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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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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.24.3.3
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    References listed on IDEAS

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    1. Eyal Dvir & Ken Rogoff, 2009. "The Three Epochs of Oil," Boston College Working Papers in Economics 706, Boston College Department of Economics.
    2. Paxson, Christina, 1996. "Saving and growth: Evidence from micro data," European Economic Review, Elsevier, vol. 40(2), pages 255-288, February.
    3. Angus Deaton, 2010. "Instruments, Randomization, and Learning about Development," Journal of Economic Literature, American Economic Association, vol. 48(2), pages 424-455, June.
    4. Kotlikoff, Laurence J & Summers, Lawrence H, 1981. "The Role of Intergenerational Transfers in Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 706-732, August.
    5. Angus Deaton, 2005. "Measuring Poverty in a Growing World (or Measuring Growth in a Poor World)," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 1-19, February.
    6. Eyal Dvir & Kenneth S. Rogoff, 2009. "Three Epochs of Oil," NBER Working Papers 14927, National Bureau of Economic Research, Inc.
    7. 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.
    8. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
    9. 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.
    10. Pierre-Olivier Gourinchas & Jonathan A. Parker, 2002. "Consumption Over the Life Cycle," Econometrica, Econometric Society, vol. 70(1), pages 47-89, January.
    11. 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.
    12. 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.
    13. A. B. Atkinson, 1969. "The Timescale of Economic Models: How Long is the Long Run?," Review of Economic Studies, Oxford University Press, vol. 36(2), pages 137-152.
    14. Angus Deaton, 1999. "Commodity Prices and Growth in Africa," Journal of Economic Perspectives, American Economic Association, vol. 13(3), pages 23-40, Summer.
    15. Angus Deaton & Christina Paxson, 2000. "Growth and Saving Among Individuals and Households," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 212-225, May.
    16. repec:pri:rpdevs:deaton_instruments_randomization_learning_all_04april_2010 is not listed on IDEAS
    17. Christopher D. Carroll & Lawrence H. Summers, 1991. "Consumption Growth Parallels Income Growth: Some New Evidence," NBER Chapters,in: National Saving and Economic Performance, pages 305-348 National Bureau of Economic Research, Inc.
    18. 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.
    19. Gregory Clark & Michael Huberman & Peter H. Lindert, 1995. "A British food puzzle, 1770–1850," Economic History Review, Economic History Society, vol. 48(2), pages 215-237, May.
    20. Kuznets, Simon, 1976. " Demographic Aspects of the Size Distribution of Income: An Exploratory Essay," Economic Development and Cultural Change, University of Chicago Press, vol. 25(1), pages 1-94, October.
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    Cited by:

    1. Pauw, Karl & Thurlow, James, 2011. "Agricultural growth, poverty, and nutrition in Tanzania," Food Policy, Elsevier, vol. 36(6), pages 795-804.
    2. David Card & Stefano DellaVigna & Ulrike Malmendier, 2011. "The Role of Theory in Field Experiments," Journal of Economic Perspectives, American Economic Association, vol. 25(3), pages 39-62, Summer.
    3. Chen, Xi & Zhang, Xiaobo, 2017. "Costly Posturing: Ceremonies and Early Child Development in China," IZA Discussion Papers 10662, Institute for the Study of Labor (IZA).
    4. Chen, Xi, 2014. "Fetus, Fasting, and Festival: The Persistent Effects of in Utero Social Shocks," IZA Discussion Papers 8494, Institute for the Study of Labor (IZA).
    5. Sunil Mitra Kumar, 2016. "RCTs for better policy? The case of public systems in developing countries," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 33(1), pages 83-98, April.
    6. repec:unu:wpaper:wp2012-70 is not listed on IDEAS
    7. Mehlum, Halvor & Torvik, Ragnar & Valente, Simone, 2016. "The savings multiplier," Journal of Monetary Economics, Elsevier, vol. 83(C), pages 90-105.
    8. repec:eee:ecolet:v:158:y:2017:i:c:p:18-20 is not listed on IDEAS
    9. Jean Cartier-Bresson, 2013. "Le pouvoir du positivisme et ses limites : microéconométrie et macroéconométrie actuelles du développement," Working Papers hal-00847005, HAL.
    10. Miguel Szekely, 2011. "Toward Results-Based Social Policy Design and Implementation - Working Paper 249," Working Papers 249, Center for Global Development.
    11. 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).
    12. 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.

    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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