Development Economics.

• Author: Pack, Howard
• Position: Review

By Debraj Ray. Princeton, NJ: Princeton University Press, 1998. Pp. xvii, 848. $55.00.

Most economists who teach either undergraduate or graduate courses in development economics have desired a new text that contains the newer topics of the last two decades. Professor Ray's textbook satisfies this longing and then some. The book is long and approaches the encyclopedic. Nevertheless, even at a length of 828 pages, including references but excluding an author index and table of contents, the volume is selective. Not surprisingly, it is more complete (and reliable) in areas in which Ray has himself done research than in other parts of the field in which he is a consumer of the research of others. The volume contains very good expositions of a variety of topics not covered in other textbooks (the main exception is Basu [1997]) including the effects of sharecropping arrangements, informal credit markets, and the role of insurance in rural areas. The exposition is clear and accessible to good undergraduates. Formal mathematics is largely eschewed in favor of geometric exposition, and there are two appendices on elementary game theory and statistics that will be helpful to students, though much of the formal testing of hypotheses characteristic of recent advances inevitably involves econometrics far beyond the boundaries of an undergraduate text.

Given the length of the volume and the necessary brevity of a review, I will focus on a relatively small number of topics. There are two long chapters on growth theory starting with Harrod-Domar and proceeding through recent tests of convergence. Despite the extensive coverage, no sense is conveyed that the assumed international production function along which nations move as they accumulate factors is not a very accurate depiction of the status of less developed countries (LDCs) that are laggards with respect to technology and typically achieve lower levels of total factor productivity than do the industrialized countries. They are in a different technological world, and closing the technology gap between themselves and OECD countries is one of the major problems they face. The investment rates of African countries may be lower than those in other nations, but their decisive disadvantage occurs not in capital accumulation but in the efficiency of use of existing resources. While this issue receives brief attention in a discussion of the models of Lucas and Romer, undergraduates are unlikely to see the...