What is the definition of corruption in the context of economic development?
It is the appropriation of public resources for private profit and other private purposes through the use and abuse of official power or influence.
How can corruption act as a regressive tax on households and firms?
The cost of bribes typically represents a much larger share of income for low-income households and revenue for smaller firms, disproportionately burdening the poor.
What is the ‘greasing the wheels’ argument regarding corruption?
It is the controversial idea that in the face of excessive regulation and bureaucracy, corruption might actually improve efficiency by allowing entrepreneurs to bypass red tape.
Rent seeking is the effort to acquire wealth not through production but through _____ of the economic and political environment.
manipulation
According to the public choice or ‘new political economy’ school, what is the primary motivation of politicians and bureaucrats?
They are assumed to act solely from a self-interested perspective, using their power to confer benefits on themselves and their allies.
What is a ‘developmental state’?
A state that sees its primary mission as promoting economic development by partnering with and guiding the private sector.
In Douglass North’s framework, what are ‘institutions’?
They are the formal and informal ‘rules of the economic game’ that shape human interaction and create incentives.
How did Douglass North distinguish between institutions and organizations?
Institutions are the rules of the game, while organizations (like firms, unions, or political parties) are the players that are created to prosper under those rules.
What is path dependency in the context of institutional development?
It is the idea that past institutional arrangements and conditions constrain the choices and possibilities available for reform today.
The _____ refers to a set of free-market economic policies favored by the IMF, World Bank, and U.S. government in the 1980s and 1990s.
Washington Consensus
What is one major critique of the original Washington Consensus?
It took a ‘one size fits all’ approach and often overlooked the importance of institutions, equity, and government’s role in overcoming market failures.
The ‘New Consensus’ on development policy acknowledges a greater role for government in areas like providing fundamental public goods and prudential supervision of the _____ sector.
financial
What is meant by ‘government failure’ in development economics?
It refers to situations where government intervention in the economy creates inefficiencies and leads to outcomes worse than the free market would have produced.
What are nongovernmental organizations (NGOs)?
They are nonprofit organizations, often involved in providing financial and technical assistance, that rely on independent voluntary efforts to promote their values and development goals.
What is the ‘status quo bias’ that can prevent beneficial policy reforms, as described by Fernandez and Rodrik?
Even if a reform benefits a majority, uncertain voters may rationally vote against it because they cannot be sure if they will personally be among the winners.
What is the ‘commitment problem’ in resolving civil conflicts?
It is the inability of a ruling power to credibly commit to a peace settlement, as it may have an incentive to renege on the deal once the opposition disarms.
How can strong checks and balances on executive authority help prevent armed conflict?
By constraining the power of rulers, they can reduce the risk that the state will expropriate resources or violate agreements, making peaceful compromise a more viable option for opposition groups.
Why might democratic majority-rule elections fail to resolve conflict in societies with deep horizontal inequalities?
They can establish a dominant winner and effectively disenfranchise minority groups, leaving them with little stake in the political system and potentially leading to violence.
One of the key governance challenges in post-conflict states is rebuilding _____, which includes checks on authority and contract enforcement.
institutions
What are ‘horizontal inequalities’ and why are they considered a major cause of civil conflict?
They are inequalities between culturally defined groups (e.g., ethnic or religious), which can fuel grievances and mobilization for conflict when one group feels systematically excluded.
What is ‘Community-Driven Development’ (CDD) and how might it aid in post-conflict recovery?
CDD is an approach that gives local communities control over planning and resources, which can help ensure fair resource distribution and rebuild social cohesion across conflict divides.
A major vulnerability for NGOs is their reliance on donor funding, which can sometimes lead them to shift their focus to the goals of _____ rather than their beneficiaries.
funders
What historical factor led to Costa Rica having a more equitable land distribution compared to Guatemala and Honduras?
Costa Rica had a small indigenous population and lacked easily exploitable resources, so it did not attract a Spanish elite to establish large plantations based on forced labor.
How did Costa Rica’s abolition of its military in 1949 contribute to its long-term development?
It prevented the drain of resources into military spending and preempted the repressive military rule that plagued many of its neighbors.
