Title: China From the Bottom Up: MicroTheory, Empirical Approaches and the Economics of Development of Chin
1China From the Bottom UpMicro-Theory,
Empirical Approaches and the Economics of
Development of China
- Scott Rozelle
- Stanford University
- Helen Farnsworth Endowed Professorship
- Professor and Senior Fellow
2Overall 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
34 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
4Summary
- 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.
5Decision Making in Developing Countries and the
Organization of Rural ProductionImportance of
Institution
6Read for Today
- Binswanger and Rosenzweig
- pp. 503-517
- The ppt is derived from the reading
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10Institutions
- 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 ..
11Preferences, Environment and Behavior in Rural
China
Environment Risk and costly poor information
Preferences
12Travel 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
13Explaining 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 15Tibet 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" ...
17Read 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)