Development Economics: Micro-based vs. Macro-based

[dreck]

The reason, I think, that Development Economics is mainly affiliated with Micro instead of Macro is that the 80's growth engineering attitude has largely disappeared after so many failed attempts.

While the theory of growth has changed little since the 80s, and the "growth engineering" attitude has faded, the empirics of growth/macro development is still an active field for research, which has important things to say about policy. See, for example Acemoglu's Settler Mortality Paper, and the wealth of imitations it has inspired. I attended a seminar a while back on culture and development using a similar approach. So while micro development is definitely hot right now--and who knows how long that will last--there's still plenty of work to be done on the macro side of things.

[greatexpect]

I think Dani Rodrik does a good job of explaning the "bifurcation" in this talk

YouTube - Dani Rodrik: Williams College Center for Development Economics 10.14.10

[OneArmedEcon]

Personal opinion: nearly everything in economics is applied micro, including the various fields contained in modern Macro.

[thewhiterabbit]

This is being picky, but I don't know if I'd go so far as to say they "determine causality." They attempt causal inference that would not be possible doing emprical macro development, but there are some big obstacles, namely the generalization problem and the third-cause problem--which usually takes the form of participants gaming the system in some way, or acting a certain way because of cultural norms rather than the reasons the researcher wants to ascribe. Of course, in the best work, the researchers make pretty compelling arguments for their results' validity. But I would say that a big part of the contention between micro and macro development is the fact that "mediocre/bad" field work papers are arguably much more likely to get published right now than "mediocre/bad" empirical macro development, despite concerns about generalization, etc.

I don't really disagree but would like to clarify (as others have done) that I don't see the generalization problem as a causality problem. I just see it as a generalization problem :-). I.e. we can say "this treatment had this effect in this setting" and then the degree of generalization from there is somewhat conjecture.

I agree generalization is a problem, though. One of the great things about the existence of the Poverty Action Lab, imho, is there is a nonacademic structure for repeating field experiments in other settings, helping a lot with generalizability, whereas a full professor would not want to do something that's been done before.

[Zeno]

Personal opinion: nearly everything in economics is applied micro, including the various fields contained in modern Macro.

Including micro theory? :P

[philecon]

Dani Rodrik's weblog: Re-uniting development economics

Here's the link to Rodrik's blog post.

[petecheese]

Applied micro FTW

[appl09]

Yep.

Development was historically macro, and I think the standard narrative on the issue was that macro dev had become somewhat of a moribund field until the micro people came along and injected a new perspective and some vitality. In my view the main point of contention between the two sectors is what constitutes an appropriate standard of evidence. The people doing micro dev tend to work on experiments and trials that can more conclusively determine causality than you could ever be able in macro dev. Macro dev people counter that their work is of broader significance and importance than micro dev.

I'm biased (micro dev person here) but a good place to look for commentary on the issue is Dani Rodrik's writings and blog; I'm quite sure he has a post addressing this out there, in fact, but don't have time to look for it now. He's more of a macro person but is in Cambridge where micro-dev tends to dominate, so he has thoughtful things to say.

I'd generally agree with what you said - I think in the Harvard/MIT development clan, there is a recent shift to even higher standards of identification...which has lead to research questions tend to be micro-based. Obviously, the identification approach taken can significantly limit the types of questions one can address.

It baffles me why causality should be of primary importance in addressing research questions. True, RCTs and other micro-based identification approaches can answer questions with more internal validity but should that come at the price of less external validity (usually the downside of RCTs along with the GE effects) or the type of questions one should address?

You make a point of JPAL replicating experiments to address the external validity concerns but replications can not address three major problems: one that has to do with the aggregation bias from micro theory; the other that has to do with a concern that a relationship that holds at the individual level may not hold on a more macro level (say, country- level). For example the health-income relationship is a perfect example of a how the relationship between health and income can be addressed with an RCT and even multiple RCTs in multiple contexts but an RCT can never address this relationship on a macro level (does better health lead to higher economic growth, which may be the more relevant and important level to address the policy question at) which is why the micro studies generate significantly different predictions than the macro ones on this relationship. And the third concern is the ever-so-present concern of the GE effects. Again, RCTs alone can not address this GE concern. A scaled-up intervention can generate a completely different relationship between two variables than the one predicted by a great LATE estimate from an RCT.

In many aspects of development content validity (the actual measure of what we intend to measure) can also be a very serious concern.

[triple_sec]

Personal opinion: nearly everything in economics is applied micro, including the various fields contained in modern Macro.

Ditto. I think that thinking in terms of the traditional micro/macro splitting hardly makes any sense any longer. By now, what is labeled collectively as economics has become a great unified theory of sorts organized around the basic principle of equilibrium behavior of rational agents who optimize. In this sense, what you call micro today could be equally legitimately labeled as "foundations of economics" and macro as "applied general equilibrium theory." Just my two cents.

[kipfilet]

Ditto. I think that thinking in terms of the traditional micro/macro splitting hardly makes any sense any longer. By now, what is labeled collectively as economics has become a great unified theory of sorts organized around the basic principle of equilibrium behavior of rational agents who optimize. In this sense, what you call micro today could be equally legitimately labeled as "foundations of economics" and macro as "applied general equilibrium theory." Just my two cents.

Seconded!