Development Economics: Theory and Practice

Citation

de Janvry, A., & Sadoulet, E. (2021). Development Economics: Theory and Practice (2nd ed.). Routledge.

Chapter Summary

The second edition runs to 572 pages and consists of a short introduction followed by 21 chapters. The authors organise the book around seven dimensions of development: growth, poverty, vulnerability, inequality, basic needs, sustainability and quality of life. They combine theory, empirical analysis and the design and evaluation of programmes and policies. The publisher lists case studies, quantitative problem sets, end-of-chapter questions and extensive references among the book's features, with Excel and Stata exercises provided as digital supplements.

Introduction

The introduction asks what economic development is, what development economics studies, and why the field deserves attention.

Chapters 1–3: What is Development? Indicators and Issues; The State of Development; History of Thought in Development Economics

The opening chapters set the frame. Chapter 1 lays out the seven dimensions and asks whether income growth alone can deliver development. Chapter 2 surveys the current state of development along those dimensions, from the convergence club in income growth to hunger, inequality, basic needs, resource use and quality of life. Chapter 3 gives a history of thought, covering the principles for analysing it and selected schools of thought.

Chapter 4: Impact Evaluation of Development Policies and Programs

A methods chapter placed early on purpose. It presents randomised experiments, propensity score matching, difference-in-differences and its roll-out generalisation with panel data, regression discontinuity, event analysis, instrumental variables, and qualitative methods, and discusses how to make evaluation more useful for policy. An appendix gives the econometrics behind each method.

Chapters 5–6: Poverty and Vulnerability Analysis; Inequality and Inequity

Chapter 5 covers choosing a welfare indicator and a poverty line, poverty profiles and maps, vulnerability, behavioural poverty traps and ways of reducing poverty. Chapter 6 covers measuring and decomposing inequality, the Kuznets inverted-U evidence, the long-run evolution of inequality, pro-poor growth and the growth incidence curve, and the roles of equity and inclusive growth.

Chapters 7–9: International Trade and Industrialization Strategies; Explaining Economic Growth: The Macro Level; Exchange Rate Policies and Development

Chapter 7 treats gains from trade, protection and trade policy, import-substitution industrialisation, and the links from trade to growth, poverty, the environment and food security. Chapter 8 presents growth models: Harrod-Domar, the Solow model with growth accounting, structural transformation, dual-economy models and endogenous growth. Chapter 9 deals with exchange-rate regimes and the real exchange rate.

Chapters 10–12: The Economics of Farm Households; Population and Development; Labor and Migration

Chapter 10 builds farm-household behaviour models, including separability, net buyers and sellers, risk and self-insurance, and intra-household allocation. Chapter 11 covers demographic concepts, the demographic transition and population policy. Chapter 12 turns to labour and employment and to rural-urban migration and its impacts.

Chapters 13–14: Financial Services for the Poor; Social Programs and Targeting

Chapter 13 runs from moneylenders and informal institutions through the microfinance revolution, savings, index-based weather insurance and mobile money, and ends by asking how useful microfinance is for poverty reduction. Chapter 14 provides a typology of social programmes, the costs and benefits of targeting, inclusion and exclusion errors, and the debate over cash transfers versus development programmes.

Chapters 15–17: Sustainable Development and the Environment; Common Property Resources and Determinants of Cooperation; Human Capital: Education and Health

Chapters 15 and 16 cover externalities, incomplete property rights, public goods, payments for environmental services, common property resources, the determinants of cooperation and the case for secure land rights. Chapter 17 covers the determinants of schooling and health, the returns to education, conditional cash transfers and the debate around health subsidies.

Chapters 18–21: Agriculture for Development; Development Aid and Its Effectiveness; Institutional Innovations and Development; Political Economy and the Role of the State

The closing chapters address agricultural growth and food security, aid and its effectiveness from macro and micro perspectives, institutions and transaction costs as sources of market failure and institutional response, and theories of the state, rent-seeking and corruption.

Key Concepts

Chapters 1–3: Dimensions of development

• Seven dimensions of development: growth, poverty, vulnerability, inequality, basic needs, sustainability and quality of life, the structure on which the whole book rests.
• Convergence club: the pattern in income growth that Chapter 2 examines when it describes the state of development.

Chapter 4: Impact evaluation

• Randomised control trial: an experimental design in which assignment to a programme is random, the first method in the chapter.
• Difference-in-differences and regression discontinuity: two quasi-experimental methods for constructing comparison groups when randomisation is not available.
• Instrumental variables: a method for estimating programme effects when participation is not random.

Chapters 5–6: Poverty and inequality

• Poverty line and vulnerability: how the poor are separated from the non-poor, and why risk of falling into poverty matters in addition to current poverty.
• Kuznets inverted U-curve: the hypothesised relationship between income level and inequality, which Chapter 6 confronts with evidence.
• Growth incidence curve: a tool for judging whether growth is pro-poor.

Chapters 7–9: Trade, growth and exchange rates

• Import-substitution industrialisation: a trade-policy strategy that Chapter 7 describes as a policy gamble.
• Harrod-Domar and Solow models: the capital accumulation and growth accounting frameworks of Chapter 8.
• Dual-economy models: models that give agriculture a role in structural transformation.

Chapters 10–14: Households, labour, credit and social programmes

• Separability: the condition under which a farm household's production decisions can be analysed apart from its consumption decisions.
• Group lending: the mechanism at the centre of the microfinance revolution.
• Targeting errors: exclusion (type I) and inclusion (type II) errors in social programmes.

Chapters 15–21: Environment, institutions and the state

• Common property resources: resources used collectively, for which cooperation is the central problem.
• Transaction costs: the source of market failures to which institutional innovations respond.
• Rent-seeking: the economics of public authority and its limits examined in the final chapter.

Critical Analysis

Strengths

• A broad syllabus in one volume. The 21 chapters cover macro topics (growth, trade, exchange rates), household and market microeconomics (farm households, labour, credit, land and common property) and policy areas (social programmes, aid, education and health, the environment). A single course can draw its whole reading from the book.
• Methods are placed where they are needed. Impact evaluation arrives as Chapter 4, before poverty, inequality, finance and social programmes, so later chapters can discuss evidence from randomised and quasi-experimental studies on a common footing. The chapter's appendix gives the underlying econometrics. Two reviewers quoted by the publisher for the first edition single out the material from the randomised-trial literature alongside depth on classic questions.
• Practice material. The publisher lists case studies, quantitative problem sets and end-of-chapter questions, plus Excel and Stata exercises as digital supplements, which makes the book usable for a course with a data component.
• Updated for the second edition. The new edition adds attention to the Sustainable Development Goals, rising inequality, health as a public good, cash transfers for social protection and carbon trading.

Limitations

• Length and selection. With 21 chapters and 572 pages, a one-semester course must choose; the book does not fit into a single term in full.
• Prerequisites are substantial. The treatment of impact evaluation, household models and growth theory presupposes microeconomics, some econometrics and comfort with formal models.
• Breadth over depth on any single topic. Chapters such as those on population, exchange rates and aid cover a topic in one chapter, so readers who want the research frontier on a single area will move on to specialist monographs.

Where It Fits in the Course

Within the development economics reading list, this is a graduate-level, full-length textbook that spans theory, evidence and policy. It sits between two kinds of neighbours. Ian Goldin's short introduction and the general-audience Poor Economics are gentler first reads: the former is a compact overview, the latter a field-experiment account of how poor households decide about food, health, schooling and savings, and both prepare the ground for Chapters 1, 2 and 13. Debraj Ray's Development Economics is a theory-oriented textbook built on simple formal models, and Todaro and Smith's Economic Development is a policy-oriented undergraduate text, so either works as a first pass before this book or as a second source on growth theory and policy.

Bardhan and Udry's Development Microeconomics is a concise graduate text on the microeconomic theory of poor economies, with models of land, labour, credit and insurance markets. It goes deeper into contract theory than Chapters 10 to 13 and pairs well with them. This book adds what a theory-only text omits: macro topics, impact evaluation and programme design.

How to Use This Book

The book suits graduate students in economics, public policy and agricultural economics, and practitioners who need analytical tools for evaluating development programmes. Intermediate microeconomics and macroeconomics and some econometrics are the realistic prerequisites; an undergraduate development course helps.

A practical plan:

• Core: the introduction and Chapters 1, 2 and 4 first, so that the seven dimensions and the evaluation toolkit are in place. Then Chapters 5 and 6 on poverty and inequality.
• Choose by interest: Chapters 7 to 9 for macro and trade, Chapters 10 to 14 for household, labour, finance and social-protection economics, and Chapters 15 to 21 for environment, institutions and the state. Chapter 3 on the history of thought can be read at any point as background.
• Alongside the text: work the problem sets and the Excel and Stata exercises, especially for Chapter 4, and replicate one evaluation method on a small data set. Use the end-of-chapter references to follow a chapter's topic into the research papers it draws on.