This course is available on the MSc in Economics (2 Year Programme). This course is not available as an outside option to students on other programmes. This course uses controlled access as part of the course selection process. For information on controlled access courses, including eligibility, application processes, deadlines, and departmental contact details, please refer to the Controlled Access Courses webpage.

New course for the 2027/28 academic session.

How to apply: These courses are intended for MSc Economics, MSc Economics (2 Year Programme), and MSc EME Students. Any external student must have successfully completed EC400 or EC451 in September and have approval of the Department of Economics.

Deadline for application: Please apply as soon as possible after the opening of course selection for all courses.

For queries contact: Econ.msc@lse.ac.uk

Mutually exclusive courses:

This course cannot be taken with PP454 at any time on the same degree programme.

Pre-requisites:

Students must have completed EC400 or EC451 before taking this course.

Assumed prior knowledge:

Students should have completed courses in intermediate level microeconomics, macroeconomics and econometrics.

This course will cover a number of topics at the forefront of development economics, combining theoretical and empirical analysis with a clear focus on policy implications. These include economic growth, poverty traps, inequality and occupational choice, credit markets, microfinance, property rights, and land markets.

The course aims to provide rigorous economic foundations for the study of development. Taking mainstream micro and macro theory and empirical methods as its starting point, it examines why some countries and individuals remain poor and what economic mechanisms sustain underdevelopment. The approach is a structured investigation of how specific forces — market failure, financial frictions, and weak property rights — generate the patterns we observe, and not a survey of development experiences, policies, or country studies. In the first half of the term, we cover theoretical and empirical analysis of economic growth at the macro or aggregate level. In the second half we move from the macro to the micro level to study different markets and institutions.

The course begins with conceptual and measurement issues: what development means, how it relates to growth, and what the data on income, poverty, inequality, and the economic lives of the poor actually show. It then turns to the theory of economic growth, covering the Solow and neoclassical frameworks together with their quantitative and empirical implications. The central organising concept is the poverty trap: dynamic models with multiple steady states, where financial market imperfections and indivisibilities imply that initial conditions persist and convergence is not guaranteed. These theoretical mechanisms are evaluated against microeconomic evidence from large-scale asset transfer programmes.

The course then shifts to a sectoral, micro-level perspective. Credit market imperfections — arising from moral hazard, adverse selection, and limited enforcement — are analysed theoretically and assessed empirically. The economics of microfinance is examined as a mechanism for addressing these frictions, drawing on both the theory of joint liability and experimental evidence on impact. Property rights and land markets are studied through the lens of incentive theory, with attention to tenancy contracts, land titling, and agricultural productivity. Throughout, the approach integrates theory, empirical implications, and evidence, with policy implications following from the analysis rather than driving it.

Indicative topics: development indicators and stylised facts; the Solow model and growth accounting; poverty trap models and occupational choice; coordination failures and multiple equilibria; credit markets: theory and empirical evidence; microfinance; property rights and land markets; direct transfer policies

20 hours of lectures and 9 hours of seminars in the Autumn Term.

This course has a reading week in Week 6 of Autumn Term.

Two marked assignments.

Most of the reading is from journal articles which appear on reading lists distributed at the start of the course.

However, the following references may serve as an introduction to material included in the syllabus.

D Ray, Development Economics, Princeton UP, 1998, Abhijit Banerjee and Esther Duflo’s Poor Economics, New York: Public Affairs,2011, and the symposium on The Agenda for Development Economics - Journal of Economic Perspectives Volume 24, Number 3, Summer 2010: Articles by Deaton, Acemoglu, Ray, Rodrik, and Rosenzweig.

Exam (100%), duration: 120 minutes, reading time: 15 minutes in the Spring exam period.

This course is IRDAP-enabled, meaning that resit and deferred assessments will take place in August at the end of the academic year.