, Ben (2014) “Trade Integration, Market Size, and Industrialization: Evidence from China’s National Trunk Highway System” Review of Economic Studies 81 (3): 1046–1070.
Lending contract form
Field, Erica, Rohini Pande, John Papp, and Natalia Rigol. 2013. "Does the Classic Microfinance Model Discourage Entrepreneurship among the Poor? Experimental Evidence from India." American Economic Review, 103 (6): 2196-2226.
Battaglia, Marianna, Selim Gulesci and Andreas Madestam (2021) Repayment Flexibility and Risk-Taking: Experimental Evidence from Credit Contracts, Working paper
Methodology
de Quidt, Jonathan, Johannes Haushofer, and Christopher Roth. 2018. “Measuring and Bounding Experimenter Demand.” American Economic Review 108 (11): 3266–3302.
McKenzie, David. 2012. “Beyond Baseline and Follow-up: The Case for More T in Experiments.” Journal of Development Economics 99 (2): 210–21.
Muralidharan, Karthik, and Paul Niehaus. 2017. “Experimentation at Scale.” Journal of Economic Perspectives 31 (4): 103–24.
