Development microeconomics / by Pranab Bardhan and Christopher Udry

Development Microeconomics looks at a broad spectrum of topics in development economics, combining the strength of conventional developmental thought with the insights of contemporary mainstream economics. This book intends to provide illustrations of microeconomic analyses of economic development by utilizing simple, theoretical, micro models of some of the key economic issues in poor countries. In particular, it draws upon the breakthrough in economic theory that has taken the form of an explicit treatment of information, including information in the sense of human capital and technical knowledge. Much of the analysis in this book applies the theory of asymmetric information and in the process helps explain why perfect competition models are inadequate when dealing with developing economies. Several of the chapters thus explore issues of information‐based market failures and fragmentation, incomplete and imperfect markets, dynamic externalities, multiple equilibria, and self‐reinforcing mechanisms that cause dysfunctional institutions to persist. The authors stress the necessity of balance when looking at some of the classic developmental questions—the importance of both the individual as economic agent and of cultural norms in socio‐economic interactions, the dual relationship between equity and efficiency, the importance of market rivalry, and the potential for information‐based market breakdown and coordination failure. There is also a focus on the rural and the agrarian, with chapters on rural land and labour markets, and on rural credit and insurance institutions. There are also chapters on household economics, demography, and on migration in which behavioral assumptions play a central role. Other issues studied include the environment, trade, the dual economy, intersectoral complementarities, and institutional economics.