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China From the Bottom Up: MicroTheory, Empirical Approaches and the Economics of Development of Chin

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Read for Today. Binswanger and Rosenzweig: pp. 503-517. The ppt is derived ... Read for next time ... Skim: Li and Rozelle (privatization and profits of ... – PowerPoint PPT presentation

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Title: China From the Bottom Up: MicroTheory, Empirical Approaches and the Economics of Development of Chin


1
China From the Bottom Up Micro-Theory,
Empirical Approaches and the Economics of
Development of China
  • Scott Rozelle
  • Stanford University
  • Helen Farnsworth Endowed Professorship
  • Professor and Senior Fellow

2
Overall schedule for today
  • Introduce the class
  • Lecture on Binswanger and Rosenzweig (Creating a
    Framework for Thinking about Development
    Economics)
  • Using the Framework for Explaining Institutions
    in China
  • Next time Agrist and Krueger / Li and Rozelle

3
4 things in 5 days
  • Why do we need to study institutions in
    developing countries, including China what do
    development economist do
  • 2. How to think about research (asking the right
    questions)
  • a. Determinants of institutions (why do they
    exist / work in some places, but not others)
  • b. How do we measure how institutions affect
    outcomes?
  • 3. Methodological issues
  • Endogeneity of institutions
  • Instrumental variables approaches
  • Fixed effect approached
  • Differences in Differences / Propensity Score
    Matching
  • 4. Learn some interesting things about China

4
Summary
  • Go over the syllabus
  • Goals and objectives
  • The overall goal of this class is to teach about
    applying theory and methods that students have
    learned in Economic Theory, Econometrics,
    Quantitative Methods, and other classes to
    studying problems of economic development in
    China. The emphasis of the course mostly will be
    on teaching students new methods most of which
    will be applied econometrics. But, we also will
    be working hard on trying to understand the
    context of our applicationsChina, the fastest,
    most dynamic developing country in the world. We
    will be going from the problem being examined to
    the theory from the theory to the method and then
    back to the problem. We hope to help you
    continue in your pursuit of learning to become to
    think like an applied economist in addressing the
    problems of the world that we study.

5
Decision Making in Developing Countries and the
Organization of Rural Production Importance of
Institution
  • Lecture 1
  • LICOS

6
Read for Today
  • Binswanger and Rosenzweig
  • pp. 503-517
  • The ppt is derived from the reading

7
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8
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9
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10
Institutions
  • Production relations
  • How people interact with the factors of
    production
  • How people relate to other people
  • Currnet using the inputs
  • Long term owning the inputs (using and
    collecting the income from them ..

11
Preferences, Environment and Behavior in Rural
China
Environment Risk and costly poor information
Preferences
12
Travel time intensive high information costs
Because difficult/impossible to monitor a.)
Leads to no labor markets in agriculture / b.)
poor efficiency of collective farming ? dominance
of family farming
13
Explaining the World We See
  • Why is there polyandry in Tibet and polegamy in
    Subharen Africa
  • Why are marriages arranged in poor rural China,
    but not in richer areas?
  • Why are brides married out of the village?
  • Why do parents give their daughter a dowry?
  • Why was the dowry gt bride price in North China
    bride price gt dowry in the South China
  • Why was my wifes mother a child bride?

14
  • C-word
  • culture

15
Tibet env.
  • Mountainous
  • Land cultivated
  • Fragile
  • Lots of pasture ? yaks ? herding activities, all
    far far away …
  • Monsoon … rains in some places / not in others …
    grass grows in some place / not in others … ?
    high risk to find pastures ..
  • 2 seasons … winter with snow (rely on feed) …
    summer in pasture

16
  • Dowry
  • you might want to break the body of your paper
    into two parts ...
  • one why families arrange marriages ...
  • two dowry makes arranged marriages MORE
    valuable ... by putting a girl in a better place
    ...
  • the economic logic for arranged marriages are
  • to start you should start with the discussion
    ... what do families need income and low risk
    (insurance) -- but there are no insurance markets
    ... or no good legal environment to do business
    in ... so, in such a context, what is the
    economic value of a daughter after she gets
    married ... there are costs and benefits to her
    leaving the house ... were you in the section
    that i discussed this in?
  • costs lose her labor and earnings
  • lose her daily presence and love
  • benefits reduce consumptoin costs
  • AND, if she marries out of the village and the
    families stay in touch (as they do in vietnam),
    then the family could turn to the daughters
    family if they have hardships, that they can not
    cover by their contacts inside the village (often
    need this if the whole village is hit by a shock,
    like a flood, etc.) ... so family is gaining
    social insurance
  • OR, if she is in a merchant family she might be
    married to another family as a source of "trust"
    ... and in countries with an absence of legal
    environment and markets, this is a benefit (this
    acutally is why they will pay a dowry .. to move
    her up the ladder and create more valuable
    social/business connections ..)
  • so why arrange the marriage? to get her in the
    village that has the best insurance value .. or
    to get her in a family that has the most business
    value, you can not leave this to chance ... there
    is a stong motivatoin to be involved in the
    marriage .. is it not until socity develops the
    formal institutions (like courts and buiness
    regulations) and is welathier that the value of
    the daughter in providing insurance and business
    potential, that families stop intervening and
    allow young adults to make their own decisoin ..
  • now, that said move on to the second question
    so, why give a dowry/brideprice? there are two
    reasons ...
  • one to make the insurance or links more
    valuable ... with a side payment you can put her
    in a better family ...
  • but, in india there is a second reason ... the
    family that gives away the daughter may be afraid
    that after putting their daughter into their new
    home, something might happen so her life style
    reduced the amount of insurance she cann provide
    (e.g., because her husband dies / her husband
    divorce her) ... as a result, part of the dowry
    given at marriage is actually given directly to
    the woman ... it is hers ... it is valuable ...
    and it is to be used in case some thing were to
    happen to her or her family so she could continue
    to survive ... but they want the option of using
    this insurance to be in the hands of the daughter
    herself (not her family -- because they might
    want to spend it on something else) ... so they
    give the daughter a piece of jewelry and do some
    things (e.g., take her pciture with it on) to
    produce evidence that the dowry is actually hers
    ... in this way you can think of it as "insurance
    for insurance" ...

17
Read for next time
  • Angrist and Kruger …
  • mainly think about how they measured the return
    to education … why did they use IVs …
  • Look at the last table … where they give a lot of
    examples about papers that need to use IV because
    of endogeneity …
  • Skim Li and Rozelle (privatization and profits
    of rural enterprises) …
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