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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.

Suggested Citation

  • Angus Deaton, 2010. "Understanding the Mechanisms of Economic Development," Journal of Economic Perspectives, American Economic Association, vol. 24(3), pages 3-16, Summer.
  • 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 listed on IDEAS

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    More about this item

    JEL classification:

    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • B41 - Schools of Economic Thought and Methodology - - Economic Methodology - - - Economic Methodology
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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