There are 2 common ways to do this for the development environment. The most straightforward is to install DB2 as the developer database on the local machine. There are no glaring disadvantages to this approach except that you have to manage each database and push updates to it regularly. THe biggest advantage is that you end up with the same database in your developer environment as you would have for your production environment.
The second approach would be to install a centralized DB2 instance. This is easier to manage but you run the risk of one developer's changes poisoning the DB for the rest of the team.