This course concerns the role of the industrial sector in economic development. It is divided into three parts, each of which juxtaposes theories and empirical evidence. Part I treats the emergence of the industrial sector in the early stages of a country’s development. Part II is devoted to the distinctive features of the business environment in developing countries, and the way that producers respond to them. Part III concerns interactions with the global economy, both through trade and through multinationals.

Students will be required to choose a developing country or a recently developed country at the beginning of the course, and to come to class prepared to discuss its industrial sector in the context of the topic being treated.  Issues to research are linked to the syllabus (click here to see a list by topic), and one class will be devoted to using library and web-based resources. At regular intervals, students will also submit short written assignments in which they assess the industrial sectors and policies of their chosen countries (click here to see the schedule). At the end of the course, students will submit a report summarizing the industrial sector performance of the country they have chosen.  Grades will be based on class participation (20 percent), a midterm exam (30 percent--click here to see an old exam and here to see this year's exam with answers),  the periodic writing assignments (30 percent), and the final country report (20 percent).

Readings that cannot be downloaded from the links provided below will be included in the Procopy packet available at the Penn State Student Bookstore. Students are also encouraged to purchase: Ross-Larson, Bruce. Edit Yourself. New York: Norton, 1996. This book is available at the Penn State Student Bookstore or online from Amazon.com.

INSTRUCTOR:          Professor James Tybout

Syrquin, Moshe, "Patterns of Structural Change," in Chenery and Srinivasan, eds., Handbook of Development Economics, vol. 1, Amsterdam: North-Holland, 1988, pp. 223-258.

Ray, Debraj, Development Economics, Princeton, N.J.: Princeton U. Press, 1998, pp. 345-388.

Krugman, Paul. “Toward a Counter-Revolution in Development Theory,” Proceedings of the Annual Conference on Development Economics, 1992, pp. 15-38.
 

Ray, Debraj, Development Economics, pp. 131-161.

III. THE BUSINESS ENVIRONMENT IN LDCS
 

A.     Governance (lecture 5; World Bank 2000/01 business surveys)

de Soto, Hernando. The Other Path: The Invisible Revolution in the Third World, New York: Harper-Row, 1989, pp. xiii-xxiii, 131-187.

Djankov, Simeon, Rafael la Porta, Florencio Lopez de Silanes, and Andrei Shleifer. “The Regulation of Entry,” Quarterly Journal of Economics. 117(1), February 2002, pp. 1-38.

 
World Bank. World Development Report 1997: The State in a Changing World.  1997. New York: Oxford U. Press, pp. 29-75.

Brunetti, Aymo, Gregory Kisunko and Beatrice Weder. “Institutional Obstacles to Doing Business: Region-by-Region Results from a Worldwide Survey of the Private Sector.” April 1997. World Bank Policy Research Working Paper No. 1759. Washington, D.C.: The World Bank.

Hausmann, Ricardo and Micheal Gavin. “Securing Stability and Growth in a Shock-Prone Region:  The Policy Challenge for Latin America,” in Ricardo Hausmann and Helmut Reisen, eds., Securing Stability and Growth in Latin America:  Policy Issues and Prospects for Shock-Prone Economies. 1996. Paris: OECD, pp. 23-78.

World Bank. World Development Report 1994:  Infrastructure for Development  1994. New York: Oxford U. Press, pp. 2-36.

Levine, Ross. “Financial Development and Economic Growth:  Views and Agenda,” Journal of Economic Literature 35(2) (June 1997), pp. 688-726.

 
Diaz-Alejandro, Carlos. “Good-bye Financial Repression, Hello Financial Crash,” Journal of Development Economics 19(1/2), 1985, pp. 1-24.

James Tybout, “Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?” Journal of Economic Literature 38(1) (March 2000), pp. 11-44.

Tokman, Victor and Emilio Klein, Regulation and the Informal Economy, Boulder: Rienner Publishers, 1996, pp. 35-59.

Gauthier, Bernard and Mark Gersovitz. “Revenue Erosion Through Tax Exemption and Evasion in Poor Countries.” Journal of Public Economics, June 1997, pp. 404-424.

James Tybout, “Manufacturing Firms in Developing Countries: How Well Do They Do, and Why?” Journal of Economic Literature 38(1), March 2000, pp. 11-44.

Roberts, Mark and James Tybout, “Producer Turnover and Productivity Growth in Developing Countries,” The World Bank Research Observer  12(1), February 1997, pp. 1-18.

 
Aw, Bee-Yan, Xiaomin Chen and Mark Roberts. “Firm-level Evidence on Productivity Differentials and Turnover in Taiwanese Manufacturing,” Journal of Development Economics 54(1), June 2001, pp. 51-86.

Roberts, Mark and James Tybout. Industrial Evolution in Developing Countries: Micro Patterns of Turnover, Productivity and Market Structure. 1996. New York:  Oxford University Press, pp. 188-199.

Djankov, Simeon, Rafael la Porta, Florencio Lopez de Silanes, and Andrei Shleifer. “The Regulation of Entry,” Quarterly Journal of Economics 117(1), February 2002, pp. 1-28.
 
 

V. TRADE AND INDUSTRIALIZATION
 

A.     Trade Policy Overview  (lecture 14)

Ng, Francis and with Alexander Yeats "Good Governance and Trade Policy: Are They the Keys to Africa's Global Integration and Growth?" World Bank PDR working paper series #2038, 1999.

Rodrik, D., "Trade and Industrial Policy Reform in Developing Countries: A Review of Theory and Evidence," chap. 45 in Handbook of Development Economics, Volume 3B, Holland: Elsevier Science, 1995, pp. 2925-82.

Panagaria, Arvind, “Evaluating the Case for Export Subsidies,” Policy Research Working Paper 2276, World Bank, January 2000.

Ray, Debraj, Development Economics, pp. 621-646.

Tybout, James. “Plant- and Firm-Level Evidence on the ‘New’ Trade Theories, forthcoming in Inbam Choi and James Harrigan, eds., Handbook of International Trade. Oxford: Basil-Blackwell, 2003.

Rodrik, Dani and Francisco Rodriguez. “Trade Policy and Economic Growth: A Skeptic’s Guide to the Cross-National Evidence,” in Ben Bernanke and Kenneth Rogoff, eds., Macroeconomics Annual 2000. Cambridge, MA: MIT press for NBER, 2001.

Clerides, Sofronis, Saul Lach and James Tybout. “Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico and Morocco.” Quarterly Journal of Economics, August 1998, pp. 903-947.

Hunt, Julie and James Tybout, "Does Promoting High Tech Products Spur Development?" in Ricardo Rocha and Marcelo Olarreaga, eds., Competitividad de las Exportaciones en Colombia , Bogota: Tercer Mundo, 2000.

Hanson, Gordon. “Should Countries Promote Foreign Direct Investment?” UNCTAD G-24 Discussion Paper No. 9, 2001.

Moran, Theodore. Parental Supervision: The New Paradigm for Foreign Direct Investment and Development, Washington, D.C: Institute for International Economics, August 2001, pp. 3-40.

Blomstrom, Magnus and Ari Kokko. “How Foreign Investment Affects Host Countries,” World Bank PRD Working Paper No. WPS-1745, March 1997.

Harrison, Ann. “Determinants and Effects of Direct Foreign Investment in Cote d’Ivoire, Morocco and Mexico,” in Roberts, Mark and James Tybout, eds, Industrial Evolution in Developing Countries: Micro Patterns of Turnover, Productivity and Market Structure. 1996. New York: Oxford University Press, pp. 163-186.

Aitken, Brian and Ann Harrison, "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela" American Economic Review, June 1999, 605-61.
 

Globalization Readings

Real WTO web site

Fake WTO web site

Rodrik, Dani "Globalization for Whom?" Harvard Magazine Online, July-August 2002.

Academic Consortium on International Trade  This site provides links to policy statements and papers that deal with important, current issues
of international trade policy. (Pro and anti-globalization writing can be found here.)