The majority of the world’s population lives in low-income countries where market failures are pervasive and governments’ budgets are tight. Research in development economics addresses the following questions:

What keeps individuals in poverty?
What keeps firms small and unable to expand?
Which policies have been effective at enabling resources to flow more easily to their most productive use, thus raising incomes?
What approaches have been effective at improving government performance, e.g. through incentives for agents delivering public services and the design of the tax system?

Latest articles

Designing tax policy in high-evasion economies

Developing economies are typically characterized by low tax revenue and widespread tax evasion. This research shows that in such environments, it can be better to tax firms based on turnover rather than profits: while turnover taxes are known to distort production decisions, they are more difficult to evade than profit taxes. Analyzing administrative tax records from Pakistan, the study shows that the use of production-inefficient turnover taxes sharply reduces tax evasion and increases tax revenue.

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Why is labor mobility in India so low?

Migration from rural areas of India to the city is surprisingly low compared with other large developing countries, leaving higher paying job opportunities unexploited. This research shows that well-functioning rural insurance networks are in part responsible for this misallocation in the labor market, creating incentives that keep adult males in the village. Policies that provide private credit to wealthy households or government safety nets to poor households would encourage greater rural-urban migration but they could also have unintended distributional consequences.

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Climate change: the potential impact on global agricultural markets

Many fear that climate change will have severe effects on the global economy, particularly through the threat to food production and farmers’ earnings. This research suggests that much of the potential harm could be avoided if farmers can switch their crops in response to changing relative yields.

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