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Using what you read this week, what can a government do (or avoid) to promote growth of its economy?

Using what you read this week, what can a government do (or avoid) to promote growth of its economy? Is this enough to ensure prosperity for all its citizens? Explain using examples and evidence from the reading.

Outline

Economic Development II

Or: When economic development goes wrong.

As you might have noticed, last week covered the “big” question about how to make a country as a whole wealthy. What it didn’t cover was where this wealth went. It also left unanswered the question of policy—what do political leaders actually do that helps or harms economic development. Albertus and Menaldo (2015) tackle this first question while Easterly (2002) presents cases of a number of ways that political actors at home and in international institutions have incorrectly tried to spur economic growth.

Easterly 2002

  • Skim these. I know there are a lot of pages. Focus on finding what the main development strategy was, and why it failed to lead to economic development.
    • Chapter 3: Why industrialization alone won’t get you there because you can only increase an individual’s productivity so much
    • Chapter 4: Education is also not the solution—people get education to get jobs that already are available but educating people where there is no opportunity just makes them leave the country
    • Chapter 6: Loans to help countries make economic reforms don’t work because they are sent after an economic crisis makes reform even harder and less politically viable.
    • Chapter 11: All the bad stuff governments do that ruin growth
      • Corruption
      • Failure to provide public services (eg. Roads/healthcare)
      • Failure to provide a stable currency

Albertus and Menaldo

  • Concerned with questions of economic inequality—especially because in the policy world (and our chapter on trade) there is the idea and understanding that expanded development/trade makes countries better off as a whole.
    • So why some benefitting and others aren’t?
  • Goes economic theory by theory and review the evidence found/not found for each one
  • First, they review the literature on whether the existence of inequality leads to redistribution in certain cases—for example whether democratic states are more likely to be redistributive.
  • Second, it generally isn’t clear that even armed conflict redistributes.
  • Lastly, they review the literature on different kinds of political transitions and how this might affect economic inequality

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