978-1292002972 Chapter 1 Lecture Note

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Online Instructor’s Manual

to accompany

Economic Development

Twelfth Edition

Michael P. Todaro

New York University

Stephen C. Smith

The George Washington University

Authored by

Christopher B. Marmé

Augustana College, Rock Island, Illinois

Acquisitions Editor: David Alexander

Program Manager: Lindsey Sloan

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ISBN-13: 978-0-13-342358-7

ISBN 10: 0-13-342358-1

Contents

Introduction ………………………………………………………………………………………………………………………….. iv

Part One Principles and Concepts………………………………………………………………………………….. 1

Chapter 1 Introducing Economic Development: A Global Perspective…………………………………….. 2

Chapter 2 Comparative Economic Development……………………………………………………………………. 8

Chapter 3 Classic Theories of Economic Growth and Development………………………………………… 17

Chapter 4 Contemporary Models of Development and Underdevelopment………………………………. 26

Part Two Problems and Policies: Domestic……………………………………………………………………… 31

Chapter 5 Poverty, Inequality, and Development……………………………………………………………………. 32

Chapter 6 Population Growth and Economic Development: Causes,

Consequences, and Controversies…………………………………………………………………………. 43

Chapter 7 Urbanization and Rural–Urban Migration: Theory and Policy…………………………………. 51

Chapter 8 Human Capital: Education and Health in Economic Development…………………………… 58

Chapter 9 Agricultural Transformation and Rural Development……………………………………………… 66

Chapter 10 The Environment and Development………………………………………………………………………. 74

Chapter 11 Development Policymaking and the Roles of Market, State,

and Civil Society…………………………………………………………………………………………………. 82

Part Three Problems and Policies: International and Macro……………………………………………… 89

Chapter 12 International Trade Theory and Development Strategy……………………………………………. 90

Chapter 13 Balance of Payments, Debt, Financial Crises, and

Stabilization Policies…………………………………………………………………………………………… 104

Chapter 14 Foreign Finance, Investment, Aid, and Conflict: Controversies and Opportunities…….. 112

Chapter 15 Finance and Fiscal Policy for Development…………………………………………………………… 120

Appendix Additional Exam Questions…………………………………………………………………………….. 129

Introduction

This introduction offers a description of the main features of this manual and provides some general

suggestions for teaching undergraduate development economics. This may be particularly useful for

instructors who have not previously taught a development economics course.

Each chapter of the manual corresponds to a chapter in the text and contains the following sections:

Key Concepts: This section highlights the major topics covered in the chapter and offers a brief

interpretation of the chapter’s general perspective and overall conclusions for easy reference.

This is not to be considered an inclusive summary of all the points covered in the text.

Lecture Suggestions: Suggestions for developing and organizing lectures are offered, based on the

experiences of several instructors who have previously used this text. Many chapters contain suggestions

on where to find additional material that can be useful for expanding on some of the topics covered

in the text. This section of the manual is not to be considered a complete lecture guide, but it can be

useful for organizing lectures, filling in gaps, and suggesting new ideas for lecture topics. There are

also suggestions for discussion topics included in each chapter.

Sample Questions: These questions can be used for homework, quizzes, problem sets, or exams. The

questions for review found at the end of each chapter in the text can also suggest potential essay

questions for the exam. In many cases, where a question is not directly derived from material in the text,

a very brief answer is suggested. Obviously, what you expect for an answer will depend on what you

cover in lecture, as far as the level of detail. Most chapters also have one or two questions related to

the case study at the end of each chapter.

The case study summaries can be found at the end of the chapter. As in previous editions, case studies

have been updated and revised to reflect the content of the relevant chapters. The Appendix to this

manual contains more exam questions for each section of the text.

 Lecture Ideas for First-Time Instructors

Development economics, with the breadth of material and ideas it covers, is one of the most difficult

undergraduate courses in economics to teach. First, the course could and probably –in a perfect world-

should be divided into a two course sequence. Especially if this is your first time teaching the course you

might think that you will be able to cover the fifteen chapters over the semester. This is unlikely. You

will want to cover as much as possible but class time is a limited resource and choices will have to be

made. The material in the text touches on every branch of economics and it assumes that students have a

good grounding in economic principles. While student interest is always high the range of comfort with

basic economic principles varies considerably as does students’ background and experiences. Also, it is

important to keep in mind that students’ familiarity with the developing world may vary considerably

from term to term. I have taught terms where virtually no one in class had travelled outside the US to

terms where students were quite familiar with the developing world for a variety of reasons (foreign

students, students of immigrant parents, travel with church groups or study abroad either in high school or

in college). In sum, because students’ level of comfort with economy theory, their knowledge of the wide

world, and the amount of material that has to be covered teaching the class for the first time can be

almost as overwhelming as is exciting and rewarding. Here are a few ideas that may make it easier:

Pick the topics and chapters that you would like to cover in your course and follow the text fairly closely

the first time. Perhaps, as I suggest in Chapter 1 of this manual, asking students to identify which 3-4

of the critical questions listed in the first chapter of the text itself might guide you on what you should

focus on that particular term.

Emphasize economic theory and the applicability of the theory to developing countries. This works

especially well in cases where the economics background of the students is only at the introductory

level. If you feel the background of your students is not what you should be in this regard putting

together tutorials (using screen capture software such as Camtasia) might be worth considering. What

has been most interesting to me over the years is the genuine pleasure students express in using

economic theory to explain such crucial real world problems.

Emphasize development problems and the associated pros and cons of solutions. This provides a nice

structure to many lectures.

Research selected countries to use as examples. If you are teaching this course, it is in all likelihood

the case that you have a high level of expertise in a certain area. You should not hesitate to go with

your strengths and your expertise in a particular area. Talk about these countries throughout the whole

course. Remind student that there are many developing countries, and it is not realistic to expect

one person to be an expert on all countries. You may a great of help in this task by turning to your

students. For example, a discussion of the informal sector may begin with a description of puchka

wallahs in Kolkata and leads to a Mexican-American student in your class talking about street food in

Oaxaca.

Look up examples from current events and apply them to the theories discussed. Student interest is

maintained by illustrating important problems and policy issues with recent events in the developing

world, growth in microcredit organizations, climate change and its impact on developing nations,

controversies over structural adjustment packages, export success of East Asia, reforms in China, Aids

crisis in Africa, work of the Gates Foundation and the economic aftermath and recovery after the Asian

tsunami. Depending on the other demands you face, this is especially a challenge but failure to do so is

a missed opportunity. In the United States, the Newspaper Periodicals Index will help you locate the

right article as well as identify topics you may have missed. Especially when a term is quite hectic,

stories from NPR and the BBC have been invaluable.

Consider using the group presentation approach described below. This has the disadvantage of taking

up lecture time, but if properly supervised can also a valuable learning experience for all concerned.

If your class is relatively small, consider using what are called participation cards. A lined 5×8 file

card works best. Hand these out the first day of class, have students put their name on this card, and

have them turn in these cards at the end of class if they have a question that, for one reason or

another, they failed to ask in class. Go through these between classes and turn them back at the very

start of the next class with your answer written on the same card. If more than one student at the end

of the first class is asking the same question then it is well worth covering in the next class. These

cards also may provide you with additional examples to use in class (a student may ask about the

relevance of purchasing power parity ratios to the rankings of economies by GDP or the connection

between natural disasters and the depreciation ratio of the Solow). Although time-consuming, these

cards can be a quite helpful tool in monitoring where your class is going from one day to the next.

Emphasize the areas that you know best.

 Writing Exams

Many instructors will find that essay-type questions (and to a lesser extent numerical problems) are most

appropriate for this subject, in order to see if students have really grasped the ideas. Suggestions for

multiple choice questions are also offered, though frequently the material does not lend itself to multiple

choice questions, but may be useful if class size is large. The tradeoff is that while essay questions are

relatively easy to write they obviously require a lot of time to grade. Writing decent multiple choice

questions however is extremely difficult and you should feel free to take and modify the multiple

questions in this manual. You might also consider putting together practice exams and multiple choice

quizzes using course management software such a Moodle or Blackboard or Google forms. Because there

is so much to cover, even if you limit what you choose to cover over the course of the term, you might

also consider giving take home exams that are all essay.

 Ideas for Assignments

There are many different types of assignments that can be used.

Traditional homework assignments or problem sets. Homework and problem sets help students

prepare for exams and to identify where they need help sooner rather than later. This is extremely

important for you and your students if you feel that their comfort with key economic principles is not

at the level it should be to fully understand the material you plan to cover. Regardless of level of

preparation, working seriously with the material before more heavily weighted measures of learning

like exams or papers is necessary.

Short papers. One option is to assign two short papers of about five pages in length. Have the first one

due a few weeks after the start of the course, and the second one at the end of the course. For the first

paper, have the students research the general growth and development experience of a country of their,

or your, choice. The purpose of the assignment is to get them to do some background reading on the

country. You can assign specific items that they must report on or leave it more open. Possibilities

include data on growth and other key indicators. Political and social factors can also be included. For

the second paper, have the student keep the same country and research a more specific hypothesis or

problem that they have learned in the class. Popular topics are growth and the environment, trade

strategy, population growth, and income inequality. You may restrict the list of topics or have them

submit the topic for approval. You can also present students with a scenario based on either the past or

current situation in a given economy or region (China early 1980s, Nigeria today) or give a

hypothetical case. You can give background information on levels of income, population growth,

inequality, absolute poverty, agricultural, and trade policies for example. Then present them with three

or more different policy options. Ask them to evaluate each proposal based on what has been covered

in class and to explain, again based on course material, why they would argue that a particular plan is

more likely to succeed. Students like this sort of assignment a great deal and it reinforces their

excitement in discovering that economic theory yields considerable insight into real world problems.

Group projects. This works well if you have a small class and if it is carefully managed. There is a

fairly substantial literature on how to properly design and manage group projects and much debate

over whether or not group projects are really that worthwhile of a teaching tool. The other

consideration is that, as mentioned earlier, with limited time available having four or five groups make

20 minute class presentations of their results and with time allotted for the rest of the class to ask

questions and to make suggestions will require more than a class period. . If groups are cohesive, you

set clear expectations about how each member will be evaluated, and you monitor a group’s progress

throughout the term such projects are indeed worthwhile. It may be something that you consider doing

after the first or second time you have taught the course.

Current events/News journal. Have the students collect articles throughout the course related to

development issues (two or three per week) and have them write up a short summary of each article

discussing the relationship between the article and what they learned in class. You can even have

one or two students present their article in class at the start of each class. You may want to devote ten

minutes of class time to a brief discussion about the articles and how they relate to what students have

covered in the course or will shortly cover; perhaps they may never explicitly study the topic but you

can explain to them why the issue is still important to the dialogue on economic development.

 The Internet

The Internet has opened up great possibilities as far as sources of information are concerned. It is worth

remembering that, when assigning papers, many of your students will not go to the library at all, but will

use the Internet instead. Therefore, instructors should point out both the potentials and pitfalls of information

collected from the Internet. The World Bank web site (www.worldbank.org), for example, has a wealth of

information, and it is relatively easy to locate country summaries on the Internet that help with assignments.

As a result, it is not too unrealistic to assign students the task of looking up information about particular

countries in order to be prepared for class discussion. Other useful web sites include:

Countries and Regions (www.worldbank.org/html/extdr/regions.htm)

World Bank Development Data and Statistics (www.worldbank.org/data/)

International Monetary Fund (www.imf.org)

IMF World Economic Outlook (http://www.imf.org/external/pubs/ft/weo/2010/02/index.htm)

United Nations Economic and Social Development (www.un.org/ecosocdev/)

United Nations Statistics Division (unstats.un.org/unsd/)

United Nations Development Program (www.undp.org)

Human Development Report (http://hdr.undp.org/en/)