Economic Development, 12th Ed, Pearson Education, 2015

Economic Development, 12th Ed, Pearson Education, 2015
By:Michael P. Todaro & Stephen C. Smith
Published on 2015-07-15 by Bukupedia

Economic Development, Twelfth Edition, presents the latest thinking in economic development with the clear and comprehensive approach that has been so well received in both the developed and developing worlds. The pace and scope of economic development continues its rapid, uneven, and sometimes unexpected evolution. This text explains the unprecedented progress that has been made in many parts of the developing world but fully confronts the enormous problems and challenges that remain to be addressed in the years ahead. The text shows the wide diversity across the developing world and the differing positions in the global economy that are held by developing countries. The principles of development economics are key to understanding how we got to where we are, how great progress has been made in recent years, and why many development problems remain so difficult to solve. The principles of development economics are also key to the design of successful economic development policy and programs as we look ahead. The field of economic development is versatile and has much to contribute regarding these differing scenarios. Thus, the text also underlines common features that are exhibited by a majority of developing nations, using the insights of the study of economic development. The few countries that have essentially completed the transformation to become developed economies, such as South Korea, are also examined as potential models for other developing countries to follow. Both theory and empirical analysis in development economics have made major strides, and the Twelfth Edition brings these ideas and findings to students. Legitimate controversies are actively debated in development economics, and so the text presents contending theories and interpretations of evidence, with three goals. The first goal is to ensure that students understand real conditions and institutions across the developing world. The second is to help students develop analytic skills while broadening their perspectives of the wide scope of the field. The third is to provide students with the resources to draw independent conclusions as they confront development problems, their sometimes ambiguous evidence, and real-life development policy choices—ultimately, to play an informed role in the struggle for economic development and ending extreme poverty. New to This Edition • Global crisis. This edition includes a major update and expansion of the new section on the impacts and potential longer-term implications of the recent global financial crisis on economic development, examining conditions that caused the crisis, its aftermath, and possible broader implications and large differences across developing nations and regions. • Prologue in Chapter 1. Chapter 1 is launched with a new introductory section that describes for students how much has changed over the past two decades in a majority of countries in the developing world and in greater autonomy and nascent leadership of some developing countries in international economic and political relationships. The chapter compares conditions today to those prevailing in 1992—a pivotal period in a number of ways, which is also close to the time when many students were born. • Violent conflict. The Eleventh Edition provided an entirely new major section on the causes and consequences of violent conflict, postconflict recovery and development, and prevention of conflict through an improved understanding of its major causes; the Twelfth Edition more fully develops and extends this section, incorporating recent developments. • Findings Boxes. The Eleventh Edition also introduced a new textbook feature of Findings boxes, reporting on empirical research results in the field that are wide-ranging in both methods and topics. New Findings boxes address such topics as long-lasting impacts of colonial institutions (Peru); how coordination and monitoring by villagers leads to better health outcomes (Uganda); how social norms facilitated or constrained changing patterns of fertility (Bangladesh); and comparative impacts of conditional versus unconditional cash transfers to the poor (Malawi). Other boxes examine global findings such as unmet contraceptives demand across countries. The number of Findings boxes has been approximately doubled for the Twelfth Edition. The Findings boxes also illustrate empirical methods for students—in an intuitive introductory manner—such as the use of instruments; randomized control trials; regression discontinuity; and fixed effects; as well as the painstaking design, implementation, and robust analysis of survey data; growth diagnostics; and systematically applied qualitative research. The Findings boxes in this edition are listed on pages xvii-xviii. • Policy Boxes. Other boxes address policy issues. New policy boxes examine such topics as the efforts of Niger—one of the world’s poorest countries— to adapt to the climate change already impacting the country and to build resilience against unknown future climate change; and what we learned from the 2011–2012 famine in the Horn of Africa. Other new policy boxes address global findings, such as the extent of contraception use and the extent of still-unmet demand for contraceptives in developing countries; and the UN’s new unexpectedly increased population projections through this century. Policy boxes in this edition are listed on pages xvii-xviii. • New, full-length, three-way comparative case study of Costa Rica, Guatemala, and Honduras. The full-length, end-of-chapter comparative case studies have long been one of the most popular features of the text. For this edition, an entirely new three-way comparative case study of Costa Rica, Guatemala, and Honduras is introduced at the end of Chapter 14, which addresses topics of conflict, foreign investment, remittances, and foreign aid; the study also addresses the themes of very long-term comparative development addressed in some of the existing and updated case studies, such as those comparing Ghana and Côte d’Ivoire; Pakistan and Bangladesh; and Haiti and the Dominican Republic. Each of the comparative cases also has a special theme, such as human development, poverty, environment, and structural transformation. • New topics. Other new topics briefly introduced in this edition include short sections on the new firm-level international trade research and the developing countries; the emergence of “Sustainable Development Goals” as successors to the MDGs; corporate social responsibility; and food price trends. • New measures. Measurement is an ever-present issue in the field of economic development. The United Nations Development Program released its Multidimensional Poverty Index in August 2010 and its New Human Development Index in November 2010. The text examines the index formulas, explains how they differ from earlier indexes, reports on findings, and reviews issues surrounding the active debate on these measures. Each has been updated since its initial release, as covered in the Twelfth Edition. Note: From surveys we know many instructors are still using the traditional Human Development Index (HDI), which is reasonable, since it permeates a majority of the literature on the subject. So, we have maintained a very substantial and detailed section on the traditional HDI, which now appears in a new Appendix 2.1 in Chapter 2; it includes a number of country applications and extensions, as in previous editions. You can teach either or both of the indexes, without losing the thread in later chapters. • Updated statistics. Change continues to be very rapid in the developing world. Throughout the text, data and statistics have been updated to reflect the most recent available information at the time of revision, typically 2011 or 2012, and sometimes 2013. • Additional updates. Other updates include a further expansion of the section on microfinance, including new designs, potential benefits, successes to date, and some limitations; further expanded coverage of China; and expanded coverage and analysis of the growing environmental problems facing developing countries. Audience and Suggested Ways to Use the Text • Flexibility. This book is designed for use in courses in economics and other social sciences that focus on the economies of Africa, Asia, and Latin America, as well as developing Europe and the Middle East. It is written for students who have had some basic training in economics and for those with little formal economics background. Essential concepts of economics that are relevant to understanding development problems are highlighted in boldface and explained at appropriate points throughout the text, with glossary terms defined in the margins as well as collected together at the end of the book in a detailed Glossary. Thus, the book should be of special value in undergraduate development courses that attract students from a variety of disciplines. Yet the material is sufficiently broad in scope and rigorous in coverage to satisfy any undergraduate and some graduate economics requirements in the field of development. This text has been widely used both in courses taking relatively qualitative and more quantitative approaches to the study of economic development and emphasizing a variety of themes, including human development. • The text features a 15-chapter structure, convenient for use in a comprehensive course and corresponding well to a 15-week semester but with enough breadth to easily form the basis for a two-semester sequence. However, the chapters are now subdivided, making it easier to use the text in targeted ways. To give one example, some instructors have paired the sections on conflict (14.5) and on informal and micro finance (15.4) with Chapter 5 on poverty. • Courses with a qualitative focus. For qualitatively oriented courses, with an institutional focus and using fewer economic models, one or more chapters or subsections may be omitted, while placing primary emphasis on Chapters 1, 2, 5, 6, 8, and 9, plus parts of Chapters 7 and 10, and other selected sections, according to topics covered. The text is structured so that the limited number of graphical models found in those chapters may be omitted without losing the thread, while the intuition behind the models is explained in detail. • Courses with a more analytic and methods focus. These courses would focus more on the growth and development theories in Chapter 3 (including Appendices such as 3.3 on endogenous growth) and Chapter 4, and highlight and develop some of the core models of the text, including poverty and inequality measurement and analysis in Chapter 5, microeconomics of fertility and relationships between population growth and economic growth in Chapter 6, migration models in Chapter 7, human capital theory, including the child labor model and empirics in Chapter 8, sharecropping models in Chapter 9, environmental economics models in Chapter 10, tools such as net present benefit analysis and multisector models along with political economy analysis in Chapter 11, and trade models in Chapter 12. Regarding methods, these courses could also expand on material introduced in some of the Findings boxes and subsections into more detailed treatments of methods topics such as use of instrumental variables, randomization, regression discontinuity, and growth empirics, including origins of comparative development and analysis of convergence (which is examined in Chapter 2). Endnotes and sources suggest possible directions to take. The text emphasizes in-depth institutional background reading accompanying the models that help students to appreciate their importance. • Courses emphasizing human development and poverty alleviation. The Twelfth Edition can be used for a course with a human development focus. This would typically include the sections on Amartya Sen’s capability approach and Millennium Development Goals in Chapter 1, the new section on conflict in Chapter 14, the discussion of microfinance institutions in Chapter 15, and a close and in-depth examination of Chapters 2 and 5. Sections on population policy in Chapter 6; diseases of poverty and problems of illiteracy, low schooling, and child labor in Chapter 8; problems facing people in traditional agriculture in Chapter 9; relationships between poverty and environmental degradation in Chapter 10; and roles of nongovernmental organizations (NGOs) in Chapter 11 would be likely highlights of this course. • Courses emphasizing macro and international topics. International and macro aspects of economic development could emphasize sections 2.6 and 2.7 on convergence, and long-run growth and sources of comparative development; Chapter 3 on theories of growth (including the three detailed appendixes to that chapter); Chapter 4 on growth and multiple-equilibrium models; and Chapters 12 through 15 on international trade, international finance, debt and financial crises, direct foreign investment, aid, central banking, and domestic finance. The book also covers other aspects of the international context for development, including the new section on financial crisis (13.6), implications of the rapid pace of globalization and the rise of China (Chapter 12 and such case studies as Brazil in Chapter 1 and China in Chapter 4), the continuing struggle for more progress in sub-Saharan Africa, and controversies over debt relief and foreign aid (Chapter 14). • Broad two-semester course using supplemental readings. Many of the chapters contain enough material for several class sessions, when their topics are covered in an in-depth manner, making the text also suitable for a yearlong course or high-credit option. The endnotes and sources offer many starting points for such extensions. Guiding Approaches and Organization The text’s guiding approaches are the following: 1. It teaches economic development within the context of a major set of problems, such as poverty, inequality, population growth, the impact of very rapid urbanization and expansion of megacities, persistent public health challenges, environmental decay, and regions experiencing rural stagnation, along with the twin challenges of government failure and market failure. Formal models and concepts are used to elucidate real-world development problems rather than being presented in isolation from these problems. 2. It adopts a problem- and policy-oriented approach, because a central objective of the development economics course is to foster a student’s ability to understand contemporary economic problems of developing countries and to reach independent and informed judgments and policy conclusions about their possible resolution. 3. It simultaneously uses the best available data from Africa, Asia, Latin America, and developing Europe and the Middle East, as well as appropriate theoretical tools to illuminate common developing-country problems. These problems differ in incidence, scope, magnitude, and emphasis when we deal with such diverse countries as India, Pakistan, Bangladesh, China, the Philippines, Kenya, Botswana, Nigeria, Ghana, Côte d’Ivoire, Argentina, Brazil, Chile, Mexico, Haiti, and the Dominican Republic. Still, a majority face some similar development problems: persistent poverty and large income and asset inequalities, population pressures, low levels of education and health, inadequacies of financial markets, and recurrent challenges in international trade and instability, to name a few. 4. It focuses on a wide range of developing countries, not only as independent nation-states, but also in their growing relationships to one another, as well as in their interactions with rich nations in a globalizing economy. 5. Relatedly, the text views development in both domestic and international contexts, stressing the increasing interdependence of the world economy in areas such as food, energy, natural resources, technology, information, and financial flows. 6. It recognizes the necessity of treating the problems of development from an institutional and structural as well as a market perspective, with appropriate modifications of received general economic principles, theories, and policies. It thus attempts to combine relevant theory with realistic institutional analyses. Enormous strides have been made in the study of these aspects of economic development in recent years, which are reflected in this edition. 7. It considers the economic, social, and institutional problems of underdevelopment as closely interrelated and requiring coordinated approaches to their solution at the local, national, and international levels. 8. The book is organized into three parts. Part One focuses on the nature and meaning of development and underdevelopment and its various manifestations in developing nations. After examining the historical growth experience of the developed countries and the long-run experience of the developing countries, we review four classic and contemporary theories of economic development, while introducing basic theories of economic growth. Part Two focuses on major domestic development problems and policies, and Part Three focuses on development problems and policies in international, macro, and financial spheres. Topics of analysis include economic growth, poverty and income distribution, population, migration, urbanization, technology, agricultural and rural development, education, health, the environment, international trade and finance, debt, financial crises, domestic financial markets, direct foreign investment, foreign aid, violent conflict, and the roles of market, state, and nongovernmental organizations in economic development. All three parts of the book raise fundamental questions, including what kind of development is most desirable and how developing nations can best achieve their economic and social objectives. 9. As part of the text’s commitment to its comprehensive approach, it covers some topics that are not found in other texts on economic development, including growth diagnostics, industrialization strategy, innovative policies for poverty reduction, the capability approach to well-being, the central role of women, child labor, the crucial role of health, new thinking on the role of cities, the economic character and comparative advantage of nongovernmental organizations in economic development, emerging issues in environment and development, financial crises, violent conflict, and microfinance. 10. A unique feature of this book is the in-depth case studies and comparative case studies appearing at the end of each chapter. Each chapter’s case study reflects and illustrates specific issues analyzed in that chapter. Inchapter boxes provide shorter case examples. Comments on the text are always welcome; these can be sent directly to Stephen Smith at ssmith@gwu.edu. Supplementary Materials The Twelfth Edition comes with PowerPoint slides for each chapter, which have been expanded and fully updated for this edition. The text is further supplemented with an Instructor’s Manual by Chris Marme of Augustana College. It has been thoroughly revised and updated to reflect changes to the Twelfth Edition. Both the PowerPoint slides and the Instructor’s Manual can also be downloaded from the Instructor’s Resource Center at www.pearsonhighered.com/irc. Acknowledgments Our gratitude to the many individuals who have helped shape this new edition cannot adequately be conveyed in a few sentences. However, we must record our immense indebtedness to the hundreds of former students and contemporary colleagues who took the time and trouble during the past several years to write or speak to us about the ways in which this text could be further improved. We are likewise indebted to a great number of friends (far too many to mention individually) in both the developing world and the developed world who have directly and indirectly helped shape our ideas about development economics and how an economic development text should be structured. The authors would like to thank colleagues and students in both developing and developed countries for their probing and challenging questions. We are also very appreciative of the advice, criticisms, and suggestions of the many reviewers, both in the United States and abroad, who provided detailed and insightful comments for the Eighth, Ninth, Tenth, Eleventh, and Twelfth Editions: U.S. Reviewers Mohammed Akacem, METROPOLITAN STATE UNIVERSITY OF DENVER William A. Amponsah, GEORGIA SOUTHERN UNIVERSITY Erol Balkan, HAMILTON COLLEGE Karna Basu, HUNTER COLLEGE, CITY UNIVERSITY OF NEW YORK Valerie R. Bencivenga, UNIVERSITY OF TEXAS, AUSTIN Sylvain H. Boko, WAKE FOREST UNIVERSITY Michaël Bonnal, UNIVERSITY OF TENNESSEE AT CHATTANOOGA Milica Z. Bookman, ST. JOSEPH’S UNIVERSITY Jim Cobbe, FLORIDA STATE UNIVERSITY Michael Coon, HOOD COLLEGE Lisa Daniels, WASHINGTON COLLEGE Fernando De Paolis, MONTEREY INSTITUTE Luc D’Haese, UNIVERSITY OF GHENT Quentin Duroy, DENISON UNIVERSITY Can Erbil, BRANDEIS UNIVERSITY Yilma Gebremariam, SOUTHERN CONNECTICUT STATE UNIVERSITY Abbas P. Grammy, CALIFORNIA STATE UNIVERSITY, BAKERSFIELD Caren Grown, AMERICAN UNIVERSITY Kwabena Gyimah-Brempong, UNIVERSITY OF SOUTH FLORIDA Bradley Hansen, MARY WASHINGTON COLLEGE John R. Hanson II, TEXAS A&M UNIVERSITY Seid Hassan, MURRAY STATE UNIVERSITY Jeffrey James, TILBURG UNIVERSITY Barbara John, UNIVERSITY OF DAYTON Pareena G. Lawrence, UNIVERSITY OF MINNESOTA, MORRIS Tung Liu, BALL STATE UNIVERSITY John McPeak, SYRACUSE UNIVERSITY Michael A. McPherson, UNIVERSITY OF NORTH TEXAS Daniel L. Millimet, SOUTHERN METHODIST UNIVERSITY Camille Soltau Nelson, TEXAS A&M UNIVERSITY Thomas Osang, SOUTHERN METHODIST UNIVERSITY Elliott Parker, UNIVERSITY OF NEVADA, RENO Julia Paxton, OHIO UNIVERSITY Meenakshi Rishi, SEATTLE UNIVERSITY James Robinson, UNIVERSITY OF CALIFORNIA, BERKELEY Monthien Satimanon, MICHIGAN STATE AND THAMMASAT UNIVERSITY Andreas Savvides, OKLAHOMA STATE UNIVERSITY Rodrigo R. Soares, UNIVERSITY OF MARYLAND Michael Twomey, UNIVERSITY OF MICHIGAN, DEARBORN Wally Tyner, PURDUE UNIVERSITY Nora Underwood, UNIVERSITY OF CALIFORNIA, DAVIS Jogindar Uppal, STATE UNIVERSITY OF NEW YORK Evert Van Der Heide, CALVIN COLLEGE Adel Varghese, ST. LOUIS UNIVERSITY Sharmila Vishwasrao, FLORIDA ATLANTIC UNIVERSITY Bill Watkins, CALIFORNIA LUTHERAN UNIVERSITY Janice E. Weaver, DRAKE UNIVERSITY Jonathan B. Wight, UNIVERSITY OF RICHMOND Lester A. Zeager, EAST CAROLINA UNIVERSITY U.K. Reviewers Arild Angelsen, AGRICULTURAL UNIVERSITY OF NORWAY David Barlow, NEWCASTLE UNIVERSITY Sonia Bhalotra, UNIVERSITY OF BRISTOL Bernard Carolan, UNIVERSITY OF STAFFORDSHIRE Matthew Cole, UNIVERSITY OF BIRMINGHAM Alex Cunliffe, UNIVERSITY OF PLYMOUTH Chris Dent, UNIVERSITY OF HULL Sanjit Dhami, UNIVERSITY OF NEWCASTLE Subrata Ghatak, KINGSTON UNIVERSITY Gregg Huff, UNIVERSITY OF GLASGOW Diana Hunt, SUSSEX UNIVERSITY Michael King, TRINITY COLLEGE DUBLIN Dorothy Manning, UNIVERSITY OF NORTHUMBRIA Mahmood Meeskoub, UNIVERSITY OF LEEDS Paul Mosley, UNIVERSITY OF SHEFFIELD Bibhas Saha, UNIVERSITY OF EAST ANGLIA Colin Simmons, UNIVERSITY OF SALFORD Pritam Singh, OXFORD BROOKES UNIVERSITY Shinder Thandi, UNIVERSITY OF COVENTRY Paul Vandenberg, UNIVERSITY OF BRISTOL Their input has strengthened the book in many ways and has been much appreciated. Our thanks also go to the staff at Pearson in both the United States and the United Kingdom, particularly David Alexander, Lindsey Sloan, Liz Napolitano, and Kate Brewin. Finally, to his lovely wife, Donna Renée, Michael Todaro wishes to express great thanks for typing the entire First Edition manuscript and for providing the spiritual and intellectual inspiration to persevere under difficult circumstances. He reaffirms here his eternal devotion to her for always being there to help him maintain a proper perspective on life and living and, through her own creative and artistic talents, to inspire him to think in original and sometimes unconventional ways about the global problems of human development. Stephen Smith would like to thank his wonderful wife, Renee, and his children, Martin and Helena, for putting up with the many working Saturdays that went into the revision of this text. Michael P. Todaro Stephen C. Smith

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