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[Ebook PDF] Economics of Development, 7th Edition
Authors: by Dwight H. Perkins (Author), Steven Radelet (Author), David L. Lindauer (Author), Steven A. Block (Author)
A dynamic revision of the most modern development economics textbook. This classic text has been aggressively revised to incorporate the latest research defining the Development Economics field today.
Preface
In 1983, when the fi rst edition of this textbook was published, 50 percent of the world’s population lived in nations the World Bank classifi ed as low income. By 2010 the number had dropped to 12 percent. Much of that change is the result of rapid economic growth in China and India. Today, both are middle- income economies. But economic growth and development has not been limited to these two Asian giants. “Africa Rising” was the cover story of a 2011 issue of Th e Economist, refl ecting more than a decade of rapid growth in a region Th e Economist 10 years earlier referred to as “Th e Hopeless Continent.” Th roughout Africa, East and South Asia, Latin America, and elsewhere, dramatic improvements have been taking place in the
education, health, and living standards of billions of people.
Th e study of the economics of development has had to keep pace with these historic changes. We have tried to keep pace as well. In this as in previous editions, we have incorporated new ideas and new data and provide fresh insights from the experiences of the nations that make up the developing world. While there is much that is new in this seventh edition, the distinguishing features of this text remain the same:
• It is based primarily on the real- world experiences of developing countries. It explores broad trends and patterns and uses numerous real- country examples and cases to illustrate major points, many of which are drawn from the authors’ own experiences.
• It draws heavily on the empirical work of economists who believe that attention to the data not only reveals what the development process entails but permits us to test our beliefs about how that process works.
• It relies on the theoretical tools of neoclassical economics to investigate and analyze these real- world experiences in the belief that these tools contribute substantially to our understanding of economic development.
• It highlights the diversity of development experience and recognizes that the lessons of theory and history can be applied only within certain institutional and national contexts.
As in previous editions, the seventh edition of Economics of Development is intended to be both accessible and comprehensive. Th e discussion is accessible to those students, whether undergraduates or those pursuing advanced degrees in international
relations, public policy, and related fi elds, who have only an elementary background in economics. At the same time, the text provides a comprehensive introduction to all students, including those with signifi cant training in economics, who are taking their
first course in development economics.
Major Changes for the Seventh Edition
The seventh edition of Economics of Development continues and extends the major revisions of the book initiated in previous editions. Th e substantial changes reflect the contributions of three new coauthors— Steven Radelet in the fifth edition, David
Lindauer in the sixth, and Steven Block in the seventh— working alongside original coauthor Dwight Perkins. The seventh edition features fundamental revisions of many chapters. Th e revised chapters take full advantage of research on development economics over the past decade. In addition, there are more and better tables, charts, and other exhibits chronicling the lessons and remaining controversies of the development fi eld. Th e chapter summaries that follow highlight the major changes
in the seventh edition. Asterisks indicate chapters that are essentially or entirely new for this edition.
Chapter 1 (Patterns of Development) has been condensed. It begins with the three vignettes— on Malaysia, Ethiopia, and Ukraine— that were introduced in the previous edition and updated for this one. Th e chapter includes a new table on the classifi cation of world economies and populations according to income status. Also added is a section on how the study of development economics differs from the study of economics as applied to developed nations.
Chapter 2 (Measuring Economic Growth and Development) reflects important updates by various agencies and authors, including the 2005 International Comparison Program (ICP) estimates of purchasing power parity; Angus Maddison’s latest and last estimates of world economic growth; and the United Nations Development Programme’s (UNDP) 2010 revision of the human development index (HDI). The analysis of economic growth and happiness has been fully revised and expanded, reversing some of the conclusions first reported in the sixth edition. A new box has been added on the determinants of long- run economic growth suggested by Jared Diamond’s Guns, Germs, and Steel. Th ere is also a new box on the use of logarithms, essential to understanding the HDI and other development measures.
Chapter 3 (Economic Growth: Concepts and Patterns) has been reorganized and updated to include the latest data and country examples. This edition features a new box on the calculation of growth rates, future values, and doubling times. Previous
material on the characteristics of production functions and on growth convergence has been moved to Chapter 4. The previous discussion of structural change has been entirely rewritten and relocated to Chapter 16, where it supports the discussion of
economic dualism Chapter 4 (Theories of Economic Growth) has also been streamlined and consolidated. This edition integrates into its presentation of growth theory the discussions of production functions and growth convergence previously found in Chapter 3. The previous discussion of dual- sector growth models has been eliminated from the discussion of growth theory and relocated to Chapter 16, where its primary purpose is to illustrate sectoral interactions as a foundation for discussing the role of agriculture in development. Chapter 4 also provides newly updated data and illustrative figures.
*Chapter 5 (States and Markets) raises the central question, What makes economic development happen? For this edition, senior author, Dwight Perkins, takes a fresh look, tracing the evolution of thinking about development from Adam Smith, through
notions of Th e Big Push advanced in the 1940s by economist Paul Rosenstein- Rodan, to more recent debates over Structural Adjustment and the Washington Consensus.
Chapter 6 (Inequality and Poverty) updates the analysis of poverty by examining the revision of the global poverty line from $1 per day to $1.25 per day. Combined with recent measures of purchasing power parity (PPP), the latest estimates on levels
of both inequality and poverty are presented. A new section, “Living in Poverty,” has been added that includes insights from the work by economists Abhijit Banerjee, Esther Dufl o, and others on the economic lives of the poor. Th e use of conditional cash transfers also receives more attention.
Chapter 7 (Population) incorporates the United Nations 2010 Revision to its world population projections. Th e chapter now includes more discussion of the demographic dividend and a new section on population issues for the twenty- first century.
Chapter 8 (Education) benefits from recent revisions to the Barro- Lee data set on school attainment and from recent results of the Organisation for Economic Co- Operation and Development’s (OECD) Programme for International Student Assessment (PISA). Fuller use is made of econometric approaches, including natural experiments and randomized controlled trials (RCTs) in determining rates of return to schooling and the effectiveness of alternative interventions to improve learning outcomes. A new box on combating teacher absence has been added.
Chapter 9 (Health) now includes an extended discussion of the relationship between income and health. Th e Preston curve, showing the relationship between life expectancy and per capita income is presented and the debate over causality more
fully developed. A box has been added on creating markets for vaccines for diseases that primarily aff ect populations in low- income settings.
*Chapter 10 (Investment and Savings) draws on material from two chapters in the sixth edition. The chapter assumes students have had some background in the principles of macroeconomics and focuses on topics central to developing nations. Th ese
include barriers to both public and private investment and alternative sources of savings to fi nance productive investments. Special attention is given to foreign direct investment and its role in promoting economic growth.
Chapter 11 (Fiscal Policy) continues to focus on the key components of government expenditures and revenues. Data have been updated and a box added on the challenges of fiscal decentralization in Brazil and China.
Chapter 12 (Financial Development and Inflation) reorders some of the material on monetary policy and price stability, providing a more intuitive flow to the material. Th e discussion of microcredit has been expanded and includes a new box based on an RCT in India.
Chapter 13 (Foreign Debt and Financial Crises) is updated to provide the most recent data on foreign debt and provides current examples of financial crises (including the 2010–11 Euro Zone crisis, though the focus remains on developing countries).
Chapter 14 (Foreign Aid) has been updated to reflect recent trends in official development assistance, which, in part, are the results of events in Afghanistan, Iraq, and Pakistan. New boxes have been added on the commitment to development index
and on Chinese foreignaid.
Chapter 15 (Managing Short- Run Crises in an Open Economy), formerly Chapter 21, now concludes the section on macroeconomic policies for developing countries. Presentation of the Australian model of short- run macroeconomic management has been clarifi ed and illustrated with updated examples. New boxes cover real versus nominal exchange rates and the Greek debt crisis of 2010–11 (with an application of the Australian model). This chapter also features a new appendix for this edition, providing a review of national income and balance of payments accounting.
*Chapter 16 (Agriculture and Development) is the fi rst of two entirely new chapters on agriculture. Th is chapter places agriculture in its broad developmental context, emphasizing the potential contributions of agriculture to both growth and poverty
alleviation. Specifi c topics include structural transformation, dual- sector growth models, agriculture and growth, and agriculture as a pathway out of poverty.
*Chapter 17 (Agricultural Development: Technology, Policies and Institutions) builds on the broad discussion of agriculture and development in the previous chapter, concentrating on policies and institutions to promote agricultural development.
Specific topics introduced in this chapter include a typology of agricultural systems common in developing countries, a broad framework for analyzing constraints to agricultural production growth, the role of technical change and the green revolution, the role of institutions and land reform in agricultural development, and a review of the global food price crisis of 2005–08.
*Chapter 18 (Trade and Development) presents an overview of trends and patterns in world trade. It reviews the theory of comparative advantage, discussing both the benefits of trade and its distributional consequences. Special attention is paid to
trade in primary products, including export pessimism and the terms of trade, Dutch disease and the real exchange rate, and the resource curse and responses to it.
*Chapter 19 (Trade Policy) builds on the broad discussion of trade and development in the previous chapter. It reviews import substitution as a trade strategy and the consequences of trade protection. This is followed by discussion of export orientation, including experience with export processing zones. Evidence is presented on trade, growth, and poverty alleviation. Th e chapter concludes with an examination of key issues on the global trade agenda, such as the impact of China and India on global trade competition, sweatshops and labor standards, the Doha Round of trade negotiations, and temporary labor migration as a strategy to alleviate world poverty.
*Chapter 20 (Sustainable Development) is essentially a new treatment of the subject, retaining from the previous edition only the discussion of market and policy failures. New topics addressed in this edition are the environmental Kuznets curve hypothesis, an expanded and more analytical treatment of the concept and measurement of sustainable development, institutional perspectives on externalities (drawing on the work of Elinor Ostrom), payments for environmental services as a response to externalities, a substantially expanded treatment of poverty- environment linkages, and a new section on the economics of climate change. New boxes in this edition cover the Malthusian eff ect of population growth on adjusted net savings in
Ghana, taxation of water pollution in Colombia, and, policy failures and deforestation in Indonesia.
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