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Lecture Economics: Chapter 35 - Dean Karlan, Jonathan Morduch

Chapter 35 - Development economics. After studying this chapter you will be able to understand: What the capabilities approach is to development economics? What relationship exists between economic growth and economic development? How education and health improvements promote human capital development? | Chapter 35 Development Economics © 2014 by McGraw-Hill Education 1 What will you learn in this chapter? • What the capabilities approach is to development economics. • What relationship exists between economic growth and economic development. • How education and health improvements promote human capital development. • Why institutions, good governance, industrial policy, and clusters in development are important. • How migration and remittances promote development. • What the arguments are for and against foreign aid. • What role impact evaluation and randomized controlled trials play in measuring program impact. © 2014 by McGraw-Hill Education 2 The capabilities approach • The capabilities approach provides a framework for thinking about poverty, inequality, and human development. – A capability is something a person is able to be or do. – The approach looks to improve what individuals can be and can do. – Institutional and market failures restrict what people can do. – In contrast, economic growth primarily focuses on expanding the economy. © 2014 by McGraw-Hill Education 3 1 The capabilities approach • GDP growth does not necessarily improve the standard of living for everyone in a country. • Policy mechanisms are crucial to translating higher average incomes into improved capabilities for the poorest citizens. • There are many reasons to believe that economic development leads to economic growth. © 2014 by McGraw-Hill Education 4 The basics of development economics • There are basic aspects to economic development: Human Capital Investment Migration Trade • Policies can be categorized in two ways: 1. Some policies put in place the conditions for economic growth. 2. Some policies translate economic growth into greater capabilities for people in a society. © 2014 by McGraw-Hill Education 5 The basics of development economics Improvements to health and education can develop human capital. Health • Health care facilities don’t exist in many parts .