Ray Palgrave Development Economics文献综述.docx

Ray Palgrave Development Economics文献综述.docx

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RayPalgraveDevelopmentEconomics文献综述

DevelopmentEconomics

ByDebrajRay,NewYorkUniversity

March2007.PreparedfortheNewPalgraveDictionaryofEconomics,editedbyLawrence

BlumeandStevenDurlauf.

1Introduction

WhatweknowasthedevelopingworldisapproximatelythegroupofcountriesclassifiedbytheWorldBankashaving“low”and“middle”income.Anexactdescriptionisunnecessaryandnottoorevealing;sufficeittoobservethatthesecountriesmakeupover5billionofworldpopulation,leavingouttheapproximatelyonebillionwhoarepartofthe“high”incomedevelopedworld.Together,thelowandmiddleincomecountriesgenerateapproximately6trillion（2001）dollarsofnationalincome,tobecontrastedwiththe25trilliongeneratedbyhighincomecountries.Anindexofincomethatcontrolsforpurchasingpowerwouldplacetheselatternumbersfarclosertogether（approximately

20trillionand26trillion,accordingtotheWorldDevelopmentReport（2003））buttheper-capitadisparitiesarelargeandobvious,andtothoseencouteringthemforthefirsttime,stillextraordinary.

DevelopmentEconomics,asubjectthatstudiestheeconomicsofthedevelopingworld,hasmadeexcellentuseofeconomictheory,econometricmethods,sociology,anthropology,politicalscience,biologyanddemographyandhasburgeonedintooneoftheliveliestareasofresearchinallthesocialsciences.MylimitedapproachinthisbriefarticleisoneofdeliberateselectionofafewconceptualpointsthatIconsidertobecentraltoourthinkingaboutthesubject.Thereaderinterestedinamorecomprehensiveoverviewisadvisedtolookelsewhere（forexample,atDasgupta（1993）,Hoff,BravermanandStiglitz（1993）,Ray（1998）,BardhanandUdry（1999）,MookherjeeandRay（2001）,andSen（1999））.

Ibeginwithatraditionalframeworkofdevelopment,onedefinedbyconventionalgrowththeory.Thisapproachdevelopsthehypothesisthatgivencertainparameters,saysav-ingsorfertilityrates,economiesinevitablymovetowardssomesteadystate.Iftheseparametersarethesameacrosseconomies,theninthelongrunalleconomiesconvergetooneanother.Ifinrealityweseeutterlackofsuchconvergence—whichwedo（see,e.g.,Quah（1996）andPritchett（1997））—thensuchanabsencemustbetracedtoapresumptionthattheparametersinquestionarenotthesame.Totheextentthathis-toryplaysanyroleatallinthisview,itdoessobyaffectingtheseparameters—savings,demographics,governmentinterventionism,“corruption”or“culture”.

ThisviewisproblematicforreasonsthatIattempttoclarifybelow.Indeed,thebulkofmyessayisorganizedaroundtheoppositepresumption:

thattwosocietieswiththesamefundamentalscanevolvealongverydifferentlines—goingforward—dependingonpastexpectations,aspirationsoractualhistory.

Now,afterapoint,thedistinctionbetweenevolutionandparameterisasemanticone.Bythrowingenoughstatevariables（“parameters”）intothemix,onemightarguethatthereisnodifferenceatallbetweenthetwoapproaches.Formally,thatwouldbecorrect,butthen“parameters”wouldhavetobeinterpretedbroadlyenoughsoastobeoflittleexplanatoryvalue.Ahistoricalconvergenceandhistoricallyconditioneddivergenceexpresstwofundamentallydifferentworldviews,andthereislittlethatsemanticjugglerycandotobringthemtogether.

2DevelopmentFromTheViewpointofConvergence

Whyaresomecountriespoorwhileothersarerich?

Whatexplainsthesuccessstoriesofeconomicdevelopment,andhowcanwelearnfromthefailures?

Howdowemakesenseoftheenormousinequalitiesthatwesee,bothwithinandacrossquestions?

These,amongothers,arethe“bigquestions”ofeconomicdevelopment.

ItisfairtosaythatthemodelofecononomicgrowthpioneeredbyRobertSolow（1956）hashadafundamentalimpacton“big-question”developmenteconomics.Fortheory,calibrationandempiricalexercisesthatbeginfromthisstartingpoint,see,e.g.,Lucas（1990）,Mankiw,RomerandWeil（1992）,Barro（1991）,ParenteandPrescott（2000）andBanerjeeandDuflo（2005）.Solow’spathbreakingworkintroducedthenotionofconvergence:

countrieswithalowendowmentofcapitalrelativetolaborwillhaveahighrateofreturntocapital（bythe“law”ofdiminishingreturns）.Consequently,agivenadditiontothecapitalstockwillhavealargerimpactonper-capitaincome.Itfollowsthat,controllingforparameterssuchassavingsratesandpopulationgrowthrates,poorercountrieswilltendtogrowfasterandhencewillcatchup,convergetothelevelsofwell-beingenjoyedbytheirrichercounterparts.Underthisview,developmentislargelyamatterofgettingsomeeconomicanddemographicparametersrightandthensettlingdowntowait.

Tobesure,savingsanddemographyarenottheonlyfactorsthatqualifytheargument.Anythingthatsystematicallyaffectsthemarginaladditiontoper-capitaincomemustbecontrolledfor,includingvariablessuchasinvestmentin“humancapital”orharder-to-quantifyfactorssuchas“politicalclimate”or“corruption”.Afailuretoobserveconvergencemustbetracedtooneoranotherofthese“parameters”.

Convergencereliesondiminishingreturnsto“capital”.Ifthisisourassumedstarting

2

point,theshareofcapitalinnationalincomedoesgiveusroughestimatesoftheconcavityofproductionincapital.Theproblemisthattheresultingconcavityunderstatesobservedvariationincross-countryincomebyordersofmagnitude.Forinstance,ParenteandPrescott（2000）calibrateabasicCobb-Douglasproductionfunctionbyusingreasonableestimatesoftheshareofcapitalincome（0.25）,butthenhugevariationsinthesavingsratedonotchangeworldincomebymuch.Forinstance,doublingthesavingsrateleadstoachangeinsteadystateincomebyafactorof1.25,whichisinadequatetoexplainanobservedrangeofaround20:

1（PPP）.Indeed,asLucas（1990）observes,thediscrepancyactuallyappearsinamoreprimitiveway,attheleveloftheproductionfunction.Forthesamesimpleproductionfunctiontofitthedataonper-capitaincomedifferences,apoorcountrywouldhavetohaveenormouslyhigherratesofreturntocapital;say,60timeshigherifitisone-fifteenthasrich.Thisisimplausible.Andsobeginsthehuntforotherfactorsthatmightexplainthedifference.Whatdidwenotcontrolfor,butshouldhave?

Thisdescribesthemethodologicalapproach.Theconvergencebenchmarkmustbepittedagainsttheempiricalevidenceonworldincomedistributions,savingsrates,orratesofreturntocapital.Thetwowillusuallyfailtoagree.Thenwelookfortheparametricdifferencesthatwillbridgethemodeltothedata.

“Humancapital”isoftenusedasafirstportofcall:

mightdifferenceshereaccountforobservedcross-countryvariation?

TheeasiestwaytoslipdifferencesinhumancapitalintotheSolowequationsistorenormalizelabor.Usually,thisexercisedoesnottakeusveryfar.DependingonwhetherweconducttheLucasexerciseorthePrescott-Parentevariant,wewouldstillbepredictingthattherateofreturntocapitalisfarhigherinIndiathanintheU.S.,orthatper-capitaincomedifferencesareonlyaroundhalfasmuch（orless）astheytrulyare.Therestmustbeattributedtothatfamiliarblackbox:

“technologicaldifferences”.Thatslotcanbefilledinavarietyofways:

externalitiesarisingfromhumancapital,incompletediffusionoftechnology,excessivegovernmentintervention,within-countrymisallocationofresources,....Allofthese

—andmore—areinterestingcandidates,butbynowwehavewanderedfarfromtheoriginalconvergencemodel,andifatallthatmodelstillcontinuestoilluminate,itisbywayofoccasionalreturntotherecalibrationexercise,afterchoosingplausiblespecificationsforeachofthesepotentialexplanations.

Thismodelservesasaquickandreadyfixontheworld,anditorganizesasearchforpossibleexplanations.Takenwiththeappropriatequantityofsalt,andviewedasafirstpass,suchanexercisecanbeimmenselyuseful.Yetplayingthisgametooseriouslyrevealsaparticularworld-view.Itsuggestsafundamentalbeliefthattheworldeconomyisultimatelyagreatleveller,andthatifthelevellingisnottakingplacewemustsearchforthatexplanationinparametersthataresomehowstructurallyrootedinasociety.

3

Tobesure,theparametersidentifiedinthesecalibrationexercisesdogohandinhandwithunderdevelopment.Sodobadnutrition,highmortalityrates,orlackofaccesstosanitation,safewaterandhousing.Yetthereisnoultimatecausalchain:

manyofthesefeaturesgohandinhandwithlowincomeinself-reinforcinginterplay.Bythesametoken,corruption,culture,procreationandpoliticsareallupforseriouscross-examination:

justbecause“culturalfactors”（forinstance）seemsmoreweightyan“explanation”doesnotpermitustoassignitthestatusofatrulyexogenousvariable.

Inotherwords,theconvergencepredictedbytechnologicallydiminishingreturnstoin-putsshouldnotblindustothepossibilityofnonconvergentbehaviorwhenallvariablesaretreatedastheyshouldbe—asvariablesthatpotentiallymakeforunderdevelopment,butalsoasvariablesthatareprofoundlya