Instructors Manual with Test Bank

Instructor’s Manual with Test Bank Economic Development Thirteenth edition Michael P. Toda ro St ephen C. Smith Auth ored by Christopher B. Marmé 1 / 4

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Contents Introduction ......................................................................................................................................... 4 Chapter 1 Introducing Economic Development: A Global Perspective .......................................... 8 Chapter 2 Comparative Economic Development ............................................................................. 14 Chapter 3 Classic Theories of Economic Growth and Development ............................................... 23 Chapter 4 Contemporary Models of Development and Underdevelopment .................................... 32 Chapter 5 Poverty, Inequality, and Development ............................................................................ 38

Chapter 6 Population Growth and Economic Development:

Causes, Consequences, and Controversies ...................................................................... 51 Chapter 7 Urbanisation and Rural–Urban Migration: Theory and Policy ....................................... 60 Chapter 8 Human Capital: Education and Health in Economic Development ................................ 67 Chapter 9 Agricultural Transformation and Rural Development ..................................................... 76 Chapter 10 The Environment and Development ................................................................................ 85 Chapter 11 Development Policymaking and the Roles of Market, State, and Civil Society ............................................................................................................. 94 Chapter 12 International Trade Theory and Development Strategy .................................................. 101 Chapter 13 Balance of Payments, Debt, Financial Crises, and Sustainable Recovery: Principles, Cases and Policies ........................................................................................................... 118 Chapter 14 Foreign Finance, Investment, Aid, and Conflict: Controversies and Opportunities ....... 127 Chapter 15 Finance and Fiscal Policy for Development .................................................................... 136 Appendix Additional Exam Questions ..................................................................... 145

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Chapter 1

Introducing Economic Development:

A Global Perspective  Key Concepts As curious as students who register to take Development Economics may be, their knowledge and experience of the developing world will vary widely. The first main point of Chapter 1 is to emphasise how different life in the developing world is. New in the 13th edition is a systematic description of four stylised strata of living standards from extreme poverty to rich based on Rosling, Rosling, and Rosling Ronnlund’s book Factfulness. This is followed by a discussion of the World Bank’s classification of economies by ranges of average national income using gross national income (GNI) statistics.The second point is to provide an overview of the nature of development economics as a field. A defense of development economics as a distinct field, rather than an agglomeration of other economics subfields, is offered. A major theme of the book, that development economics must encompass the study of institutional and social, as well as economic, mechanisms for modernising an economy while eliminating absolute poverty, is introduced.Sections 1.5 and 1.6 looks deeper into the meaning of development and a view of development that is multidimensional. Amartya Sen’s “Capabilities” approach is discussed in Section 1.5. In Section 1.6, data collected in a Gallup World Poll on the relationship between happiness (as measured by Gallup’s life satisfaction “ladder” question and real per capita income) and other research on happiness/life satisfaction is discussed. The level of happiness is not only related to level of income but to other factors such as democratic freedoms and the quality of social relationships. The role of normative values in development economics—a subject dealing with human misery and human potential, with equity as well as efficiency, with cultural change that causes losses as well as gains, and with transfer as well as creation of wealth—is also stressed.The conclusion is that development is both a physical reality and a state of mind. The meaning and objectives of development include the provision of basic needs, reducing inequality, raising living standards through appropriate economic growth, improving self-esteem in relation to the developed countries, and expanding freedom of choice in the market and beyond.Section 1.7 presents an in depth examination of the UN’s Sustainable Development Goals (SDGs).This includes a more comprehensive list of the goals themselves (appearing in Table 1.1) and a discussion of the shortcomings of the SDGs. In Section 1.8, the plan of the book is introduced through 32 critical questions of development economics. Depending on the amount of material covered by the instructor, students should be able to intelligently address most of these questions by the end of the course. Finally, a comparative case study of Pakistan and Bangladesh is presented. 3 / 4

Todaro and Smith, Economic Development, 13e, Instructor’s Manual 9 © Pearson Education Limited 2020

 Lecture Suggestions It might be best to begin with a discussion of the immense scale of transformation in the world economy. The late Hans Rosling’s video “200 countries, 200 years, 4 minutes” (readily available on YouTube) can be used to confirm this point in an entertaining way. It might also be helpful to highlight that real gross world product per capita has almost tripled between 1960 and 2018 (implying growth per year of 1.85%) and is 33% higher than it was at the turn of this century (implying annual growth of 1.56% from 2000 to 2018). This data can be found on the Saint Louis Federal Reserve’s website in the Federal Reserve Economic Database (or FRED).Despite such advances, tremendous disparities continue to exist. In terms of easily accessible statistics the PEW Research Centre’s “World Population by Income” provides an interactive map showing the share of economies’ population who are economically poor, low income, middle income, upper middle income, and high income. While regrettably the data provided is for 2011, it echoes what Todaro and Smith point out in the text, that more than 75% of the world’s population live on $15 or less a day (or about $5,500 per person per year). Several excellent books attempt to give some idea of the range of living standards found throughout the world. For example, The Material World by Peter Menzell. This book presents photographic profiles of typical families around the world with all of their possessions placed in front of their homes. As one goes from one family to the next the instructor has the opportunity to highlight the important differences between nations and regions and to touch on key issues of growth and development.One of the key strengths of this chapter is that it does not focus solely on the hard numbers that supposedly measure development. The discussion of Sen’s Capabilities approach and the far less than perfect relationship between income and happiness are well worth spending a fair amount of class time exploring. Class time should also be spent discussing the 32 critical questions listed on pages 21–23 of the text and then asking students to identify 3 or 4 questions that they are particularly interested in exploring. Asking each student to list what they consider to be “critically” critical questions on a sheet of paper, collecting their responses, and then trying to direct the rest of the term to addressing the most commonly mentioned critical questions for that class will be helpful in further drawing students in and holding their attention throughout the term.At this same point, the instructor might also wish to get some idea of students’ experiences traveling to developing countries and, in as subtle a way as is possible, determine how shaky their understanding of the wider world is. The instructor perhaps could draw on his or her own experiences and give some background as to how he or she first became interested in Development Economics. This may – through the kinds of questions asked – help the instructor further gauge students’ level of sophistication in this area. This is not something that should be or, can, be settled in the first one or two classes and will develop over the course of the term.In many universities, the economic development course will be filled with students who are not majoring in economics. These students may come from different colleges with majors such as anthropology, sociology, or political science or business (management, finance, etc.). They may have had as little as one semester of introductory economics. Given that you are teaching an economics class, you may wish to remind the students of this fact and offer whatever help you can.Given video capture software, you might consider recording some primers that then could be made available to students through course management software such as Blackboard or Moodle. You

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