Economics of Development 3
AAE 732 / Econ 878
Michael R. Carter
The idea that economic performance might be sensitive to the distribution of endowments has deep roots in the theory of agrarian economy. Writing in the early 20th century, the Russian economist A.V. Chayanov argued that farm households with distinct endowments of productive resources would use those resources in different proportions, with different factor productivities. Following an introductory look at different aspects of the inequality-development problem, this course will first examine modern variants of the Chayanovian argument that important household decisions in the sphere of production (and consumption) are inseparable from household wealth endowments. The course will then look more deeply into the economics of the household itself, asking if intra-household distribution similarly matters for factor use and the composition of consumption. We will also explore how socially constructed identities, starting with gender, may influence economic behavior inside and outside of the household.
The course will then turn to explore theory and empirical evidence concerning access to capital, both through markets and through informal relationships (social capital). The implications of capital access for for behavioral differentiation in production, class formation and asset accumulation will be considered using what might be termed endowment continuum models. The additional complexity introduced by risk, in the presence of incomplete contingency markets, is then considered. Particular attention will be given to the impact of risk on the accumulation of assets, and the possibility that under risk initial endowment inequality may reproduce or deepen itself. Finally, we ask whether social protection policy, perhaps implemented through a class of incentive compatible risk transfer instruments (index insurance), can be employed to alter poverty dynamics.
Last updated on Fri, November 14, 2008 3:16 PM
Photo credits: Henry C. Taylor (left), Wisconsin Historical Society, WHi26622. Benjamin H. Hibbard, University of Wisconsin-Madison Archives.
