MA Economics

The principal aim of this course is to provide students with a thorough understanding of microeconomic models applied to a wide range of issues of development and poverty in less developed countries (LDCs) based on the critical examinations of the main text book and journal articles on theory and empirical evidence. The course also aims to provide students with a good background and ideas for their future research in applied development microeconomics, such as PhD research. 

Pre-requisite: Knowledge of basic microeconomics and introductory econometrics
(ECON60611 Introduction to Econometrics) or the Basic Knowledge of Econometrics

The principal aim of this course is to provide students with a thorough understanding of microeconomic models applied to a wide range of issues of development and poverty in less developed countries (LDCs) based on the critical examinations of the main text book and journal articles on theory and empirical evidence. The course also aims to provide students with a good background and ideas for their future research in applied development microeconomics, such as PhD research. 

At the end of the course, through reading references and attending lectures, students should be:

(i) able to understand and explain basic analytical models in development microeconomics

(ii) able to frame relevant questions in terms of analytical models

(iii) develop a critical insight in to the models, particularly their shortcomings

Lecture 1:  Agricultural Household Models (by ID)

Given the importance of agricultural sector in many of the LDCs, the standard Agricultural Household Model (AHL) is presented and examined in detail. 

Lectures 2 & 3  Intra-household Models (by ID)

The focus of these set of lectures would be to study the different theoretical models used to explain intra-household distribution of resources.  In particular we will study the cooperative and the non-cooperative models of intra-household behaviour and also explore the models based on efficient household assumptions

Lectures 4 & 5 Labour Markets in Developing Countries (by ID)

These lectures will use analytical models to explain different features of the labour markets in developing countries, such as segmented markets, voluntary unemployment and child labour

Lectures 6 & 7  Introduction P-A Theory and applications to Development Economics  (by AC)

Lectures 8  Rural Credit Markets as an application of the P-A framework (by AC)

Lecture 9  Risk Insurance and Savings under Risk in Rural Economy as an application of the P-A theory (by AC)  Mainly discusses a model of risk insurance in developing countries closely following Bardhan and Udry, Chapter 8. Savings models which have been developed for households in developed countries (e.g. life-cycle models, permanent-income hypothesis) are not necessarily applicable to households in LDCs because savings are constrained by the nature of the society (e.g. frequently occurring shocks) and the low level of household asset and income. The lecture thus reviews a version of the savings model under liquidity constraints. Empirical evidence is reviewed based on Paxson (1992).

Lecture 10: Models of Microfinance on Rural Credit Markets (by AC)

The theoretical literature of microfinance is still developing and there are not so many papers to explain the salient feature of microfinance (in particular microcredit) except a few. The rigorous empirical evidence is also scarce. However, given the growing interest in the topic among academics and policy makers, this lecture will provide examples of theoretical models of microfinance with focus on joint liability lending based on Ahlin and Townsend (2007). Empirical evidence is also discussed.

Lectures and Tutorials

2 hour exam at the end of Semester 2.

For those who need to revise basic issues in development microeconomics, see

Todaro, M. and S. C. Smith, 2002, Economic Development, Eighth edition, Longman.

A main textbook used in this course is:

Pranab Bardhan and Christopher Udry, Development Microeconomics, New York, Oxford University Press, 1999.

Other useful textbooks are:

Basu, K. Analytical Development Economics, MIT Press, 2003.

These will be supplemented by a number of journal articles, working papers and book chapters detailed as follows.   * denotes essential readings, but students are expected to read the following articles widely (including the ones without *) according to their own interests.