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Understanding the Mechanisms of Economic Development

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  • Angus Deaton

Abstract

In this paper, I advocate the investigation, testing, and modification of mechanisms as a progressive empirical research strategy for the field of economic development (and other areas of applied economics). I discuss three lines of work that have elucidated mechanisms that are relevant for development: 1) connections between saving and growth; 2) the determinants of commodity prices, which are a key source of income for many developing countries; and 3) some unexpected puzzles that arise in considering the linkages between income and food consumption. In each case, my discussion illustrates the positivist approach to the hypotheticodeductive method. In this approach, mechanisms are proposed, key predictions derived and tested, and if falsified, the mechanisms are rejected or modified. If the predictions of a mechanism are confirmed, if they are sufficiently specific, and if they are hard to explain in other ways, we attach additional credence to the mechanism, albeit provisionally since later evidence may undermine it. Sometimes the falsifications can be repaired by changing supplementary assumptions, and sometimes they involve long steps backwards where the model is abandoned; and often there is disagreement about which is the correct response. But the end result is an accumulation of useful knowledge and understanding.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.24.3.3
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Bibliographic Info

Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 24 (2010)
Issue (Month): 3 (Summer)
Pages: 3-16

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Handle: RePEc:aea:jecper:v:24:y:2010:i:3:p:3-16

Note: DOI: 10.1257/jep.24.3.3
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References

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  1. Angus Deaton, 2010. "Instruments, Randomization, and Learning about Development," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 424-55, June.
  2. Chang-Tai Hsieh & Peter J. Klenow, 2007. "Relative Prices and Relative Prosperity," American Economic Review, American Economic Association, vol. 97(3), pages 562-585, June.
  3. Angus Deaton & Christina Paxson, 1998. "Economies of Scale, Household Size, and the Demand for Food," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 897-930, October.
  4. Christina Paxson, 1995. "Saving and Growth: Evidence from Micro Data," NBER Working Papers 5301, National Bureau of Economic Research, Inc.
  5. Angus Deaton, 1999. "Commodity Prices and Growth in Africa," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 23-40, Summer.
  6. Laurence J. Kotlikoff & Lawrence H. Summers, 1980. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," NBER Working Papers 0445, National Bureau of Economic Research, Inc.
  7. Johnson, Simon & Larson, William & Papageorgiou, Chris & Subramanian, Arvind, 2013. "Is newer better? Penn World Table Revisions and their impact on growth estimates," Journal of Monetary Economics, Elsevier, vol. 60(2), pages 255-274.
  8. Angus Deaton, 2005. "ERRATUM: Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 395-395, May.
  9. Angus Deaton, 2003. "Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," NBER Working Papers 9822, National Bureau of Economic Research, Inc.
  10. Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002. "Consumption Over the Life Cycle," Econometrica, Econometric Society, vol. 70(1), pages 47-89, January.
  11. Atkinson, Anthony B, 1969. "The Timescale of Economic Models: How Long Is the Long Run?," Review of Economic Studies, Wiley Blackwell, vol. 36(106), pages 137-52, April.
  12. Eyal Dvir & Kenneth S. Rogoff, 2009. "Three Epochs of Oil," NBER Working Papers 14927, National Bureau of Economic Research, Inc.
  13. Deaton, Angus & Laroque, Guy, 1996. "Competitive Storage and Commodity Price Dynamics," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 896-923, October.
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Cited by:
  1. Chen, Xi & Zhang, Xiaobo, 2012. "Costly posturing: relative status, ceremonies and early child development in China:," IFPRI discussion papers 1206, International Food Policy Research Institute (IFPRI).
  2. David Card & Stefano DellaVigna & Ulrike Malmendier, 2011. "The Role of Theory in Field Experiments," NBER Working Papers 17047, National Bureau of Economic Research, Inc.
  3. Miguel Szekely, 2011. "Toward Results-Based Social Policy Design and Implementation - Working Paper 249," Working Papers 249, Center for Global Development.
  4. Pauw, Karl & Thurlow, James, 2010. "Agricultural growth, poverty, and nutrition in Tanzania:," IFPRI discussion papers 947, International Food Policy Research Institute (IFPRI).
  5. Jean Cartier-Bresson, 2013. "Le pouvoir du positivisme et ses limites : microéconométrie et macroéconométrie actuelles du développement," Working Papers hal-00847005, HAL.
  6. Mlambo, Kupukile & Murinde, Victor & Zhao, Tianshu, 2011. "How Does the Institutional Setting for Creditor Rights Affect Bank Lending and Risk-Taking?," Stirling Economics Discussion Papers 2011-03, University of Stirling, Division of Economics.

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