Development Microeconomics


Every year, 9 million children die before their fifth birthday. A woman in sub-Saharan Africa has a one-in-thirty chance of dying while giving birth – in the developed world, the chance is one in 5,600. There are at least twenty-five countries, most of them in Sub-Saharan Africa, where the average person is expected to live no more than fifty-five years. In India alone, more than 50 million school-going children cannot read a very simple text.
The goal of this course is to study why extreme poverty, poor health, low education levels, and a reluctant adoption of modern technologies are persistent in the developing world. Which market failures and distortions, institutional failures and behavioral biases prevent households from improving their situation, and countries from getting richer? Which policies work, which ones do not, and why?
The course will focus on microeconomic questions: Rather than studying countries, we will seek to understand decision-making at the level of individuals or households.


The course presumes familiarity with basic economic theory (especially microeconomic optimization). In addition, it requires some background in econometric methods, specifically those used for policy evaluation: Instrumental variables, differences-in-differences, regression discontinuities, and randomized experimentation.


Chapter 1. Introduction: The Economics of Development

  • Facts of Development
  • Poverty Traps
  • Methodological Overview

Chapter 2. Education

  • Returns to Education
  • Demand for Education
  • Quality of Education

Chapter 3. Health and Nutrition

  • Demand for Preventative Care
  • Subsidizing Provision of Health Services

Chapter 4. Microcredit

  • Joint vs Individual Liability
  • The Miracle of Microcredit ?
  • If there’s time: Micro-Insurance

Chapter 5. Microsavings & Intra-Household Bargaining

  • Behavioural Constraints to Saving
  • Commitment Savings Products
  • Household Bargaining and Female Empowerment

Chapter 6. Technology and Learning

  • Learning by doing, and learning from others
  • Applications: From fertilizer to chlorine dispensers


Course Textbooks
As a general background textbook, use 
•    Ray, D., Development Economics, 1998.
•    Banerjee, A. V., R. Benabou and D. Mookherjee,
Understanding Poverty, 2006.

IN ADDITION, I strongly recommend buying
•    Banerjee, A. V. and E. Duflo, Poor Economics: A Radical Rethinking of the Way to Fight Global Poverty, 2011.
-> A book that summarizes the evidence generated in the last 10 years, mostly from randomized experiments. A very entertaining read!

The course relies heavily on econometric identification methods for policy evaluation. A very useful, low-technical reference text is
•    Angrist, J., and J.-S. Pischke, Mostly Harmless Econometrics, 2009.

Topic-Specific References
These will be updated as the course progresses. Always check the lecture notes for references. All links should lead to freely available copies of the academic paper in question.


Part 1 : Development Microeconomics 

Chapter 1: Introduction
Ray, Development Economics, Chapter 2.
•    Poor Economics, Foreword and Chapter 1.
•    Hans Rosling, New Insights on Poverty, 2007, TED talk.
•    Dasgupta, P. and D. Ray (1986), “Inequality as a Determinant of Malnutrition and Unemployment: Theory,” Economic Journal 96 (384): 1011-1034.
•    Also covered in Chapter 13 of Ray’s Development Economics textbook.

Chapter 2: Education
•    Angrist, J. and A. B. Krueger (1991), “Does Compulsory School Attendance Affect Schooling and Earnings?”, Quarterly Journal of Economics 106 (4): 979-1014.
•    Duflo, E. (2001), “Schooling and Labor Market Consequences of School Construction in Indonesia: Evidence from an Unusual Policy Experiment,” American Economic Review 91 (4): 795-813.
•    Ozier, O. (2016), “The Impact of Secondary Schooling in Kenya: A Regression Discontinuity Analysis,” Journal of Human Resources.
•    Understanding Poverty, Chapter 18 (Anne Case), “The Primacy of Education”
•    Baird, S., C. McIntosh, and B. Ozler (2011). "Cash or condition? Evidence from a cash transfer experiment," The Quarterly Journal of Economics (2011).
•    Muralidharan, K., and V. Sundararaman (2008) "Teacher Performance Pay: Experimental Evidence from India", Journal of Political Economy 119 ( 1): 39-77.

Chapter 3: Health
•    Poor Economics, Chapter 3.
•    Dupas, P. (2011). “Health Behavior in Developing Countries.” Annual Review of Economics 3.
•    Miguel, E., and M. Kremer (2004), "Worms: identifying impacts on education and health in the presence of treatment externalities." Econometrica 72 (1): 159-217.
•    Cohen, J., and P. Dupas (2010). “Free Distribution or Cost-Sharing? Evidence from a Randomized Malaria Prevention Experiment.” Quarterly Journal of Economics, 125(1): 1–45. 
•    Banerjee, A.V., E. Duflo, R. Glennerster, and D. Kothari. "Improving immunisation coverage in rural India: clustered randomised controlled evaluation of immunisation campaigns with and without incentives." BMJ 340 (2010): c2220.
•    Thomas, D., et al. "Causal effect of health on labor market outcomes: Evidence from a random assignment iron supplementation intervention." California Center for Population Research (2004).
•    Field, E., R. Glennerster and R. Hussam (2011). “Throwing the Baby out with the Drinking Water: Unintended Consequences of Arsenic Mitigation Efforts in Bangladesh”, Working paper.

Chapter 4: Microcredit
•    Poor Economics, Chapter 7
•    Ghatak, M., & Guinnane, T. W. (1999), The Economics of Lending with Joint Liability: Theory and Practice, Journal of Development Economics, 60(1), 195-228.
•    Banerjee, A., Duflo, E., Glennerster, R., & Kinnan, C. (2015), “The miracle of microfinance? Evidence from a randomized evaluation,” American Economic Journal: Applied Economics, 7(1), 22-53.
•    Czura, K. (2015). Pay, peek, punish? Repayment, information acquisition and punishment in a microcredit lab-in-the-field experiment. Journal of Development Economics, 117, 119-133.
•    Ananth, B., Karlan, D., & Mullainathan, S. (2007). “Microentrepreneurs and their money: Three anomalies,” Working paper.

Chapter 5: Microsavings & Household Bargaining
•    Poor Economics, Chapter 8
•    Ashraf, N., Karlan, D., & Yin, W. (2006), “Tying Odysseus to the mast: Evidence from a commitment savings product in the Philippines,” Quarterly Journal of Economics, 635-672.
•    John, A. (2016), “When Commitment Fails — Evidence from a Regular Saver Product in the Philippines,” EOPP Discussion Paper 55.
•    Dupas, P. and J. Robinson (2013), “Why don’t the poor save more? Evidence from health savings experiments,” American Economic Review, 103(4), pp. 1138-71. 
•    Anderson, S. and J.-M. Baland, “The Economics of Roscas and Intrahousehold Resource Allocation,” Quarterly Journal of Economics, 2002, 117(3), 963–995.

Chapter 6: Technology & Learning
•    Banerjee, A. (1992), "A Simple Model of Herd Behavior," Quarterly Journal of Economics, 107(3), pp. 797-817.
•    Foster, A. D., & Rosenzweig, M. R. (1995), „Learning by doing and learning from others: Human capital and technical change in agriculture,” Journal of Political Economy, 1176-1209.
•    Duflo, E., Kremer, M., & Robinson, J. (2011). Nudging farmers to use fertilizer: Theory and experimental evidence from Kenya. The American Economic Review, 101(6), 2350-2390.
•    Conley, T. G., & Udry, C. R. (2010), Learning about a new technology: Pineapple in Ghana, The American Economic Review, 100(1), 35-69.
•    Jensen, R. (2008): “The Digital Provide: Information (Technology), Market Performance and Welfare in the South Indian Fisheries Sector,” Quarterly Journal of Economics, 122(3), 879-924.
•    Jack, W., & Suri, T. (2014), Risk sharing and transactions costs: Evidence from Kenya's mobile money revolution.  American Economic Review, 104(1), 183-223


Part 2 : Development Macroeconomics

Chapter 1. International Migration, Remittances and Development
•    Todaro/Smith, Economic Development, chapter 3 and 7
•    Clemens & McKenzie (2014), Why don't remittances appear to affect growth? World Bank Policy Research Working Paper, (6856)
•    De Haas, H. (2012). The migration and development pendulum: A critical view on research and policy. International Migration, 50(3), 8-25.
•    McKenzie, D., & Sasin, M. J. (2007). Migration, remittances, poverty, and human capital: conceptual and empirical challenges. World Bank Policy Research Working Paper, (4272).
•    Rapoport, H., & F. Docquier (2006). The economics of migrants' remittances. Handbook of the economics of giving, altruism and reciprocity, 2, 1135-1198.
•    Stark, O., & Bloom, D. E. (1985). The New economics of labor migration. The American Economic Review, 75(2), 173-178.

Chapter 2. Foreign Aid, Growth and Development
•    Todaro/Smith, Economic Development, chapter 3 and 14
•    Brückner, M. (2013). On the simultaneity problem in the aid and growth debate. Journal of Applied Econometrics, 28(1):126-150.
•    Burnside, C. and Dollar, D. (2000). Aid, policies, and growth. American Economic Review, 37(6):847-868.
•    Rajan, R., & Subramanian, A. (2007).Does aid affect governance? The American Economic Review, 97(2), 322-327.
•    Rajan, R. G., & Subramanian, A. (2008). Aid and growth : What does the cross-country evidence really show? The Review of Economics and Statistics, 90(4), 643-665.

Chapter 3. Institutions, Governance and Development
•    Todaro/Smith, Economic Development, chapter 2, 4 and 11
•    Collier, P. (2007). The bottom billion: Why the poorest countries are failing and what can be done about it. Oxford University Press.
•    Acemoglu, D. & J.A. Robinson (2001). The Colonial Origins of Comparative Development: An Empirical Investigation. The American Economic Review, 91(5), 1369-1401.
•    Acemoglu, D. & J.A. Robinson (2012). Why nations fail: the origins of power, prosperity and poverty. New York: Crown Business.