Econ 277C  Economic Development III: Development Macroeconomics

Tridip Ray, Indian Statistical Institute, New Delhi

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Syllabus

Introduction and Background Reading

  1. Ray, Debraj (1998), Development Economics, Princeton University Press, Chapters 2, 3, 4, 5.
     

  2. Mookherjee, Dilip and Debraj Ray (2000), Introduction to Readings in the Theory of Economic Development, London: Blackwell.
     

  3. Ray, Debraj (2008), "Development Economics", in The New Palgrave Dictionary of Economics, edited by L. Blume and S. Durlauf.

Development From the Viewpoint of Convergence

  1. Solow, Robert (1956), "A Contribution to the Theory of Economic Growth", Quarterly Journal of Economics, 70, 65-94.

  2. Mankiw, Gregor, David Romer and David Weil (1992), "A Contribution to the Empirics of Economic Growth", Quarterly Journal of Economics, 107, 407-438.

  3. Barro, Robert (1991), "Economic Growth in a Cross-Section of Countries", Quarterly Journal of Economics, 106, 407-444.

  4. Lucas, Robert (1990), "Why Doesn't Capital Flow from Poor to Rich Countries?" American Economic Review, 80, 92-96.

  5. Parente, Stephen and Edward Prescott (2000), Barriers to Riches, Cambridge, MA: The MIT Press.

  6. Quah, Danny (1993), "Empirical Cross-section Dynamics in Economic Growth", European Economic Review, 37, 426-434.

  7. Quah, Danny (1996), "Twin Peaks: Growth and Convergence in Models of Distribution Dynamics", Economic Journal, 106, 1045-1055.

  8. Quah, Danny (1997), "Empirics for Growth and Distribution: Stratification, Polarization, and Convergence Clubs", Journal of Economic Growth, 2, 27-59.

  9. Pritchett, Lant (1997), "Divergence, Big Time", Journal of Economic Perspectives, 11, 3-17.

  10. Banerjee, Abhijit and Esther Duflo (2005), "Growth Theory through the Lens of Development Economics", Handbook of Economic Growth, Vol. 1A, eds. Philippe Aghion and Steven Durlauf, Amserdam: Elsevier, 473-552.

  11. Durlauf, Steven, Paul Johnson and Jonathan Temple (2005), "Growth Econometrics", Handbook of Economic Growth, Vol. 1A, eds. Philippe Aghion and Steven Durlauf, Amserdam: Elsevier, 555-677.

  12. Jones, Charles (2011), "Intermediate Goods and Weak Links in the Theory of Economic Development", American Economic Journal: Macroeconomics, 3, 1-28.

  13. Erosa, A., T. Koreshkova and D. Restuccia (2010), "How Important Is Human Capital? A Quantitative Theory Assessment of World Income Inequality", Review of Economic Studies, 77, 1421-1449.

Development From the Viewpoint of Nonconvergence

Expectations and Development

  1. * Murphy, Kevin, Andrei Shleifer and Robert Vishny (1989), "Industrialization and the Big Push", Journal of Political Economy, 97(5), 1003-1026.
     
  2. Da Rin, Marco and Thomas Hellmann (2002), "Banks as Catalysts for Industrialization", Journal of Financial Intermediation, 11(4), 366-397.
     
  3. Kremer, Michael (1993), "The O-Ring Theory of Economic Development", Quarterly Journal of Economics, 108(3), 551-575.
     
  4. Journal of Development Economics special issue on coordination failures (1996).

    4(a): Rodriguez-Clare, A. (1996), "The Division of Labour and Economic Development", Journal of Development Economics, 49, 3-32.

    * 4(b): Ciccone, A. and K. Matsuyama (1996), "Start-up Costs and Pecuniary Externalities as Barriers to Economic Development", Journal of Development Economics, 49, 33-59.
     
  5. * Acemoglu, Daron and Fabrizio Zilibotti (1997), "Was Prometheus Unbound by Chance? Risk, Diversification and Growth", Journal of Political Economy, 105(4), 709-751.

History versus Expectations

  1. * Krugman, Paul (1991), "History versus Expectations", Quarterly Journal of Economics, 106, 651-667.
     
  2. Matsuyama, K. (1991), "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium", Quarterly Journal of Economics, 106, 617-650.
     
  3. Adsera, A. and Debraj Ray (1998), "History and Coordination Failure", Journal of Economic Growth, 3, 267-276.
     
  4. Frankel, D. and A. Pauzner (2000), "Resolving Indeterminacy in Dynamic Settings: The Role of Shocks", Quarterly Journal of Economics, 115, 283-304.

Aspirations and Development

  1. * Genicot, Garance and Debraj Ray (2020), " Aspirations and Economic Behavior ", Aspirations and Economic Behavior", Annual Review of Economics, 12, 715-746.
     
  2. Ray, Debraj (2006), "Aspirations, Poverty and Economic Change", in Abhijit Banerjee, Roland Benabou and Dilip Mookherjee (eds), Understanding Poverty, New York: Oxford University Press, 409-421.
     
  3. Duflo, Esther (2006), "Poor but Rational?" in Abhijit Banerjee, Roland Benabou and Dilip Mookherjee (eds), Understanding Poverty, New York: Oxford University Press, 367-378.
     
  4. Mookherjee, Dilip, Stefan Napel and Debraj Ray (2010), "Aspirations, Segregation and Occupational Choice", Journal of the European Economic Association, 8(1), 139-168.
     
  5. * Genicot, Garance and Debraj Ray (2015), "Aspirations and Inequality", Econometrica, 85, 489-519.
     
  6. Dalton, Patricio S., Sayantan Ghosal and Anandi Mani (2011), "Poverty and Aspirations Failure", Economic Journal, 126, 165-188.

History: Inequality and Markets

  1. Loury, G. (1981), "Intergenerational Transfers and the Distribution of Earnings", Econometrica, 49, 843-867.
     
  2. Becker, G. and N. Tomes (1986), "Human Capital and the Rise and Fall of Families", Journal of Labour Economics, 4, S1-S39.
     
  3. * Galor, Oded and J. Zeira (1993), "Income Distribution and Macroeconomics", Review of Economic Studies, 60, 35-52.
     
  4. * Banerjee, Abhijit and Andrew Newman (1993), "Occupational Choice and the Process of Development", Journal of Political Economy, 101, 274-298.
     
  5. Ljungqvist, Lars (1993), "Economic Underdevelopment: The Case of a Missing Market for Human Capital", Journal of Development Economics, 40, 219-239.
     
  6. Aghion, P. and P. Bolton (1997), "A Theory of Trickle-Down Growth and Development", Review of Economic Studies, 64, 151-172.
     
  7. Piketty, T. (1997), "The Dynamics of the Wealth Distribution and the Interest Rate with Credit Rationing", Review of Economic Studies, 64, 173-189.
     
  8. Ghatak, Maitreesh and Neville Nien-Huei Jiang (2002), "A Simple Model of Inequality, Occupational Choice and Development", Journal of Development Economics, 69, 205-226.
     
  9. Mookherjee, Dilip and Debraj Ray (2002), "Contractual Structure and Wealth Accumulation", American Economic Review, 92, 818-849.
     
  10. Mookherjee, Dilip and Debraj Ray (2003), "Persistent Inequality", Review of Economic Studies, 70, 369-394.
     
  11. Mookherjee, Dilip and Debraj Ray (2010), "Inequality and Markets: Some Implications of Occupational Diversity", American Economic Journal: Microeconomics, 2, 38-76.

 History: Political and Legal Institutions

  1. * Sokoloff, K. and S. Engerman (2000), "History Lessons: Institutions, Factor Endowments, and Paths of Development in the New World", Journal of Economic Perspectives, 14(3), 217-232.
     
  2. * Acemoglu, Daron, Simon Johnson, and James Robinson (2001), "The Colonial Origins of Comparative Development: An Empirical Investigation", American Economic Review, 91, 1369-1401.
     
  3. * Acemoglu, Daron, Simon Johnson, and James Robinson (2002), "Reversal of Fortune: Geography and Institutions in the Making of the Modern World Income Distribution", Quarterly Journal of Economics, 117, 1231-1294.
     
  4. * Banerjee, Abhijit and Lakshmi Iyer (2005), "History, Institutions, and Economic Performance: The Legacy of Colonial Land Tenure Systems in India", American Economic Review, 95, 1190-1213.

Key Concepts in Development Macroeconomics

Structural Transformation

  1. * Herrendorf, Berthold, Richard Rogerson, and Akos Valentinyi (2014), "Growth and Structural Transformation", in Philippe Aghion and Steven N. Durlauf, eds., Handbook of Economic Growth, Vol. 2, Elsevier, 855-941.
     
  2. * Acemoglu, Daron and Veronica Guerrieri (2008), "Capital Deepening and Non-Balanced Economic Growth", Journal of Political Economy, 116, 467-498.
     
  3. Boppart, Timo (2014), "Structural Change and the Kaldor Facts in a Growth Model with Relative Price Effects and Non-Gorman Preferences", Econometrica, 82, 2167-2196.
     
  4. * Bustos, Paula, Bruno Caprettini, and Jacopo Ponticelli (2016), "Agricultural Productivity and Structural Transformation: Evidence from Brazil", American Economic Review, 106 (6), 1320-65.
     
  5. Porzio, Tommaso, Federico Rossi, and Gabriella Santangelo (2022), "The Human Side of Structural Transformation", American Economic Review, 112 (8), 2774-2814.
     
  6. * Huneeus, Federico, Richard Rogerson (2024), "Heterogeneous Paths of Industrialization", Review of Economic Studies, 91 (3), 1746-1774.
     
  7. * Nguyen, Duc (2024), "Heterogeneous Paths of Structural Transformation", SSRN working paper.
     
  8. Comin, D., Lashkari, D. and Mestieri, M. (2021), "Structural Change with Long-Run Income and Price Effects", Econometrica, 89, 311-374.
     
  9. * Fan, T., Peters, M. and Zilibotti, F. (2023), "Growing Like India -- the Unequal Effects of Service-Led Growth", Econometrica, 91, 1457-1494.

Misallocation

  1. * Restuccia, Diego and Richard Rogerson (2017), "The Causes and Costs of Misallocation", Journal of Economic Perspectives, 31(3), 151-174.
     
  2. * Hopenhayn, Hugo (2014), "Firms, Misallocation, and Aggregate Productivity: A Review", Annual Review of Economics, 6(1), 735-770.
     
  3. * Hsieh, Chang-Tai and Peter J. Klenow (2009), "Misallocation and Manufacturing TFP in China and India", Quarterly Journal of Economics, 124(4), 1403-1448.
     
  4. Hsieh, C.-T., E. Hurst, C.I. Jones and P.J. Klenow (2019), "The Allocation of Talent and U.S. Economic Growth", Econometrica, 87, 1439-1474.
     
  5. * Bau, N. and A. Matray (2023), "Misallocation and Capital Market Integration: Evidence from India", Econometrica, 91, 67-106.
     
  6. * Boehm, Johannes and Ezra Oberfield (2020), "Misallocation in the Market for Inputs: Enforcement and the Organization of Production", Quarterly Journal of Economics, 135(4), 2007-2058.
     
  7. * Hsieh, Chang-Tai and Peter J. Klenow (2014), "The Life Cycle of Plants in India and Mexico", Quarterly Journal of Economics, 129(3), 1035-1084.
     
  8. * Sraer, David and David Thesmar (2023), "How to Use Natural Experiments to Estimate Misallocation", American Economic Review, 113 (4), 906-38.
     
  9. * Rotemberg, Martin (2019), "Equilibrium Effects of Firm Subsidies", American Economic Review, 109 (10), 3475–3513.
     
  10. * 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.
     
  11. * 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.
     
  12. * Bolhuis, Marijn A., Swapnika R. Rachapalli, and Diego Restuccia (2021), "Misallocation in Indian Agriculture", Working Paper 29363, National Bureau of Economic Research.

Further Topics in Development Macroeconomics

Poverty Traps: Neighbourhood Effects

  1. * Benabou, Roland (1993), "Workings of a City: Location, Education, and Production", Quarterly Journal of Economics, 108(3), 619-652.
     
  2. Durlauf, Steven (1996), "A Theory of Persistent Income Inequality", Journal of Economic Growth, 1(1), 75-93.

Human Capital: Public versus Private Investment in Education

  1. * Glomm, Gerhard and B. Ravikumar (1992), "Public versus Private Investment in Human Capital: Endogenous Growth and Income Inequality", Journal of Political Economy, 100(4), 818-834.
     
  2. Saint-Paul, G. and T. Verdier (1993), "Education, Democracy and Growth", Journal of Development Economics, 42, 399-407.
     
  3. Fernandez, R. and R. Rogerson (1995), "On the Political Economy of Education Subsidies", Review of Economic Studies, 62, 249-262.
     
  4. De Fraja, G. (2001), "Education Policies: Equity, Efficiency and Voting Equilibrium", Economic Journal, 111, C104-C119.

Human Capital: Credit Constraints in Education

  1. * Lochner, Lance and Alexander Monge-Naranjo (2012), "Credit Constraints in Education", Annual Review of Economics, 4, 225-256.
     
  2. * Lochner, Lance and Alexander Monge-Naranjo (2016), "Student Loans and Repayment: Theory, Evidence, and Policy", in Handbook of the Economics of Education, New York: Elsevier, volume 5, 397-478.
     
  3. Lochner, Lance and Alexander Monge-Naranjo (2011), "The Nature of Credit Constraints and Human Capital", American Economic Review, 101 (6), 2487-2529.
     
  4. * Abbott, Brant, Giovanni Gallipoli, Costas Meghir and Giovanni L. Violante (2019), "Education Policy and Intergenerational Transfers in Equilibrium", Journal of Political Economy, 127(6), 2569-2624.
     
  5. * Caucutt, Elizabeth M. and Lance Lochner (2020), "Early and Late Human Capital Investments, Borrowing Constraints, and the Family", Journal of Political Economy, 128(3), 1065-1147.
     
  6. Solis, Alex (2017), "Credit Access and College Enrollment", Journal of Political Economy, 125(2), 562-622.

Human Capital: Health

  1. * Chakraborty, Shankha (2004), "Endogenous Lifetime and Economic Growth", Journal of Economic Theory, 116, 119-137.
     
  2. * Acemoglu, Daron and Simon Johnson (2007), "Disease and Development: The Effect of Life Expectancy on Economic Growth", Journal of Political Economy, 115, 925-985.
     
  3. * Chakraborty, Shankha, Chris Papageorgiou and Fidel Perez-Sebastian (2010), "Diseases, Infection Dynamics and Development", Journal of Monetary Economics, 57, 859-872.
     
  4. Lorentzen, Peter, John McMillan and Romain Wacziarg (2008), "Death and Development", Journal of Economic Growth, 13, 81-124.
     
  5. Young, Alwyn (2005), "The Gift of the Dying: The Tragedy of AIDS and the Welfare of Future African Generations", Quarterly Journal of Economics, 120, 243-266.
     
  6. Aksan, Anna-Maria and Shankha Chakraborty (2013), "Twin Transitions", mimeo, University of Oregon.

Financial Institutions and Development

  1. Greenwood, Jeremy and Boyan Jovanovic (1990), "Financial Development, Growth, and the Distribution of Income", Journal of Political Economy, 98, 1076-1107.
     
  2. Bencivenga, Valerie and Bruce Smith (1991), "Financial Intermediation and Endogenous Growth", Review of Economic Studies, 58, 195-209.
     
  3. * Greenwood, Jeremy and Bruce Smith (1997), "Financial Markets in Development, and the Development of Financial Markets", Journal of Economic Dynamics and Control, 21, 145-181.
     
  4. * Tressel, Thierry (2003), "Dual Financial Systems and Inequalities in Economic Development", Journal of Economic Growth, 8, 223-257.
     
  5. * Matsuyama, Kiminori (2004), "Financial Market Globalization, Symmetry-Breaking and Endogenous Inequality of Nations", Econometrica, 72, 853-884.
     
  6. King, Robert G. and Ross Levine (1993), "Finance and Growth: Schumpeter Might be Right", Quarterly Journal of Economics, 108, 717-737.
     
  7. Levine, Ross and Sara Zervos (1998), "Stock Markets, Banks, and Economic Growth", American Economic Review, 88, 537-558.
     
  8. Rajan, Raghuram and Luigi Zingales (1998), "Financial Dependence and Growth", American Economic Review, 88, 559-586.
     
  9. Demirguc-Kunt, Asli and Vojislav Maksimovic (1998), "Law, Finance, and Firm Growth", Journal of Finance, 53, 2107-2137.
     
  10. Levine, Ross (2005), "Finance and Growth: Theory and Evidence", Handbook of Economic Growth, Vol. 1A, eds. Philippe Aghion and Steven Durlauf, Amserdam: Elsevier, 865-934.
     
  11. Levine, Ross and Asli Demirguc-Kunt (2001) (eds.), Financial Structure and Economic Growth: A Cross-Country Comparison of Bank, Markets, and Development, Cambridge: MIT Press.

Last Updated on 15 March 2025.