Economic Development, 11th Ed, Addison Wesley Pearson, 2012

Economic Development, 11th Ed, Addison Wesley Pearson, 2012
By:Michael P. Todaro & Stephen C. Smith
Published on 2012-08-12 by Bukupedia

Economic Development, Eleventh 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 held by developing countries. The principles of development economics are key to understanding how we got to where we are, and why many development problems are so difficult to solve; and 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 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 Eleventh 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 poverty alleviation. New to This Edition • Global crisis.Amajor new section of the text addresses potential longer-term impacts of the recent global financial crisis on economic development, examining conditions that caused the crisis, its aftermath, and possible broader implications and potential differences for developing nations and regions. • Violent conflict. The Eleventh Edition provides 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. In the last several years, substantial advances have been made in theory, empirical studies, and policy analysis regarding civil war and civil conflict, one of the leading obstacles to human development and economic growth. The section examines what has been learned about consequences for people and for economic development, causes and prevention of violent conflict, and strategies for postconflict recovery, reconstruction, and sustained development. • Findings boxes.Anew textbook feature reports empirical findings in boxes that are wide-ranging in both methods and topics. They address both specific policy concerns—such as improving child health, education, and microfinance design—and a broader understanding of the sources of disparities in the world’s economies that can inform the strategy of economic development. And with these findings, they illustrate methods ranging from the use of instruments; randomized control trials; 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. As economic development research findings are published and become influential, they will be reported on the textbook Web site between editions. • New comparative case studies. Two new full-length end-of-chapter comparative case studies are introduced to address current topics and findings and to broaden geographic coverage. An in-depth comparison of Ghana and Côte d’Ivoire appears at the end of Chapter 5, examining themes of the origins of comparative development and of the analysis of poverty causes and remedies. (The updated Grameen case is moved to Chapter 15.) An in-depth comparative study of Haiti and the Dominican Republic is introduced at the end of Chapter 10, demonstrating the influence of environment on development and vice versa, but revealing how environmental degradation stems from deeper causes. All the other case studies have been updated to reflect current conditions and status. • 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. • Applications of contemporary models to new topics. Insights from multipleequilibria models (explained in detail in Chapter 4) are used to help explain the staying power of violent ethnic conflict and the persistence of harmful cultural practices such as female genital mutilation. The way these insights have helped inspire strategies for ending these practices are explained. • Expanded glossary, with definitions in margins where terms are first used. Each key term is defined in the text at the spot where it is first used. Each of these definitions are also collected alphabetically in the Glossary near the end of the book. xx Preface • 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. • Additional updates. Other updates include an expanded section on microfinance, including new designs, potential benefits, successes to date, and some limitations; Amartya Sen’s latest thinking on capability; new evidence on the extent and limits of convergence; expanded coverage of China and the stubborn chronic poverty among hundreds of millions of people despite otherwise impressive global progress; a streamlined Malthus trap model presentation; development implications of new and proposed environmental agreements for developing countries; and growing challenges of adaptation to climate change with examples of efforts that are already underway; as well as topics such as trends in central banking in developing economies. The end-of-chapter case studies have been updated. • Convenient numbered subsections. The introduction of numbered subsections facilitates a tailored course design and extended class focus on selected topics. The text features a 15-chapter structure, convenient for use in a comprehensive course. But the chapters are now subdivided, usually into six to ten numbered subsections in each chapter. This makes it more straightforward to assign topical areas for a class session. It also makes it convenient to use the text for courses with different emphases. 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. • 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. Preface xxi • Courses with a more analytic focus. These courses would focus more on the growth and development theories in Chapter 3 (including appendixes 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. It could also expand on material briefly touched on in some of the Findings boxes and subsections into treatments of methods topics such as use of instrumental variables, randomization, 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 Eleventh 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 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 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 section 2.7 on 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, implications of the rapid pace of globalization and the rise of China, the continuing struggle for more progress in sub-Saharan Africa, and controversies over debt relief and foreign aid. • 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. xxii Preface 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 Preface xxiii 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 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 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. Aunique 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. In-chapter 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 Eleventh Edition comes with a comprehensive Companion Website with content by Abbas Grammy of California State University, Bakersfield. Available at www.pearsonhighered.com/todaro_smith, this site offers an online Student Study Guide for each chapter that includes multiple-choice quizzes and sets of graphing and quantitative exercises. In addition, Internet exercises allow students to explore the countries highlighted in the end-of-chapter case studies in more depth. ARecommended Readings section provides links to and questions about additional development resources. The Web site also links to material for the instructor, including PowerPoint slides for each chapter, which have been expanded and fully updated for this edition by Professor Meenakshi Rishi of Seattle University. The text is further supplemented with an Instructor’s Manual by Pareena G. Lawrence of the University of Minnesota, Morris. It has been thoroughly revised and updated to reflect changes to the Eleventh 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. xxiv Preface 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, and Eleventh Editions: U.S. Reviewers 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, UNIVERISTY OF TENNESSEE AT CHATTANOOGA Milica Z. Bookman, ST. JOSEPH’S UNIVERSITY 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 Preface xxv Meenakshi Rishi, SEATTLE UNIVERSITY James Robinson, UNIVERSITY OF CALIFORNIA, BERKELEY 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 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 Addison-Wesley in both the United States and the United Kingdom, particularly David Alexander, Lindsey Sloan, Kathryn Dinovo, Alison Eusden, Kate Brewin, Denise Clinton, Mary Sanger, Bruce Emmer, and Pauline Gillett. 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 xxvi Preface 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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