This course is an introduction to the analysis of core issues in economic development. It is an applied course that tackles major real work problems faced by policy makers especially in developing countries. The course combines description and analysis with an emphasis on the elaboration of simple and useful theoretical models for an understanding of the issues that comprise the subject of development economics. Its aim is to provide students with some foundational analytic tools for addressing core problems associated with economic development today while drawing on some experiences from developing economies.

Learning Outcomes

Upon successful completion, students will have the knowledge and skills to:

On completion of this unit you should be able to:

• demonstrate a sound understanding of the theoretical principles and conceptual arguments for dealing with key issues in economic development

• demonstrate the capacity to apply the analytical methodology learned to the real world situation

• gain a clear understanding of the key issues with respect to government economic policy aimed at enhancing economic development

• evaluate the role, strengths and limitations of various kinds of institutions which exist in many developing countries

• demonstrate the capacity to carry out research on a topic explaining the cross-country differences in economic growth performance in developing countries.

Required Resources

Economics of Development: Theory and Evidence

• Author: A.P. Thirwall
• Publisher: Palgrave Macmillan
• Edition: Tenth Edition, 2017

The textbook can be purchased from the Bookshop on campus.

Recommended Resources

BLOGS

• Dev Policy: http://devpolicy.org/
• East Asia Forum: http://www.eastasiaforum.org/
• Marginal Revolution: http://marginalrevolution.com/
• New Mandala: http://asiapacific.anu.edu.au/newmandala/

 VIDEOS

• TED Talks: http://www.ted.com/talks?lang=en&event=&duration=&sort=newest&tag=28

 OTHER

• Poor Economics: http://www.pooreconomics.com/
• Marginal Revolution University: http://mruniversity.com/

Staff Feedback

Students will be given feedback in the following forms in this course:

• Written comments
• Verbal comments
• Feedback to the whole class, to groups, to individuals, focus groups

Student Feedback

ANU is committed to the demonstration of educational excellence and regularly seeks feedback from students. Students are encouraged to offer feedback directly to their Course Convener or through their College and Course representatives (if applicable). The feedback given in these surveys is anonymous and provides the Colleges, University Education Committee and Academic Board with opportunities to recognise excellent teaching, and opportunities for improvement. The Surveys and Evaluation website provides more information on student surveys at ANU and reports on the feedback provided on ANU courses.

Class Schedule

Week/Session	Summary of Activities	Assessment
1	Topic: Development and underdevelopment: an overview Why study development economics: some critical questions The meaning of development and the challenge of development economics The perpetuation of underdevelopment The development gap and income distribution in the world economy Readings: Chapter 1 in Economics of Development: Theory and Evidence (Thirlwall 2011). Chapter 2 in Economics of Development: Theory and Evidence (Thirlwall 2011). Maddison, A., 2001. ‘The Contours of World Development’ and ‘Appendix A3 Population, GDP and GDP Per Capita in 56 Asian Countries, 1820-1998’ in A. Maddison, The World Economy: A Millennial Perspective, OECD, Paris. Helpman, E., 2004. ‘Background’ Chapter 1 in E. Helpman, The Mystery of Economic Growth, The Belknap Press of Harvard University Press, Cambridge Massachusetts. Tutorial questions: How would you define the process of economic development? What forces perpetuate underdevelopment? What lessons can poor countries learn from the development experience of today’s industrialised countries? What do you see as the major challenges confronting developing countries?
2	Topic: The characteristics of underdevelopment and strctural change The characteristics of underdevelopment The curse of natural resources Stages of development and structural change Rostow’s stages of growth Industrialisation and growth Kaldor’s growth laws Readings: Chapter 3 in Economics of Development: Theory and Evidence (Thirlwall 2011). Tutorial questions: What is the importance of the distinction between diminishing returns activities and increasing return activities? What major structural changes take place during the course of development? What accounts for the fact that a close association exists between industrial growth and the growth of GDP? Explain what the natural resource curse is. Is it different to Dutch Disease?
3	Topic: The role of institutions in economic development The role of institutions Measuring institutions and the debate on institutions versus geography The role of democracy Readings: Chapter 4 in Economics of Development: Theory and Evidence (Thirlwall 2011). Acemoglu, D. & Robinson, J.A., 2012, ‘Why nations fail today’, Chapter 13 in Acemoglu, D. & Robinson, J.A., Why nations fail, Crown Business, New York. Acemoglu, D., Johnson, S. and Robnson, J., 2002. ‘Reversal of Fortune: Geography and Instituions in the Making of the Modern World Income Distribution’, Quarterly Journal of Economics, 117(4):1231-94. Aron, J., 2000. ‘Growth and Institutions: A Review of the Evidence’, World Bank Research Observer, 15(1):99-135. Lin, J. and Nugent, J., 1995. ‘Institutions and Economic Development’, in J. Behrman and T. Srinivasan (eds), Handbook of Development Economics, Volume 3, Part A, North Holland, Amsterdam: 2301-70. North, D., 1990. Institutions, Institutional Change and Economic Performance, Cambridge University Press, New York. Tutorial questions: Why are institutional structures and rules of behaviour a necessary condition for economic activity to flourish? What is the importance of local knowledge in building appropriate institutions? In what ways can democracy help and hinder economic development?
4	Topic: Theories of economic growth: why growth rates differ between countries? Growth theories (the classical, the Harrod-Domar and neoclassical growth theories) The production function approach to the analysis of growth Production function studies of developing countries New (endogenous) growth theory and the macro-determinants of growth Readings: Chapter 5 in Economics of Development: Theory and Evidence (Thirlwall 2011). North, D., 1994. ‘Economic Performance Through Time’, American Economic Review, 84: 359-68. Olson Jr., M., 1996. ‘Big Bills left on the Sidewalk: Why some nations are rich and others poor’, Journal of Economic Perspectives, 10(2): 3-24. Lewis, W. A. 2004., ‘pp. 243-256’, in W.A. Lewis, The Power of Productivity, The University of Chicago Press, Chicago. Tutorial questions: What did Adam Smith mean when he said that ‘the division of labour is limited by the extent of the market’ and ‘the extent of the market is limited by the division of labour’? What have been the major findings of production function studies of the sources of growth in developing countries? Outline the essential propositions of ‘new’ (endogenous) growth theory. What have we learnt from the major studies of the macro-determinants of growth in developing countries?
5	Topic: Factors in development process The role of agriculture in development Economic development with unlimited supplies of labour Rural-urban migration and urban unemployment The role of capital in development Investment in human capital: education Readings: Chapters 6 and 7 in Economics of Development: Theory and Evidence (Thirlwall 2011). Psacharopoulos, G., 1994. ‘Returns to investment in education: a global update’, World Development, September Todaro, M., 1969. ‘A model of labour migration and urban unemployment in less developed countries’, American Economic Review, March Tutorial questions: What is the importance to economic development of rapid productivity growth in agriculture? What factors hold back productivity growth in agriculture? In what ways do the agricultural and industrial sectors are complementary? What is meant by the process of capital accumulation? Why do developing countries, and many development economists, lay great stress on the role of capital accumulation in the development process?
6	Topic: Resources allocation in developing countries, and sustainable development The market mechanism and market failures The role of the state and corruption The allocation of resources: the broad policy choices Choice of techniques Balanced versus unbalanced growth Investment criteria Readings: Chapters 10 in Economics of Development: Theory and Evidence (Thirlwall 2011). Arndt, H. W., 1988. ‘Market failure and underdevelopment’, World Development, February Easterly, W., 2002. ‘Governments Can Kill Growth’, Chapter 11 pp. 217-231 in W. Easterly, The Elusive Quest for Growth, The MIT Press, Cambridge Massachusetts. Krueger, A. O., 1990. ‘Government Failures in Development’, Journal of Economic Perspectives, 4 (3): 9-23. Ranis, G., 1962. ‘Investment criteria, productivity and economic development: an empirical comment’, Quarterly Journal of Economics, May Stewart, F. and Ghani, E., 1991. ‘How significant are externalities for development?’, World Development, June Streeten, P., 1993. ‘Markets and states: against minimalism’, World Development, August Tutorial questions: What is the role of markets in the development process? Distinguish the different types of market failure, and the role that governments can play in rectifying market failures. What are the key roles of the state in developing countries and how can the role of the state be made more effective?
7	Topic: Development and the environment A model of the environment and economic activity The market-based approach to environmental analysis The harvesting of renewable resources Non-renewable resources Measuring environmental values Sustainable development Readings: Chapters 12 in Economics of Development: Theory and Evidence (Thirlwall 2011). Grossman, G. and A. Krueger, 1995. ‘Economic growth and the environment’, Quarterly Journal of Economics, May Tutorial questions: What are the functions of the environment in supporting economic activity? What is an externality, and why are externalities considered to be a problem? Define and explain the idea of sustainable development. How are the poor in developing countries affected by climate change?
8	Topic: Financing development from domestic resources Financial systems and economic development The informal financial sector Critics of financial liberalisation and empirical evidence Fiscal policy and taxation The Keynesian approach to the financing of development The quantity theory approach to the financing of development Readings: Chapters 13 in Economics of Development: Theory and Evidence (Thirlwall 2011). Levine, R., 1997. ‘Financial development and economic growth: views and agenda’, Journal of Economic Literature, June Tutorial questions: How can ‘monetisation’ of the economy help to raise the level and productivity of capital accumulation in developing economies? What are the essential features of the informal financial sector in developing countries? Outline the main characteristics of a well-developed financial system. What forms does financial repression take in developing countries? What are the dangers of financial liberalisation, and on what factors does the success of liberalisation depend? Suggest reforms to the tax system in developing countries that would promote both equity and more saving for investment.
9	Topic: Foreign assistance, aid, debt and development Dual-gap analysis and foreign borrowing Capital imports, domestic saving and the capital-output ratio Types of international capital flows The debate over international assistance to developing countries Foreign direct investment and multinational corporations Optimal borrowing and sustainable debt Readings: Chapters 14 in Economics of Development: Theory and Evidence (Thirlwall 2011). Allsopp, C. and V. Joshi, 1991. ‘The assessment: the international debt crisis’, Oxford Review of Economic Policy, Spring Bosworth, S. and S.Collins, 1999. ‘Capital flows to developing economies: implications for savings and investment’, Brookings Papers on Economic Activity, 1 Collier, P. and D.Dollar, 2004. ‘Development effectiveness: what have we learned?’, Economic Journal, June Tutorial questions: What is the distinctive contribution of dual-gap analysis to the theory of development? Under what circumstances will foreign borrowing (a) raise the rate of growth of income, and (b) raise the rate of growth of output? What are the characteristics of the different types of financial flow to developing countries? How might the flow of resources to developing countries be augmented, and what criteria should govern their distribution between countries? What is the purpose of World Bank structural adjustment lending, and how successful has it been? What are the advantages and disadvantages of FDI in developing countries? What is the nature of the debt problem in developing countries?
10	Topic: Trade theory, trade policy and economic development The gains from trade Trade liberalisation, exports and growth Models of export-led growth Import substitution versus export promotion Technical progress and the terms of trade Effective protection Readings: Chapters 15 in Economics of Development: Theory and Evidence (Thirlwall 2011). Bleaney, M. and D. Greenaway, 1993. ‘Long run trends in the relative prices of primary commodities and in the terms of trade of developing countries’, Oxford Economic Papers, July Edwards, S., 1993. ‘Openness, trade liberalisation and growth in developing countries’, Journal of Economic Literature, September Greenaway, D., W. Morgan and P. Wright, 2002. ‘Trade liberalisation and growth in development countries’, Journal of Development Economics, 17 Tutorial questions: What is the essence of the distinction between static and dynamic gains from trade? What fundamental assumptions of free trade theory may be violated in the context of developing countries? Why might there be a tendency for the terms of trade to move against primary products and primary-producing countries, and what does the empirical evidence show? Outline the various arguments for protection. Discuss the relative merits of import substitution versus export promotion. What has been the impact of trade liberalisation on exports and economic growth in developing countries?
11	Topic: The balance of payments, international monetary assistance and development Balance-of-payments-constrained growth The exchange rate and devaluation The IMF supply-side approach to devaluation Capital flows Exchange rate systems for developing countries The East Asian financial crisis: a cautionary tale The international monetary system and developing countries Readings: Chapters 16 in Economics of Development: Theory and Evidence (Thirlwall 2011). Tutorial questions: What factors determine the demand for a country’s exports and imports? Can the devaluation of a country’s currency guarantee balance-of-payments equilibrium on the current account? What do you understand by the IMF’s ‘supply-side approach to devaluation’ in developing countries? What factors need to be taken into account in choosing a country’s exchange-rate regime? What are the lessons of the financial crisis in South-East Asia in 1997? What criticisms have been levelled against the IMF in its policies of support to developing countries?
12	Summary and conclusion On the goal of development Revisiting the challenge of development Development issues: settled and open

Assessment Summary

Assessment task	Value	Due Date	Return of assessment	Learning Outcomes
Essay	40 %	29/05/2020	02/07/2020	5
Final Exam	40 %	*	02/07/2020	1, 2, 3, 4
Written assignments	20 %	*	*	1, 2, 3, 4

* If the Due Date and Return of Assessment date are blank, see the Assessment Tab for specific Assessment Task details

Policies

ANU has educational policies, procedures and guidelines, which are designed to ensure that staff and students are aware of the University’s academic standards, and implement them. Students are expected to have read the Academic Misconduct Rule before the commencement of their course. Other key policies and guidelines include:

• Student Assessment (Coursework) Policy and Procedure
• Special Assessment Consideration Policy and General Information
• Student Surveys and Evaluations
• Deferred Examinations
• Student Complaint Resolution Policy and Procedure

Assessment Requirements

The ANU is using Turnitin to enhance student citation and referencing techniques, and to assess assignment submissions as a component of the University's approach to managing Academic Integrity. For additional information regarding Turnitin please visit the ANU Online website Students may choose not to submit assessment items through Turnitin. In this instance you will be required to submit, alongside the assessment item itself, hard copies of all references included in the assessment item.

Moderation of Assessment

Marks that are allocated during Semester are to be considered provisional until formalised by the College examiners meeting at the end of each Semester. If appropriate, some moderation of marks might be applied prior to final results being released.

Assessment Task 1

Essay

The purpose of the essay is to provide students with the opportunity to gain deeper knowledge and understanding of the interaction between economic, institutional and environmental factors in the development of nations.

In writing the essay, students are expected to interpret facts and synthesise existing knowledge and understanding of the key issues in economic development. When writing the essay keep in mind: Why is this topic important? What does it tell us about the characters of policy formation and economic development? What causal factors are involved in economic growth? What factors affect policy strategies and through which the institutional, or economic or environmental outcomes?

Length: 2,000 words (excluding references and appendix)

Full details of topics and assessment criteria will be made available in Lecture 1 and on Wattle

Mode of submission: Turnitin

Due date: Friday 11:55PM, Week #12

Assessment Task 2

Final Exam

The exam at the end of the course will be a synoptic review of the main themes covered throughout the semester. The exam is “closed book” (i.e. dictionaries are the only resource that may be taken into the exam room).

Length: three hours

Mode of submission: sitting in

Time: TBA

Assessment Task 3

Written assignments

Two written assignments of 2 pages each worth 10% each.

Mode of submission: turnitin

Full details of the assignment and assessment criteria will be available in Lecture 1 and on Wattle

Due date: TBC (likely week 5 and week 9)

Return of assessment date: two weeks after the due date

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Online Submission

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Hardcopy Submission

For some forms of assessment (hand written assignments, art works, laboratory notes, etc.) hard copy submission is appropriate when approved by the Associate Dean (Education). Hard copy submissions must utilise the Assignment Cover Sheet. Please keep a copy of tasks completed for your records.

Late Submission

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Referencing Requirements

Accepted academic practice for referencing sources that you use in presentations can be found via the links on the Wattle site, under the file named “ANU and College Policies, Program Information, Student Support Services and Assessment”. Alternatively, you can seek help through the Students Learning Development website.

Extensions and Penalties

Extensions and late submission of assessment pieces are covered by the Student Assessment (Coursework) Policy and Procedure The Course Convener may grant extensions for assessment pieces that are not examinations or take-home examinations. If you need an extension, you must request an extension in writing on or before the due date. If you have documented and appropriate medical evidence that demonstrates you were not able to request an extension on or before the due date, you may be able to request it after the due date.

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